Should you consider no-fee online banks as a way to minimize bank fees?

Hey there, time traveller!
This article was published 13/05/2021 (1955 days ago), so information in it may no longer be current.

Bank fees might only represent a $15 to $20 dollar charge per month for most Canadians, but experts say switching to a no-fee institution or minimizing your fees with your current bank can be a good way to save a larger sum of money every year.

Vanessa Bowen, founder of the personal finance firm Mint Worthy, said she had one client who unknowingly paid $75 per month because of individual transaction charges.

“People don’t actually realize how much they’re paying in bank fees until they really start tracking their spending,” said Bowen, who said the client ended up switching to a no-fee bank the next week.

“I think people are doing that a little more because of COVID-19, and looking at where they’re putting their money.”

Randolph Taylor, a counsellor with Credit Canada, an organization that helps Canadians overcome debt issues, said a no-fee bank account can also be a step in the right direction for someone who’s looking to maximize their debt payments.

“It’s not a huge drop in the bucket… but a penny saved is a penny earned,” said Taylor, who agreed that increased use of online banking over the past year may make it more comfortable to switching to a mid-size bank that functions primarily online than it would have been before the pandemic.

“Now that consumers have gotten a better handle on how to do their banking from home, on their phones or on their laptops, then maybe they’re going to be more receptive to switching to these banks.”

However, he points out that people aren’t always willing to make such a move based on a relatively small financial gain.

Isaiah Chan, director of counselling at Credit Counselling Society, said many of his clients prefer the convenience of having different loan and investment options under one roof — something that mid-size banks can’t always provide.

For existing customers of Canada’s big banks who don’t want to change financial institutions, Chan advises people to take a look at the specific type of account they have to see if they can save on fees while sticking with the institution by changing to a different account.

Chan says sometimes customers are mismatched and paying for benefits that they don’t use, such as free foreign transactions.

“If you look at the majority of financial institutions, even the ones that do charge … they all have low-cost chequing account options,” Chan says.

Bowen says consumers who end up switching to a no-fee provider often have options to make the most of their spending habits, such as signing up for a PC Financial account that rewards you with loyalty points towards things like groceries.

“Once you rack up $100 dollars in points, say you use it for groceries — that $100 you didn’t spend on groceries, you can take that and put it towards your debt.”

This report by The Canadian Press was first published May 13, 2021.