Weekend Reading: A Money Grab Edition

Weekend Reading_ A Money Grab Edition (1)

Canada’s big banks rollout new fee increases every year or two. These fee hikes may seem innocuous at first – 50 cents here and $1 there – but they collectively (and annoyingly) add up to big bucks over time. 

My advice for Canadians who want to remain with a big bank but don’t want to pay excessive fees is to downgrade to a basic chequing account, maintain a minimum balance, and use a cash back or travel rewards credit card for everyday spending instead of using debit (which can incur more fees).

But that’s becoming more and more difficult as banks continue to hike monthly fees, increase the minimum balance requirement, tie the account fee reduction to holding multiple (fee-based) products, and in some cases not even offer the option to waive the fee with a minimum balance.

For example, TD’s all-inclusive plan costs $29.95 per month and requires a minimum monthly balance of $5,000 to waive that fee. Their Everyday chequing account costs $10.95 per month and includes 25 transactions. The fee is waived when you maintain a $3,000 minimum balance. 

Canada’s largest banks (and others) have all signed a public commitment to offer low cost and no cost accounts. Youth, students, seniors, and RDSP beneficiaries may be eligible for a no cost account that includes basic features.

Bank / Account NameMonthly FeeMaximum number of monthly debit transactionsMinimum monthly balance (for monthly fees to be waived)
BMO / Practical Plan$4.0012 (in-branch and self-serve transactions)
CIBC / Everyday Chequing Account$3.9012 (in-branch and self-serve transactions)
HSBC / Performance Chequing - Limited$4.0014 (in-branch and self-serve transactions)
National Bank / The Minimalist Chequing Account$3.9512 (includes 2 in-branch transactions)
RBC / Day to Day Banking$4.0012 (includes in-branch and self-serve transactions)
Scotiabank / Basic Banking Account$3.9512 (includes 4 in-branch transactions)
TD Canada Trust / Minimum Account$3.9512 (includes 2 in-branch transactions)$2,000

Consumer advocates will call these fee hikes a money grab (as I did in this Global News column) and they’re right. Big banks get away with increasing fees because they know that most Canadians will begrudgingly accept them. Chequing accounts are ‘sticky’ products and customers simply don’t want to go through the hassle of switching banks, or don’t know that free options exist outside the big bank environment.

I recognize that it’s not practical for some people to hold a basic account with a low number of transactions, or to keep thousands of dollars tied-up in a chequing account just to waive monthly fees. In that case I think you can make one last-ditch effort to negotiate your monthly fee down to an acceptable level (as I’ve done) before you need to seriously consider moving to a no-fee bank account.

For no-fee banking options that come with a debit card I’d look at Tangerine, Simplii, Motive, or a local credit union. You’ll get access to a limited number of ATMs (Scotia, CIBC, or the Exchange network of ATMs) and can typically get unlimited free transactions, including bill payments and e-Transfers.

The one downside to moving away from a big bank environment is the lack of branch access. For example, if you need a bank draft to make an offer on a house you may not be able to get one for 48 hours or more if you deal primarily with an online bank.

Canada’s big banks continue their relentless assault on our wallets by nickel-and-diming us to death with fee increases. It doesn’t have. to be this way. In the age of FinTech, there is a better and cheaper option available outside the big banks in every line of business in which they operate. It’s time to explore those options if you haven’t already.

This Week’s Recap:

I recently shared with readers what’s in my wallet and looked at some excellent rewards credit card options.

On Wednesday I took a deep dive into BMO’s line-up of fixed income ETFs.

Over on Young & Thrifty I explained exactly how to transfer your RRSP or TFSA to Questrade.

We’re getting our minds back into travel mode (finally) and so here’s my Airbnb versus hotels comparison on Rewards Cards Canada.

Promo of the Week:

Our friends at Credit Card Genius have outdone themselves with this one. Sign-up for Canada’s top cash back credit card – the Scotia Momentum Visa Infinite Card – and you’ll also get a free $100 Amazon.ca gift card.

The card still offers an incredible 10% cash back bonus for the first three months, 4% cash back on groceries and recurring bills, 2% back on gas and daily transit, and 1% back on everything else. All of this, and the $120 annual fee is waived in the first year.

Weekend Reading:

Purpose Investments introduced a new mutual fund for seniors that targets an initial lifetime income payment of 6.15% (for investors aged 65 to 67). It’s an annuity wrapped up in a mutual fund, with a pooled structure that takes advantage of mortality credits to meet its long-term goals.

Fee-only planner Jason Heath shares the top mistakes that do-it-yourself retirement planners most often make:

“Life expectancy is easy to misjudge for a retiree. The current life expectancy is age 80 for a Canadian man and age 84 for a woman. However, those are the average ages of men and women at death. A 65-year-old man has a 50 per cent probability of living to age 89, and for women, it is age 91. For a 65-year-old husband and wife, there is a 50 per cent chance that one of them will live to age 94, so at 65, they should plan for a 30-year retirement.”

Here’s why retirees need to heed the sequence of returns risk in their portfolios.

This Globe and Mail article explains when it makes sense to withdraw funds early from your RRSP.

An interesting post at Money We Have looks at collecting CPP and OAS when retiring abroad.

Michael James on Money explains how to lie to yourself about a stock crash with statistics. This is in a response to a particular advisor who has been beating the drum about a stock market bubble for the past 15 months.

PWL Capital’s Shannon Bender explains how to calculate your investment returns using the Modified Dietz Method:

The Monevator blog explains how self-directed investors can keep their investment portfolios on track.

Nick Magguilli (Of Dollars and Data) explains how we become so obsessed with millionaires?

A Wealth of Common Sense blogger Ben Carlson digs into 200+ years of asset class returns to find some interesting nuggets:

“There is a very good case to be made that returns over the next 50-100 years will be lower than they’ve been over the past 50-100 years.”

If being a landlord is part of your retirement plan, read this first. Agree 100% – I would not recommend owning rental properties in your retirement years.

Finally, here’s the Blunt Bean Counter with a must-read article on estate planning: “My kids will never fight over my estate.”

Have a great weekend, everyone!

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8 Comments

  1. Warren on June 5, 2021 at 5:51 pm

    Re bank fees. We have banked with CIBC for over 30 years and have not paid any monthly fees on any of our accounts, including a joint account with our son, from the time we turned 55 or 60. The monthly fee shows, along with a credit for the same amount. I’m guessing that we’ve been ‘grandfathered’.

  2. Lotar Maurer on June 5, 2021 at 9:33 pm

    Re: Purpose Investments — sounds like a tontine, which I’ve long thought was a great but under-used retirement funding product — but with the difference that you (or, on your death, your beneficiaries) get back any remaining capital, and all/any accumulated investment returns remain in the pool — in a true tontine, returns AND capital remain in the pool.

  3. fbgcai on June 5, 2021 at 9:47 pm

    re TD fees : keep the $5K in the account and the waived $29.95 fee becomes a 7% return (360/5000) better than most other ‘investments’ and tax free and basically all bank services are ‘free’ – just my $0.02.

  4. Norbert Laforge on June 6, 2021 at 3:50 am

    Scotiabank charges me $6.95 for monthly fees but gives me a $4.00 senior’s rebate. So I get to pay $2.95 per month. Big deal indeed over the usual fee of $3.95. I intend to talk to my financial advisor (from Scotiabank), about that fee. I will ask him why I pay that amount and will try to get that taken out completely. Do you think they will waive that fee?

    Thanks!

  5. Paul on June 6, 2021 at 1:12 pm

    Great article Robb. Do note the TD Minimum Chequing Account no longer has an option to waive monthly fees with a minimum balance. It used to be $2000 as indicated in your article but that was removed at some point last year by TD.

    • Jason on June 7, 2021 at 9:50 am

      After the change the document I received had no mention of the $2000 and even with $2500 in the account I was being charged the fee also.

  6. Deborah S. on June 6, 2021 at 1:45 pm

    We moved most of our money to various Tangerine accounts before moving to Mexico, but left $5K in the TD All-Inclusive “just in case.” I was so glad we did! When our Tangerine card would not work AT ALL in Mexico, and Tangerine could not offer any reason why, we were so grateful for the TD backup. Plus, Tangerine’s services are limited: no incoming or outgoing wire transfers, bank drafts available by mail only (read the complaints on Reddit about Tangerine drafts not arriving timely), endless waits on the phone for anything “out of the ordinary.” Now that we’re back in Canada, we are unwinding our relationships with Tangerine and moving money to EQ as our GICs mature. I figure that at the 1.25% that EQ would pay on the $5k minimum balance works out to about $5.21 per month, which gets us personal service, a free safety deposit box, a free travel rewards card with good travel medical insurance, etc., etc. Worth it to us!

  7. David @ Filled With Money on June 8, 2021 at 5:25 pm

    It’s amazing just how much banks made from fees in the year 2020. A year where so many people were struggling to get by but banks raked in BILLIONS of dollars from people who can’t afford to buy a lot of stuff which banks gladly charged for.

    Fees should be avoided at all costs.

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