March 5, 2007: The federal finance minister met with Canada's bank chiefs over fees and Automated Machine charges.
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Mention the topic of bank fees in a crowd of people and, chances are, you'll see veins begin to bulge. People really don't seem to like paying a bank for the privilege of getting access to their own money. Canada's banks collect a small fortune in personal account and ABM fees each year. The Canadian Bankers Association says service fees paid by retail customers account for only five per cent of the revenues of chartered banks. But any fee is too much for many Canadians, who wonder how much of the $19 billion in profits Canada's six biggest banks earned in 2006 were made up of the bank machine fees — $1.50 at a time.

The chartered banks say service fees are simply a result of the "user-pay" model the industry has had since the 1980s. Before then, the banks say borrowers ended up subsidizing account costs through wider interest rate spreads. Now, the spreads are narrower and account holders are told they basically have to pay their own way. "Now, it's a very transparent system here," says Maura Drew-Lytle of the Canadian Bankers Association. True enough. We know exactly what we pay. And many of us don't like it.

Here then, are some ways to ease the pain.

ABM Facts

Number of chartered bank ABMs: 16,190

Number of cash withdrawals (during the year 2005): 707 million

Number of deposits: 264 million

Number of bill payments: 61 million

Number of transfers: 47 million

Source: Canadian Bankers Assn. (2007)

Account fees

Remember when chequing accounts at the big banks were always free? Not any more, they aren't. These days, unless you're a child or a "senior" (definitions vary), you can't get away with paying nothing unless you keep a minimum monthly balance that can range from $1,000 to $5,000. And even then, transactions will be limited to a certain number, unless you have an account that allows "unlimited" transactions.

If you are able to keep that minimum balance, the idea of a "free" account sounds great. But the Financial Consumer Agency of Canada advises people to be aware of the "opportunity cost" of keeping their money in a low-paying chequing account rather than somewhere else that may be more beneficial (like paying down a loan).

For people who tend to keep just $50 in their accounts, they can watch the banks charge $3 to $4 a month for a basic chequing account. With that, you're allowed anywhere from eight to 15 transactions a month. (What constitutes a "transaction" varies from bank to bank).

If you pay lots of bills online, visit the bank machine every other day and don't care which machine you use — look out! Those fees can quickly add up to $10, $20, even $30 a month.

What you can do

First of all, find out exactly what kind of account you have. Long gone are the days when banks offered one kind of chequing account and one kind of savings account. The type of account you have determines how much you pay and what it covers. Ideally, you have the account that will generate the lowest monthly bill, given your particular use of the bank's facilities. But don't count on that being the case. Your banking situation may have changed dramatically from when you set up your account. Sometimes your bank will suggest a more appropriate (and cheaper) account. Sometimes they won't.

You can ask about the details of each account package at your local branch. Or there's an easy online way of finding the cheapest banking packages. The Financial Consumer Agency of Canada has an interactive Cost of Banking Guide that will provide a list of packages or accounts that best fit your banking profile. Just enter your typical minimum monthly balance and the numbers of each kind of transaction you do (i.e. in-branch withdrawals, ABM transfers, writing cheques), and the guide suggests packages that would be cheapest for each kind of account.

All the big banks have special no-fee accounts for young and old. All have special low-fee accounts for students. For the rest of us, all the big banks have flat-fee accounts that include a set number of transactions.

But some "virtual" banks, like President's Choice Financial, or ING, have no-fee accounts for everyone, regardless of how many transactions, and they don't require a certain minimum balance. But you may still have to pay some ABM fees. Virtual banks also pay better interest than "brick-and-mortar" banks. The catch is, of course, that they don't have that expensive network of corner branches. So if you want to certify a cheque or cash in some rolled coins, you'll have to leave "virtual" and go back to "real" banks.

There are also a range of other account fees that many financial institutions charge. Fees to have your cheques returned. Fees for writing cheques that aren't encoded. Even fees for inactive accounts.

But the Canadian Bankers Association says about a third of bank customers pay no service fees, either because they're children or seniors, or because they maintain the minimum balances in their flat-fee accounts that result in having their monthly fee waived.

ABM fees

If there's one particular group of service fees that seems to give Canadian consumers fits, it's ABM fees. Some bank customers are charged as much as $1.25 for withdrawing money from their own accounts, even if they use a bank machine from their own bank. That's the "regular account fee."

Add another $1.50 if they use a machine from a competing bank. That's what called a "network access fee" to the Interac network. (Some financial institutions are members of "The Exchange" network, which is similar to Interac. Members — which include Canadian Western Bank, Citizens Bank, Alterna Bank, HSBC, Manulife Bank, National Bank and many credit unions — do not charge convenience fees to the customers of other member institutions.)

Then you have to add in "convenience fees." These are charged by other financial institutions (not your own) as well as private operators. Figure on an extra $1.50 if you use an ABM from a competing financial institution. But if you make a withdrawal from one of those ubiquitous private, "white label" machines at the local variety store, chalk up as much as $3 more.

Add up all the potential charges and the Financial Consumer Agency of Canada says it's possible to pay as much as $6 for a single cash withdrawal from a privately-operated ABM.

Little wonder that some Canadians are getting "fee-d up."

What you can do

Some solutions are obvious. People should use their own financial institution's ABMs as much as they can. That avoids all network access and convenience fees. Account packages include a certain number of "free" transactions — including ABM transactions. If your account package allows for a limited number of transactions, you can always withdraw $200 once (counts as one transaction), rather than $40 five times (counts as five transactions).

The Canadian Bankers Association points out that it may be cheaper to do some transactions at a bank machine rather than with a teller. It may also be cheaper to use a debit card rather than writing a cheque.

The Financial Consumer Agency of Canada also suggests taking advantage of so-called "cash back" arrangements. If you're paying with a debit card, many stores will allow you to ask the cashier to add in $20 or $50, which will be given back to you in cash. (Most stores don't charge for doing these cash backs, but the FCAC warns that some do.)