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What are Bank Service Charges?

The term bank service charge is described by Wikipedia as covering charges and fees made by a bank to its customers. These charges may be in the form of the following:
  • monthly charges for the provision of an account

  • charges for specific transactions other than overdraft limit excesses

  • interest in respect of overdrafts (whether authorised or unauthorised by the bank)

  • charges for exceeding authorised overdraft limits, or making payments (or attempting to make payments) where no authorised overdraft exists

This article shares information about the service fees and value obtained by consumers, the Bank Act of Canada and the Principles of Consumer Protection for Electronic Commerce.

What are the Service Fees and Value Obtained by Consumers?

There are so many banks with different sets of rules so it is advisable for Canadian consumers to be aware that they have substantial control over the service fees they pay. 60 percent of Canadians claim to be paying less than $15 or less for their monthly service fees while roughly 30 percent reported not having paid any amount at all since they took advantage of no-fee service packages for seniors, students or youth, maintained minimum monthly account balance, or opted for a no-fee electronic banking package.

Most consumers said they got good value because of the following:
  • Bank service fees are a comparatively small household expense. Statistics Canada has found that households spend an average of about $16.2 per month on bank service fees, compared to $22.11 spent on lotteries, $56.88 on cable and satellite TV, $41.09 on prescription drugs, and $214.06 on household utilities.

  • Banks offer low-fee account packages for just pennies a day. For example, the monthly fee for low-fee accounts ranges from $2.95 to $4 for eight to 15 transactions a month, unlimited deposits, a debit card and free monthly statements or passbook updates – all for less than the cost of a daily newspaper delivered to your door.

  • Personal service charges account for about 5.6 per cent of total bank revenues.

As consumers, you can go and shop around for the best value for your needs. There are 77 banks operating in Canada and more than 40 offer financial products and services including bank accounts, credit cards, loans and investments to Canadian consumers. The Financial Consumer Agency of Canada (FCAC) offers an online tool to help make it easy. The FCAC’s Banking Package Selector tool compares over 100 different account packages at 16 financial institutions.

What is the Bank Act?

The Bank Act is the primary legislation governing banks and federal credit unions1 in Canada. FCAC is responsible for administering sections of the Act designated as consumer provisions, in addition to monitoring the financial institutions’ compliance with voluntary codes of conduct and public commitments.

There are voluntary codes of conduct that you should also be aware of:
  • Canadian Bankers Association's Code of Conduct for Authorized Insurance Activities.
    This code outlines the banks’ standards for branch employees selling credit, travel and personal accident insurance. It deals with training, disclosure, promotion practices, customer privacy protection and complaints procedures.

  • Canadian Code of Practice for Consumer Debit Card Services
    This code of conduct is designed to protect Canadian consumers who use debit card services. It outlines industry practices as well as the responsibilities of and consumers and the industry in relation to debit card transactions and liability.

  • Code of Conduct for Credit and Debit Card Industry in Canada
    This code applies to debit and credit card networks and their participants. It outlines payment card networks operators’ responsibilities for providing information, flexibility and choice to merchants.

  • Canadian Bankers Association's Model Code of Conduct for Bank Relations with Small- and Medium-Sized Businesses

The Canadian Bankers Association (CBA) has developed a code of conduct model that states minimum standards for banks dealing with small- and medium-sized enterprises (SMEs). The code outlines the banks’ responsibilities when it processes loan or credit applications by small- and medium-sized businesses. Each bank develops and applies its own code to the business activities it conducts with SMEs. However, all bank codes include the key elements of the CBA model.

What are the Principles of Consumer Protection for Electronic Commerce?

These principles, which follow a Canadian framework, are meant to guide the actions of businesses, consumers and governments in Canada in developing a consumer protection framework for electronic commerce over open networks, including the Internet. The framework also clarifies the responsibilities associated with the service.
There are public commitments as well such as that of the Canadian Bankers Association's Cheques. Banks have undertaken a voluntary commitment to reduce the maximum period of time for which they will hold funds deposited by cheque. Cheques must not be damaged in any way, and must be drawn on a financial institution in Canada, in Canadian dollars. For fraud protection, several organizations and institutions have made formal commitments to protect consumers from the unauthorized use of their credit card. These commitments outline consumers' liability in relation to fraudulent transactions on their credit card. For low-cost accounts, eight Canadian banks (BMO Bank of Montreal, CIBC, HSBC Bank Canada, Laurentian Bank, National Bank, RBC Royal Bank, Scotia Bank and TD Canada Trust) committed to offer accounts that meet guidelines set out by the federal government, with the aim of ensuring that Canadians have access to affordable banking services.

Mutual Cooperation

The key to the harmonious relationships between banking institutions and consumers is mutual cooperation and respect. Customers must adhere to all rules and regulations set forth by the banks regarding services and charges. On the other hand, banks need to consider all the limitations of their customers and accommodate all reasonable requests.


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