The golden rule of banking when you’re in school or starting a career is to not help the banks get more gold.
You do that by paying zero fees to do your day-to-day banking. No monthly account fees, no fees for transactions like e-transfers.
Later on, when you’re earning a decent salary, monthly bank fees may be tolerable. But when money’s tight, paying fees to a bank is a pure waste. All you’re doing is subsidizing dividends paid to baby boomers, seniors and other investors who own bank stocks directly or through funds.
Almost all of the big banks now offer no-fee youth or student bank accounts with unlimited debits and e-transfers. One that stands out is a recently introduced package from Canadian Imperial Bank of Commerce CM-T -0.23% decrease called CIBC Smart Start.
Aimed at young people aged 13 to 24, Smart Start offers unlimited free banking, including e-transfers, plus no-cost investing through the bank’s digital brokerage, CIBC Investor’s Edge. That means no account fees or commissions to trade stocks or exchange-traded funds.
The no-cost investing experience sets Smart Start apart, but so does its availability to anyone under 25. TD Canada Trust’s no-fee student chequing account is available until age 23, while Bank of Montreal BMO-T -0.04% decrease gives you an extra 12 months of eligibility after graduation. Student bank accounts at Bank of Nova Scotia BNS-T, HSBC Canada and Royal Bank of Canada RY-T +0.35% increase are available to full-time students. National Bank of Canada NA-T -0.36% decrease offers free banking to people aged 18 to 24.
With their branch networks and ubiquitous marketing, the big banks in Canada have built overwhelming brand power. This explains why alternative banks, while plentiful and deserving of attention, are less of a force in the Canadian banking scene than they should be, considering the value they offer.
Two online banks with strong no-fee chequing options for all clients are run by big banks – Tangerine by Scotiabank, and Simplii Financial by CIBC. The roster of no-fee chequing options available widely also includes Alterna Bank, Motive Financial and motusbank. Some credit unions also offer no-fee chequing.
Some features to look for when comparing no-fee accounts:
- Unlimited transactions, including e-transfers
- Remote cheque deposit – just take a picture with your phone
- No minimum balance
- Access to a national ATM network
- Access to a savings account at the same bank that pays a competitive rate
- A well-designed mobile app with biometric login – you use your fingerprint rather than typing a password
A few non-traditional bank accounts are also worth a look. One is the EQ Bank Savings Plus account, which pays a competitive interest rate of 1.5 per cent and allows you to send e-transfers and pay bills at no cost. The catch: There’s no debit card for buying stuff or chequing.
Koho is an app that pays you 1.2 per cent on your savings, which you can access using a prepaid card. Load your own money onto the card and use it just like any other credit card. A perk with Koho is 0.5 per cent cash back on all purchases.
If you’re a frequent customer of Loblaw supermarkets or Shoppers Drug Mart, take a look at the PC Money Account from PC Financial. You can earn PC Optimum points just by using this account, which provides most banking services except for chequing.
One more banking app to consider is Wealthsimple Cash, a no-fee account with a prepaid Visa card that generates 1 per cent back on spending paid in the form of cash, stocks or crypto. You also get reimbursement of foreign exchange fees charged when you use your card in other countries.
An area where the big banks excel is in building tools into their online and mobile banking apps that help clients budget and track spending. One thing you never want to see in any summary of your spending: Fees charged for day-to-day banking.
PERSONAL FINANCE COLUMNIST
The Globe and Mail, June 7, 2022