Banking Accounts and Packages

Choosing a banking account package can be confusing. Your financial institution may offer a dozen or more different types of account packages and plans—some for young people and students, some for seniors, some that allow chequing, some that do not. And the fees are hard to compare: some accounts charge a flat monthly fee, while others charge for each transaction. And they pay different rates of interest.

How do you know which account to choose? In this section, you will learn:

the main features that chequing and savings accounts offer
the interest paid and how it affects your savings
the account fees you’ll pay and how to reduce them
how to read your account statement.

Financial institutions in Canada offer a wide variety of deposit accounts. To match your needs to the services they offer, they need to know a bit about you and how you expect to use a banking account. For example, they need to know:

if you are a member of a special group, such as students, youth or seniors (they may charge lower fees for some groups)
the minimum balance you will have in the account each month (they may not charge regular fees if you keep a minimum amount in the account)
the number of transactions you expect to do in a month (sometimes it’s cheaper to pay for each transaction, sometimes it’s better to pay a flat monthly fee)
if you need any special services on a regular basis, such as:
- certified cheques
- money orders and bank drafts
- stop payments
- travellers’ cheques
- personalized cheques
- overdraft protection
- cheque returns
- safety deposit box
- access to bank machines that are not owned by your financial institution
- email money transfers.

The two main types of accounts are savings and chequing accounts:

Savings accounts	Chequing accounts
pay higher rate of interest	pay lower interest, or none at all
may not offer debit card or chequing	include debit cards and chequing
may have fees on basic transactions	may offer basic services at no fee
may have limit on number of free transactions	usually allow more free transactions
may require one or more days to transfer money	do not delay withdrawals, cheques or debits
	may offer special rates for certain groups
best for money you won’t need for day-to-day expenses	best for day-to-day banking

Some financial institutions also offer combined chequing/savings accounts that offer features of both types of accounts. You earn a small amount of interest and you can also write cheques. You will likely get less interest than with a regular savings account, and you may pay higher fees when you write cheques.

Tip

Financial institutions offer other alternatives if you won’t need to withdraw your money for a few months or more, such as term deposits or investment accounts. Ask the customer service representative about plans that might make more money. For more information, see the Investing module.

You can go to the website of the institution you are interested in to find details of the features and costs of each account. Or you can simply use the Financial Consumer Agency of Canada’s Account Comparison Tool for banks, credit unions, caisses populaires and trust companies. The tool will ask for some information about your banking needs, then show a list of financial institutions in your province, the features they offer and the fees they charge.

Comparing accounts

Before choosing an account, ask questions and compare different accounts.

Try the Account Comparison Tool to see if you have the best account for your needs.

Or download and use this form to compare accounts.

Savings accounts usually pay interest on the money that you deposit. The interest you earn on money you save will add to your savings, especially if you have a higher-interest savings account.

Savings accounts normally pay compound interest—you receive interest on interest previously paid into your account. This way, every time your financial institution pays you interest, you’ll receive a little more and your savings grow faster.

Some investments pay simple interest. With simple interest, the amount of interest is calculated on the original amount only, not on the interest added to the account. These investments usually pay a slightly higher rate of interest. However, compound interest is the standard for savings accounts.

For example, compare these three savings accounts:

Savings account #1

Savings account #2

Savings account #3

Pays simple interest

Pays compound interest

Pays 1.5% interest per year

Pays 2.0% interest per year

If you deposit $10,000:

after one year, you will receive $150 interest
after two years, you will receive $150 interest
after ten years, you will receive $150 interest
after ten years, your savings will have grown to $11,500

If you deposit $10,000:

after one year, you will receive $150 interest
after two years, you will receive $152.25 interest
after ten years, you will receive $171.51 interest
after ten years, your savings will have grown to $11,605.41

If you deposit $10,000:

after one year, you will receive $200 interest
after two years, you will receive $204 interest
after ten years, you will receive $208.08 interest
after ten years, your savings will have grown to $12,189.94

Financial institutions usually calculate the amount of interest to pay each month. Some calculate the amount daily and pay the amount into your account at the end of the month. Some calculate it on the lowest amount you had in the account over the month. If they calculate it daily, you’ll save a little faster.

Of course, you’ll save more if you make regular contributions to your savings account.

Try the interest calculator below to see how much you could save.

Annual percentage yield

Yearly 8.00%
Quarterly 8.24%
Monthly 8.30%
Daily 8.33%

Return in dollars

Yearly $43,178.50
Quarterly $44,160.79
Monthly $44,392.80
Daily $44,506.92

Your financial institution will give you a record showing the money that goes into and comes out of your account: your account statement. The type of record depends on the account you have. It could be online or a monthly statement that is mailed to you. (Your financial institution may charge a fee for paper statements.) Some accounts give you a passbook in which you can print the transactions at a teller machine or in your branch.

The account statement will look similar to the statement below, whether it is printed on paper or displayed on a computer screen.

Check your account statement at least once a month, either online or on your printed record. Watch for any transactions you don’t recognize. This is your chance to make sure that no one has used your account improperly, and that there are no mistakes.

If you find any unusual transactions, first check your own records to make sure you haven’t forgotten anything. If you are sure the statement is wrong, contact your financial institution and explain what the problem is.

Your account statement

ABC Bank ^Footnote1

1425 Names Street, PO BOX 4000
Victoria BC V8X 3X4. 1-800-555-5555

Chequing Account Statement
Page: 1 of 1

Statement Period

Account No.

John Jones ^Footnote2
1643 Dundas St. W Apt 27
Toronto ON M6K 1V2

2012-03-18 to 2012-04-19 ^Footnote3

00005-123-456-7 ^Footnote4


Date	Description	Ref.	Withdrawls ^Footnote5	Deposits ^Footnote6	Balance ^Footnote7
2012-03-18	Previous Balance ^Footnote8		Column shows money taken out of account	Column shows money put into account	Column shows total amount in the account 0.55
2012-03-19	Payroll Deposit – Hotel			694.81	695.36
2012-03-20	Web Bill Payment – Mastercard	9685	200.00		495.36
2012-03-21	ATM Withdrawal – Interac	3990	21.25		474.61
2012-03-22	Fees – Interac ^Footnote9		1.50		472.61
2012-03-25	Interac Purchase – Electronics	1975	2.99		469.62
2012-03-25	Web Bill Payment – AMEX	3314	300.00		169.62
2012-03-27	ATM Withdrawal – First Bank	0064	100.00		69.62
2012-03-29	Interac Purchase – Supermarket	1559	29.08		40.54
2012-04-01	Interac Refund – Electronics	1975		2.99	43.53
2012-04-02	Telephone Bill Payment – VISA	2475	6.77		36.76
2012-04-02	Payroll Deposit – Hotel			694.81	731.57
2012-04-04	Web Funds Transfer – From Savings	2620		50.00	781.57
2012-04-08	Pre-Auth. Payment – Insurance		33.55		748.02
2012-04-12	Cheque No. – 409		100.00		648.02
2012-04-15	Mortgage Payment		710.49		-62.47
2012-04-16	Fees – Overdraft ^Footnote10		5.00		-67.47
2012-04-17	Fees – Monthly		5.00		-72.47

	* Totals *		1515.63	1,442.61

Footnote 1

Your financial institution’s name and address.

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Footnote 2

Your name and address.

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Footnote 3

The time period that the statement covers.

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Footnote 4

Your account number.

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Footnote 5

Column shows money taken out of account.

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Footnote 6

Column shows money put into the account.

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Footnote 7

Column shows total money in the account.

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Footnote 8

The amount in the account at the start of the period.

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Footnote 9

Column shows transactions the financial institution has recorded

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Footnote 10

Account fees charged by the financial institution

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Your account statement will list any fees your financial institution has charged, including account fees that cover a basic package of services over a month, or transaction fees that are charged each time you use a service. Often, for example, your account will include a number of free withdrawals or other transactions, but it may not include services such as using a banking machine from another institution or sending a payment from your account. Fees for these services can add up to a significant amount.

Case study: Banking service fees add up

Daniel didn’t usually read his account statement. It seemed to be okay when he looked at the first one, so he thought, “Why bother?” It was just one more piece of junk mail. But today he opened it as he was waiting for a phone call.

“What’s that?” he thought, as his eye ran down the items on the page. “Monthly fee, $6.95. Network fee, $2.95. Twice! Non-system machine fee, $3.49. Bill payment fee, $1.25. What is all this?”

He called his branch to find out, and the service rep explained: his account charged a monthly fee of $6.95, but it included only certain transactions. Daniel had used a banking machine at another bank twice, and the network, which links financial institutions to each other, charged a fee for each transaction. One of the transactions was at a privately owned cash machine that charged an additional fee of $3.49. And bill payments were not included in Daniel’s account package, so there was an additional fee of $1.25. The total was $17.59.

The branch representative said that Daniel could switch to another account that included free network charges and bill payments. That account charged a service fee of $17.95 a month. Daniel decided to keep track of his transactions for the next few months to see if the new plan would save money for him.

Lessons Daniel learned:

Find out what your transaction fees will be when you open an account.
Check your account statement regularly.
Ask about items on your statement you don’t understand.
Monitor your transactions to make sure you have the best plan for your needs.
Avoid transactions with higher fees, such as those from automated teller machines (ATMs) that are not affiliated with your financial institution.

Most accounts include some fees, whether a monthly account fee, individual fees per transaction or both. (Some no-fee accounts are available, but they may include only limited services.) Some common fees your financial institution might charge you are:

transaction fees for withdrawing or transferring money
bill payment fees if you pay your bills at the financial institution
debit card fees if you use debit to pay for purchases, or if you withdraw cash from a cash machine that is not operated by your financial institution
non-sufficient funds (NSF) fees if you write a cheque for more than you have in the account and the financial institution doesn’t honour it
overdraft fees for protection that covers your payments if there is not enough money in your account and the financial institution covers the payment
account statement fees to give you a printed statement
cheque printing fees to provide you with a set of cheques.

Some accounts charge a monthly fee that lets you do several transactions for one price. If you pay a lot of individual service fees, you may find that a monthly fee will provide the services you use at less cost. Also, you may be able to reduce fees by making one larger withdrawal per week instead of several small ones.

Ask your financial institution what fees they charge your account. They may have an account available that will provide the services you need at less cost. Or, if you want to find out what other financial institutions offer, including banks, credit unions, caisses populaires and trust companies, go to the Financial Consumer Agency’s Account Comparison Tool. The tool will tell you what various financial institutions charge for accounts in your province or territory.

See the video, Banking tips, for more information.

You can ask for lower fees. Contact your financial institution and discuss lowering or waiving some of your fees.

Make sure your account is in good order. Be ready to say how many years you’ve been a good customer, what accounts you have at the institution and what charges you pay.
Ask for something specific. Explain that you want a specific fee waived and why.
The first person you talk to may not be able to help you. Ask to speak to a supervisor if necessary.
Explain your position, but make sure your request is reasonable.

Review your accounts with a representative once a year or if there is a major change in your finances. Ask the representative to suggest ways to reduce your fees. You may be able to get the institution to reduce some or all of your banking fees if you take out a mortgage or line of credit at the institution

Here are some easy ways to lower your account fees:

Watch how many transactions you make: With some accounts, you can do as many transactions as you like for one monthly fee. With other accounts, you can only do a certain number of transactions for the fee you pay—you pay more if you go over the limit.
Use the cheapest method to do your banking: You may pay less if you use a cash machine or Internet banking instead of going to a bank branch in person. But some accounts charge extra fees if you pay your bills online.
Get only the records you really need: If you write cheques and you want to get the cheques or scanned images of the cheques back after they have been cashed, you usually pay a fee for this service. You may also pay fees for getting your account balance and for updating your bank book.
Watch your account balance: Some accounts offer lower fees if you keep a certain amount of money in your account at all times (a minimum balance). If you make a payment from an account and there is not enough money to cover it, your payment may be rejected, and you may have to pay a non-sufficient funds (NSF) fee.

Tip

Be sure you have enough money in your account to cover payments. To avoid NSF charges for rejected payments, you can consider overdraft protection. You pay a monthly fee in months when you use the overdraft, and your financial institution covers your cheques, even if there is not enough money in your account. However, it will charge interest daily on the amount of the overdraft, so this may be a costly option.

Ask for special fees based on your age: Some institutions offer special services or rates if you are over a certain age. Some also have special accounts for children and teens who are just starting to save.

Pick a location that’s easy to get to at times you like, and that has convenient teller machines. It will be easier to deposit and withdraw your money and you’ll save money on travelling or using machines from another institution.
Get only the services you need. Don’t pay for services you don’t need. Also, check from time to time to see if you should change your account features.
Different financial institutions calculate fees in different ways. Compare fees and pick the account that charges the lowest fees for the services you need.
Check the interest rate. Compare rates before you open an account.

At the end of the module, you will find an Action plan. This is a tool that you can use to track your progress and take the next steps to manage your banking successfully in the future. Use the action plan as a roadmap for financial action!