SERVICE FEE – 7EPMT/WD/TFR@$.150 at Royal Bank of Canada (RBC)

The other day I was surfing my savings account's details and I noticed a withdrawal of $10.50 (CAD) that I never did. The description was SERVICE FEE - 7EPMT/WD/TFR@$1.50 and was done on September 2nd, 2010. See the red rectangle in the picture below:

Going back in time a little bit, I noticed that I also had a SERVICE FEE – 4EPMT/WD/TFR@$1.50 on August 2nd, 2010. At that time I was charged with $6.00 (CAD).

I found a pattern in those withdrawals:

1. They apply always on the second day of every month.
2. The amount of the fee is the result of multiplying $1.50 by the number preceding “EPMT” in the description.

See the relation below for a trivial mathematical calculation of the fees:

Description:                                                                Fee value:

SERVICE FEE - 1EPMT/WD/TFR@$1.50       =>   $1.50 (CAD)

SERVICE FEE - 2EPMT/WD/TFR@$1.50       =>   $3.00 (CAD)

SERVICE FEE - 3EPMT/WD/TFR@$1.50       =>   $4.50 (CAD)

SERVICE FEE - 4EPMT/WD/TFR@$1.50       =>   $6.00 (CAD)

SERVICE FEE - 5EPMT/WD/TFR@$1.50       =>   $7.50 (CAD)

SERVICE FEE - 6EPMT/WD/TFR@$1.50       =>   $9.00 (CAD)

SERVICE FEE - 7EPMT/WD/TFR@$1.50       =>  $10.50 (CAD)

…...............................................................................................

SERVICE FEE - NEPMT/WD/TFR@$1.50      =>  $1.50 * N (CAD)

At this point I decided to go to the nearest branch of the RBC and ask about the reason for those fees. They said I was charged because I had withdrawn money from my “savings account”, which is intended for “saving” and not for “making payments”. So, if you plan to pay for anything, don't use directly your “savings account”, instead use your “checking account”.

Most Canadian institutions do unfair tricks like the one described above to eat your money. Fortunately, I found a bank in Canada (Tangerine) that does not seem to trick you and eat your money. If you are interested, you might take a look at the link below:

How to open a checking account at Tangerine?

Note: I am a client of Tangerine. These guys conduct a very clear business. They don’t trick, they don’t hide stuff and above all, they don’t charge any fees.

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RBC online banking: Choose the right Savings Account type

Savings accounts are intended to save... or so RBC [1] says. There's one golden rule: the money that goes into the savings account should stay there. If you don't follow this norm, you will be charged $1.50 per each transaction you make directly from your savings account.These charges are named service fees.

Service fees apply in most situations that you have moved money out from your savings account. For example, whether you withdraw money in an ATM machine, pay with your debit card or make any kind of transaction using your savings account, you are busted and then you should pay the corresponding service fee.

If you need to use the  money in your savings account, first, transfer that money to your checking account by means of the RBC online banking. Then use your checking account to make the payments or withdraw the amount you need.

Even this way you might be charged, because sometimes transferring from savings to checking is penalized with $1.50 per transaction. This depends on the type of savings account your are using. My advice: use RBC High Interest eSavings™ account, which gives you higher savings interests and also allows you to transfer money from savings to checking without being charged.

A better advice, do you banking with an institution that is not waiting for you to make a “mistake” in order to fine you for it. So far, my best candidate is Tangerine. I outlined some of the benefits of banking with Tangerine and how to open a checking account at this institution in almost no time and from the comfort of your home. The details can be found here: How to open a checking account at Tangerine?.

If you decide to remain at RBC, this is how you can change your savings account type:

1.) Login into your online banking account.

2.) Expand your savings account details by clicking on the corresponding link.

3.) Click Personal Accounts --> Change Account Type or Add Owners in the left column of the page.

4.) At his point, follow the instructions your are given, but make sure to choose RBC High Interest eSavings™ as your new account type. [2]

Hopefully you can achieve more freedom with your new RBC High Interest eSavings™ account. It will give you the ability to move money from your savings account to your checking account  without being penalized by the unpleasant service fees. [3]

Notes:

[1]: RBC stands for Royal Bank of Canada.

[2]: There are 7 types of account by default:

• RBC High Interest eSavings™
• RBC VIP Banking™
• RBC Signature No Limit Banking™
• RBC No Limit Banking™
• RBC Day to Day Banking™
• RBC Enhanced Savings™
• RBC Day to Day Savings™

[3]: Important: The money being moved (transferred) is extent of charge only if you use online banking.