5 fees you’re unknowingly paying

For this week’s No More Ls column, we’re revealing some hidden fees and service charges you may be missing.

By Jessica Martel

If you feel like you’re always coming up short, like there’s a leak in your budget, you’re not alone. The drip we’re referring to: hidden fees.

“Many Canadians are struggling more than usual,” says Mark Marshall, a licensed insolvency trustee in Saint John, N.B., at Allan Marshall and Associates. “The basic cost of living continues to climb,” and even if you make a decent income, by the time you pay your bills, there’s often little to nothing left.

The problem: Many of the costs draining your bank account aren’t obvious. Beyond essentials like rent and groceries, Canadians pay various fees built into everyday products and services. From banking and investing to travel bookings, these fees often go unnoticed.

“Hidden service fees affect people’s budgets greatly,” says Marshall. People don’t account for these fees in their monthly expenses and then wonder why they’re short $100 in savings. Find out what you can do about them.

Five fees that could be quietly affecting your budget

So, what are some of the high fees you’re unknowingly paying for, and what can you do to avoid them?

1. Transaction fees

Transaction fees are extra costs that are added to a purchase. Some examples that could show up on your card statement can include:

Debit fees: If you use your debit card to take out cash from an out-of-network ATM, expect to pay a fee (usually $1.50 to $5). Additionally, if you go over the number of debit transactions your bank allows per month, you may get charged an extra $1 to $2 per transaction.
Cash advance: Using your credit card to withdraw cash at an ATM can result in fees ranging from $3.50 for in-Canada transactions to $7.50 for an international advance.
Processing fees: When you pay with a debit or credit card, the card companies charge a fee (up to 2.4%) to process the payment. Often, the seller will cover this cost, but in some instances, it can be passed on to you. For example, if you buy something for $100 with a 2.4% charge, you’ll pay a total of $102.40. These fees must be disclosed before you purchase, but if you don’t check the fine print, they’re, easy to miss.

To avoid debit fees, try to stick to in-network ATMs and consider switching to an account with unlimited transactions. To limit cash advance and processing fees, use debit cards for cash withdrawals and pay with cash when there’s a processing fee. In Canada, there are financial institutions that don’t charge transaction fees, so comparison shop.

2. Low balance fees

Many savings and chequing accounts require a minimum balance to avoid a monthly fee. If your balance falls below this number, even for a day, you’re hit with a low balance fee, which can vary depending on your bank and account.

For example, let’s say your minimum balance is $2,000, and it dips to $1800 at one point during the month. At this point, your bank charges you $12. It might not seem like much, but this adds up to $144 per year. It’s easy to miss because these fees are automatically deducted from your bank account. Again, it pays to shop around and look for a savings account with no minimum balance fees.

3. Investment management fees

If you invest in mutual funds, you likely pay a management fee, expressed as a management expense ratio (MER). This fee covers the costs associated with managing and rebalancing your portfolio.

Most mutual fund management fees are a percentage (usually 1% to 2%) of your portfolio’s value. For instance, if you have $100,000 invested and a 2% management fee, you’ll pay $2,000 per year. An easy way to reduce this fee is to invest in exchange-traded funds (ETFs) which typically come with much lower fees (around 0.5%). In this example, the fees on a $100,000 ETF investment will cost $500—a $1,500 difference.

4. Buy-now-pay-later fees

With a buy-now-pay-later (BNPL) plan, you can buy something, spread out the payments over time and take home your purchase immediately (or get it delivered), which can help with budgeting. Many BNPL providers advertise 0% interest, making it an attractive choice. But, miss a payment or fail to pay your balance on time can trigger a late fee—either a flat fee or a percentage of the order value (often up to 25%!).

On top of late fees, some BNPLs include service fees or rescheduling fees if you wish to change the payment date. All of the extra charges can turn a convenient option into an expensive form of borrowing. Before using a BNPL, read through the policy so you know what the potential fees are. To avoid BNPL fees, you can set a reminder or enable autopay to prevent missing a payment, use a credit card to pay off the balance before interest accrues, or save up for the item.

5. Resort fees

A resort fee—also known as a property fee or destination fee—is a mandatory charge that covers different hotel services, such as access to the pool or sporting facilities, shuttle services, or other hotel amenities. You pay these fees even if you don’t use the amenities.

Legally, resort fees must be disclosed up front. But they’re often kept separate from the base hotel rate and displayed in a less-than-obvious way. Resort fees vary depending on your destination and hotel, but are often around $35 per night. For a week away, resort fees can set you back a few hundred dollars.

To completely avoid paying resort fees, look for hotels that don’t charge them in the first place. That means reading the fine print, and ensuring that the price is the price you want when you click “book.” (But don’t be penny-wise but pound-foolish. Ensure the total price is within your budget.) And if you’re part of a hotel loyalty program, you can check to see if they waive resort fees as an added benefit.

Why you may not notice these fees

So, why are all these fees often overlooked?

Dr. Stefano Di Domenico, Behavioral Scientist and Assistant Professor at the University of Toronto Scarborough, suggests it’s a combination of factors, including:

Fee presentation. Instead of using dollar amounts, some fees (like the MER) are presented as small annual percentages. So, while they seem minor, they do add up over time.
Financial jargon. Fees are often buried in “information-dense documents filled with jargon,” explains Di Domenico. “This can be overwhelming.”
Product bundling. Fees are wrapped up in the total cost of the product or service, meaning there’s no separate bill, so it’s easy to miss.

What can you do to identify these fees?

Now that you know these fees exist, what can you do to spot them in the future? Our experts provide a few useful tips.

Ask about fees upfront: If you’re not sure if a service comes with extra fees, “pick up the phone and call customer support,” says Marshall. Domenico agrees, saying people need to feel encouraged to “ask basic questions without feeling embarrassed.”
Check your statements: Marshall suggests doing a quick audit of all your plans and statements. “Awareness of what you’re being charged for is the key.”

How do hidden fees impact you?

When Canadians realize they’re paying extra for hidden fees, what’s the response? “People can have a variety of negative reactions,” Di Domenico says. Learning about the fees can “reinforce feelings of incompetence, embarrassment and even shame.” People can also “feel duped, and that obviously leads to a lack of trust.”

On a more positive note, Di Domenico suggests that finding out about these hidden fees can act as a catalyst for some people to increase their financial education. He says, “It’s not the kind of inspiration anyone hopes for, but people do learn from trial and error.” If you have a willingness to learn, ask questions, and make a few changes to avoid these fees, you can limit this financial leak in your budget.

Jessica Martel, MSc, is a freelance writer, researcher, and certified financial education instructor (CFEI). She is based in Calgary.