Canadians Overpaying Billions in Bank Fees, Report Finds

A recent report from consultancy North Economics has shed light on the excessive bank fees that Canadians are facing, revealing that they are overpaying by billions of dollars each year. The report compared fees at the Canadian Big Five banks — RBC, TD, BMO, CIBC, and Scotiabank — with those in the U.K. and Australia, showing a significant disparity in costs.

According to the findings, Canadians pay significantly more per month for bank accounts, as well as for fees such as non-sufficient funds, overdraft charges, and accessing ATMs at competitor banks. The report's analysis of retail bank profits compared with deposits revealed that Canada's largest banks had $7.73 billion in "excess" income in 2022, equating to about $250 per Canadian.

In response to the report, the Canadian Bankers Association emphasized the importance of banks in providing essential financial tools to Canadians and small businesses. However, the comparison with banks in the U.K. and Australia highlights the stark differences in fee structures, with major banks in those countries offering free accounts to all consumers and charging minimal fees for services like non-sufficient funds.

While Canadian banks charge between $45 and $50 for non-sufficient funds, U.K. banks charge either nothing or only a few dollars. Similarly, Canadian banks typically charge $5 for overdraft protection, while U.K. banks offer this service at no cost, albeit with higher interest rates on the overdrafted amount.

The report also points out that while certain groups like young people, students, and seniors may have access to no-cost accounts, there is no free option available to all Canadians. Additionally, customers can avoid fees by maintaining a high account balance, but the required amount can range from $3,000 to $6,000, potentially limiting the opportunity for higher returns through better interest rates.

The report by North Economics underscores the significant disparity in bank fees between Canada and other countries, highlighting the need for greater transparency and fairness in fee structures to ensure that Canadians are not overpaying for essential financial services.