If you’re looking to open any bank account – it is important to understand what bank fees and charges are covered, what comes out of pocket and which fees you can avoid.
What are Bank Fees and Charges?
Monthly Fees
Depending on the account type you have, and the features it encompasses, you will be charged monthly fees. If you want to know more on the types of chequing & saving accounts that exist, check out our previous articles. These fees are charged every month and typically range anywhere from free to $30+ a month. Certain account types waive any monthly fee, conditional upon maintaining a minimum balance instead.
Statement Fees
While most statements are offered digitally now, you can request paper statements to be mailed to your home address monthly instead. The fee that is charged as a result is called the statement fee.
Non-Sufficient Fund (NSF) Fees
This fee is charged when a transaction is attempted, yet there is no money to cover the balance. In this case, the payment will typically bounce and you will be charged a non-sufficient fund fee by your bank. The best way to avoid this if you tend to get into a negative balance is to set up overdraft protection on the account.
ATM Fees
These fees are charges for withdrawing at ATMs outside of your bank’s network or when you exceed the limit of ATM withdrawals set out on your account type.
Transaction Fees
These fees typically accumulate if you go over the transaction amount set up on your bank account. For example, if your account type allows for 25 free transactions monthly and you do 30 instead, the bank will charge you a transaction fee for each additional transaction. The sum of these fees is referred to as transaction fees. Depending on the account type, this may not apply if you have unlimited transactions.
Draft Fees
If you don’t use cheques often or don’t have a checkbook, you are more likely to use drafts from the bank. These are typically used when putting down a down-payment, giving first & last months rent for a new rental place or as simple as reserving an elevator when moving. These can also be waived depending on the account type.
Interac e-Transfer Fees
This fee is applied when you send an electronic money transfer to someone. It is charged per transaction sent and can typically be cancelled for an additional cost as well. Some banks put a limit on the amount you can send for free before they begin to charge you. These can also be waived depending on the account type.
Overdraft Fees
To help you avoid big fees like the non-sufficient fund fees, banks will recommend setting up overdraft protection on your account. These funds are set up as a fail safe in case your balance falls below $0 and you have upcoming transactions that need to be completed. Depending on the overdraft protection plan set up on the account, you will either be charged each time your balance falls below $0 or once every month. Interest is calculated everyday on any amount used from the overdraft protection.
How to Avoid Unnecessary Bank Fees and Charges:
Now that we have a good understanding on the different types of bank fees and charges that exist, let’s dive deeper into how to avoid unnecessary accumulation on bank fees and charges.
1. Choose a No / Low-Fee Bank
While traditional banks charge more bank fees, digitally focused banks like Tangerine and PC Financial offer chequing and saving accounts with low to no fees. These banks can also offer a higher interest rate on saving accounts which is an attractive offer when compared to traditional banks. One key thing to note is that while they may offer higher interest and close to no fees, they don’t have a lot of the same options and features and also lack the same emphasis on customer service.
2. Ask Advice to Get the Best Account Type
One of the first things to explore when opening a bank is your typical monthly transaction history.
- How many transactions do you do? 1-6? 10-20? 25+?
- Do you use the ATM often?
- Will you be writing as drafts?
- Do you send e-transfers?
- Do you tend to fall below a $0 balance?
These questions will help determine the appropriate account type based on your needs. By doing so you can avoid getting charged unnecessary fees.
3. Go Through Any Fine Print
Never open an account without getting all the necessary details along with it. Review the terms and conditions, payment and interest schedules. Make sure you understand exactly what your account features cover and what is considered an additional cost.
4. Monitor Your Account Weekly
Stay up to date on your bank account by checking your online statements, if possible, to ensure everything is correct. Monitor any money that is expected to come up and any income expected to come in. This will help avoid any non-sufficient funds bank fees and charges.
5. Set Up Balance Texts
Take a preventative approach and sign up for balance texts with your bank. This will help you save and monitor your bank balance at the same time. For example, if your monthly fee of $29.95 is waived as long as you maintain a minimum balance of $5000, you can set up your balance limit to notify you immediately if it falls below $5500. This way you can keep track of your spending and ensure you don’t collect additional bank fees and charges.
Now that you are aware of the common features that banks typically charge for, you can avoid unnecessary bank fees and charges in the future.
Set up a bank account and want to understand credit and debt or how to invest, check out our Personal Finance Guides.
Want to learn how to define your financial goals? Get started here.
Join AstroWealth today to earn Cash Back when you shop online or activate a partner offer.
