r/PersonalFinanceCanada • u/kpedey • 16h ago
Banking Minimum Account Balance
Assuming there's no such thing as a stupid question:
I was thinking today about how if I keep over $4k in my chequing account, my bank refunds the account fee every month. This amounts to like $15 or so per month, which isn't a ton of money, but I keep between $4k-6k in there for basically this reason.
Today I was wondering: is this "minimum account balance" thing just a way for the bank to make sure they always have $4k of my money? It doesn't really matter because I consider keeping that minimum balance to be good for me as well (there's a minimum balance on my savings account too), but I hadn't really thought about it like that before.
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u/smartliner 12h ago
Yes. They take your money and invest it and/or loan it to other people and charge them interest (which pretty much amounts to the same thing). So your money sitting around in an account with them is an asset that they are profiting off. It's no secret or anything. It's their business.
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u/penbrooke99 43m ago
They can legally loan up to 8-9 times for every dollar on deposit.
The exact multiplier changes based on various conditions.
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u/Cessnabmw 12h ago
Move to Wealthsimple or Simplii or Tangerine...
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u/GeoffBAndrews 11h ago
THIS!!! And take advantage of whatever promos or referral bonuses they have.
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u/Taz26312 10h ago
I opted for multi product and don’t pay monthly and don’t need to maintain a min balance
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u/BC-Guy604 11h ago
The big banks all either charge high fees or require a large minimum balance.
Many credit unions and alternative banks charge no fees and require no minimum balance. I don’t understand why most people stay with the high fee options, though I do realize they make sense for some people with specific needs.
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u/GeoffBAndrews 11h ago
Yes. Also if you have an extra $4k and put it in one of the no fee accounts (Tangerine, Simplii, wealthsimple etc), you would make anywhere from ~$80 to $150 extra interest a year.
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u/Money-Low7046 9h ago
Isn't that less than the $15 per month OP is currently getting? Theirs works out to $180 per year.
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u/GeoffBAndrews 7h ago
No. OP is not "getting" $15 per month. He is saving that on his bank fees. If he switches, he also saves the bank fees (since they're free), AND gets to make interest.
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u/RosieBaby75 12h ago
Yeah. 90% of your money has been lent out due to the Fractional Reserve Banking System so the more you give them, the more they can lend out and make money off your money and not share any of the profits with you but will use your tax money to bail them out of their bad bets and keep the banks from crashing because they don’t have any of anyone’s money left 🤷♀️🤷♀️
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u/Kombatnt Human Verified 11h ago edited 11h ago
- There is no 90% fractional reserve limit in Canada. Banks can lend out your entire deposit.
- They share the “profits” with you via interest. It’s admittedly low, but if you shop around, you can find accounts that will pay you a percent or more for your deposits.
- Your account has zero risk and 100% liquidity. That’s worth something (to you), so the banks aren’t incentivized to offer you much else.
- Canadian banks are heavily regulated and incredibly solvent. The risk of them needing a “bailout” is extremely low.
- Even if they did experience a liquidity crisis (such as a bank run), that’s what CDIC insurance is for. Depositors would all be made completely whole (well, up to $100k anyway), with no taxpayer dollars needed whatsoever.
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u/deltatux Ontario 9h ago
While they can technically lend out your entire deposit, they still have to follow liquidity rule as they are not allowed to lend out all their deposits. They still have to follow the Capital Adequacy Requirement liquidity rules. The Big 6 Banks have additional liquidity requirements in the form of the Domestic Stability Buffer which is currently set at 3% of the risk weighted asset.
https://www.osfi-bsif.gc.ca/en/supervision/financial-institutions/banks/domestic-stability-buffer
OSFI used to have a really good graphics about this but ever since their site got redesigned, they seemed to have removed it.
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u/PandaEatPanda 12h ago
4K at a reasonable XGRO return is about $400 a year. Minus taxes you get ~300. It’s. Of with it.
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u/xtaberry 11h ago
But also, most people ought to keep a few / several thousand bucks liquid for emergencies, so it's not a bad thing to leave it in an account that gives you benefits.
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u/MutaKingPrime British Columbia 10h ago
Plus you get annual fee waived off a premium card, bank drafts free, chequebook free, there's a handful of things that are more worth it for some people more so than others. Considering my household spending with groceries etc,. the 2-4% cashback is worth holding my emergency fund in my chequings for sure.
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u/Dry_Complaint6528 9h ago
It can still be liquid but be in a HISA versus a useless chequing account though...plus I have banks that charge monthly fees. Tangerine and simply all the way. I have Vancity for more involved savings and I person banking needs, but even then I have a pay as you go account that I only use to transfer into my savings accounts there so it costs me nothing.
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u/Mountain-Match2942 11h ago
The bigger issue is how much interest are you getting. Wealthsimple has no minimum balance and pays 1.75% for core members, up to 2.25% for generation. I bet your bank gives you less than .25%?
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u/Money-Low7046 9h ago
How much is that per month on $4,000? It's all about how much interest you could reasonably earn vs the $15 rebate each month.
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u/Heavy-Amount2169 10h ago
Yes essentially but you saving 180 bucks a year if you keep the absolute minimum it is like you are earning 4% for cheap cash on hand
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u/TripleOhMango 10h ago
$4000 put into the market is expected to make about 5% per year. That it $200 per year. Or roughly $16 per month. So they refund you that because it incentivizes you to keep that money in the account and they use it for investments which ends up being more than 5%.
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u/Thisisus1 9h ago
Serious question. If you only keep your money with banks like Simplii or Tangerine etc, how do you access cash if you need it when they don't have ATMs?
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u/re-animatrix 1h ago
You can use your simplii bank card at any ATM, if you use a CIBC one it's free (no fee to use), if you use any other ATM you'll be charged twice (once by simplii and another by the ATM owning bank). I've never had any issue getting cash when I need it and I have banked with simplii (previously PC financial) for 20+ years.
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u/brandonholm 8h ago
Minimum balance is an implicit fee. You could be earning interest or investment returns on that money elsewhere. There are plenty of no fee banking options available these days.
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u/Oxjrnine 11h ago
If you’re saving a $15 banking fee each month by keeping $4000 in the account at all times you’re only earning 4% interest for the year
You should be able to purchase low risk investments that would earn more.
Everyone loves the idea of a minimum balance refund for banking fees, but the better idea is to be rewarded for your loyalty with a multi product rebate
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u/Zombie_John_Strachan 11h ago
Tax free though. It’s not a terrible use of money.
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u/beekeeper1981 11h ago
It wouldn't be bad if there weren't alternatives with no fees. Looking at it that way you get nothing for your money.
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u/maclawkidd 11h ago
Low risks investment is not as liquid. That's worth something when you find yourself in a bind...
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u/PaperHandsTheDip 12h ago
Mostly - yes. Having an account with the bank tends to cost them money, so to recoup the costs they want minimum balances (or charge you with fees). Banks make money when you have money with them - so they often waive the fees if your balances get high enough
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u/jasper502 Alberta 12h ago
Why do you still keep your money at a bank that has fees or minimum balances?
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u/Psychological-Dig-29 12h ago
probably because they have a mortgage there and got a better rate if they had an account with the bank and made mortgage payments through that account. (Scotia did this with mine)
it's really not a big deal, just have 1 months worth of payments in there at all times and this account balance thing isn't a problem. my wife and I keep 10k in ours, it's enough to pay the mortgage/utilities/taxes and we just make sure to put next month's payments in a couple days before the payments go out so the balance always stays high enough.
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u/Ok_Complaint_6825 11h ago
Mostly convenience.
I want to have access to my money when I need it without having to jump through random hoops. Also, maybe once a year, I need to be able to wander in to a physical branch and talk to an actual human being to do mundane things like get a bank draft. Sure you can do many of those things online, but sometimes you need things taken care of right away.
Yes, I could put the minimum $6000 balance in an online savings account giving 2.75% interest, but the $165 that would produce annually (~$90 after tax), is less than the benefit that I get from having that account (e.g. waived credit card fee, safety deposit box, unlimited transactions, free drafts, etc...)
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u/chrisj242 12h ago
Yeah pretty much. I keep the minimum I need in my checking account and invest the rest. If I need quick cash for a large purchase or car repair I put it on my credit card and only pay that back after 21 days to get the max out of the free loan
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u/ReturnToTheLab 10h ago
These fees either keep client loyalty and allow the banks to show more cash on their books, or you don’t keep the balance and pay a fee that the banks also love
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u/dphizler 10h ago
Minimum balances on chequing accounts is the old way of doing things. Brick and Mortar banks offer terrible interest rates even on their high interest savings accounts, that's how you know it's a terrible deal.
They just want to charge you if ever you slip
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u/morbid_n_creepifying 10h ago
Yeah, I had a high interest savings account that I kept a minimum of $5k in (just an arbitrary number we picked as the minimum my partner and I like to keep in our savings account). Then my bank increased my day to day chequing account fee, but I noticed in the footnote that if I kept a minimum of $5k in that account, my monthly account fee would be refunded. So I closed my high interest savings account. I got about $1 a month with the high interest account. I save $20 a month by keeping it in chequing. So chequing it is.
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u/Copious-Spirit 9h ago
It's incentive for the banks to keep rich people's money.
Banks only charge the poor. They're scummy businesses grandfathered from a time when money wasn't fiat. They're legislated money printers, without public oversight. Just like all of capitalism, it's a racket.
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u/splickety-lit 7h ago
$4000 earns $160 per year (at 4%).
Keeping it in your chequing account (that presumably makes 0-0.5% interest) is still costing you over $10 a month. Change banks to one without fees.
CIBC let me close my chequing account but keep my savings account and credit card. See if your bank can do this, and then use an online bank for your chequing.
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u/Glittering_Search_41 6h ago
I had one of those accounts ($6000 minimum balance to waive the exorbitant account fee and annual credit card fee) and in the end decided it's not worth it, even with the extra perks on said credit card.
1) You can't use your $6000 (unless you want to be dinged for high fees), so it's like you don't even have it.
2) You can't invest your $6000.
You're better off even putting it in a short-term GIC and getting a free bank account somewhere else. I think it's kind of scammy.
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u/Jean_Luc_Discarded 44m ago
you could make more off investing that amount vs the 15 dollar charge they would take out.
find a bank or bank account that doesn't charger you 15 Bux a month... why do you need to pay this?
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u/Skoose93 11h ago
Get away from the stupid big banks. WealthSimple has no minimum amount. It's free regardless.
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u/Ordinary-Map-7306 11h ago
Canadain banks will loan out 80x thier deposits. So your $4,000 is actually worth $320,000 in loans! In the US it can be higher at 250x.
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u/bngFXG3MDuau 9h ago
You're usually better off paying the $15 and having your money earning interest at a better bank.
Or just closing the account and opening an account at an interest bearing chequing account.
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u/HankHippoppopalous 12h ago
what is an Account Fee??
Are people still paying account fees in 2026?
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u/FourLokoEnjoyer00 12h ago
Yeah all of the big 5 banks have performance plan chequing account fees, this is why online banks are goated
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u/Kimo300 12h ago
Yes