7 easy ways to lower your banking fees

Kerry Taylor has been a customer of all five of Canada's largest banks. "I have always kept an eye out to see what other banks are offering, to see if there is a better account with a more competitive price," says Taylor, the Vernon, B.C., author of 397 Ways To Save Money and the creator of squawkfox.com, a popular blog about frugal living. "It's a bit of work to change your bill payments or your credit card, but it's a drop in the bucket compared to the hundreds of dollars you can save on fees."

Ellen Roseman, personal finance and consumer issues columnist at the Toronto Star, agrees. She points out that branch staff are given incentives to upsell. "They get a memo that says if they sell so many RRSPs this year, they'll have a chance to win a free trip or a Coach bag." Today, the average Canadian household spends almost $200 a year on banking charges, and credit card fees (never mind interest) can easily double that figure.

It's time to push back. Here's how to keep the banks' hands out of your own Coach bag.

1. Get the right chequing account

While the details vary, chequing accounts come in three basic flavours. There's the type that charges about $4 a month, but allows only a small number of ATM withdrawals, bill payments, cheques, pre-authorized payments and debit card purchases - any additional transactions cost about 65 cents each. The second type of account charges $10 to $15 a month and allows unlimited transactions. Finally, there are premium accounts that cost about $25 a month and typically include a credit card with no annual fee, plus a host of other services.

Choosing the wrong type can cost you big. The most common error is thinking you can get by with a dozen or so transactions a month. Just using your debit card three times a week will put you over that limit, and those 65-cent transaction charges can quickly turn into $30 or $40 a month. For most of us, unlimited transactions are a must. But don't pay big bucks for a premium account if you won't take advantage of the perks. If you pay all your bills online, for example, you don't need free personal cheques.

Pull out your last few statements to see how many transactions you make each month, and how much they're costing you. Then visit your bank's website and see whether there's an account better suited to your needs.

2. Use an online bank

If you want to dispense with chequing account fees altogether, do what Kerry Taylor did and open an online account with President's Choice Financial. While all of the big banks allow you to pay bills and do other transactions online, PC Financial and ING Direct are the only two online banks that offer no-fee chequing accounts. "I don't have to count how many cheques I use or how many debit card transactions I make, and I don't have to keep a minimum balance in that account," says Taylor. Although PC Financial has no branches, customers such as Taylor can use either PC's own ATMs or those of CIBC to make no-fee deposits and withdrawals.

Even if you're not ready to dispense with human tellers, Roseman suggests, at the very least, using an online bank for your savings.

Not only do PC Financial, ING Direct and Ally pay higher interest, they do not charge you for taking your money out. The big banks often ding you $5 for every withdrawal from a savings account.

Next page: 3 more ways to reduce your bank fees