Big banks like to encourage you to do more business with them. Whether it’s more products, more expensive products, or more deposits, they want more, more, more, to earn your loyalty and dependence.
As consumers in our own pursuit of more, we can benefit from this integration ourselves. The more you put into a bank, the more awards you can get out – the trick is making sure you’re still getting ahead as you increase your commitment.
Indeed, following this “pay-to-play” model, many of the best credit card bonuses come with the highest cardholder fees. As premium credit cards form the backbone of a strong Miles & Points strategy, annual fees are a necessary evil, and it’s well worth minimizing them by any means possible.
One key way to do so is by opening a premium bank account at the same institution that issues the credit card, many of which provide an annual fee rebate for one card at the popular Visa Infinite or Mastercard World Elite tiers. Let’s see how we can use these accounts to boost our credit card gains.
All About Premium Bank Accounts
Every big bank offers a package of perks to its premium clients. Top-tier chequing accounts come with a suite of benefits, such as unlimited free transactions, ATM withdrawals, cheques, money orders, bank drafts, or even a safety deposit box.
Some clients will see real value in these features and choose premium banking irrespective of the credit card angle.
What’s the appeal for travellers?
Even if you have no need for the other features of a premium banking package, credit card enthusiasts may find enough value in the annual fee waiver alone. In particular, this is valuable as you seek to decrease the associated costs for any cards you plan on keeping long-term.
After all, First Year Free isn’t forever, and there are more considerations to keep in mind than merely a welcome bonus.
Avid travellers can rely on their credit cards for travel insurance. If you book a trip far in advance, you want to ensure that you’ll hold the card you booked with through the duration of the trip, so that the insurance remains valid. It’s wise to designate a keeper card for this purpose.
Also, it’s good for your credit file to keep your oldest cards open, even if they don’t give you much everyday value anymore. If any of these are premium cards which you can’t or don’t want to downgrade, you can eliminate the annual fee while keeping your credit score healthy as you focus on newer cards in your portfolio.
Not to mention, some cards with annual fees offer great ongoing value for daily use. Maybe you’d like to maintain high earn rates at grocery stores. Or if you frequently make Aeroplan bookings on Air Canada flights, you’d benefit from preferred pricing discounts as a TD or CIBC Visa Infinite Privilege cardholder.
How does it work?
Premium bank accounts come with high fees, around $30/month. Of course, there’s no good reason to pay $360/year to waive a $120 credit card fee (unless you value premium banking itself at $240).
Thankfully, at most banks you can eliminate this fee by maintaining a minimum balance in the account, generally around $5,000. Be careful not to dip below this amount for even a second, or you may not qualify for the fee waiver that month.
In other words, get the premium bank account to waive the premium credit card fee, and deposit the minimum required balance to waive the premium bank account fee. Easy!
Some banks also offer a partial rebate for seniors or students, but these can’t be combined with the full fee waiver for holding a minimum balance, nor are they enough to remove fees entirely on their own. These discounts might be useful if you’re interested in premium banking for its own sake, but not if you’re only in it for a free credit card.
What are the drawbacks?
Before committing a large cash deposit to obtain a credit card fee waiver, it’s important to consider the opportunity cost. With the funds idle in a chequing account, they won’t earn interest or grow as they would in a more lucrative savings or investment vehicle.
For example, let’s say you open an account that requires $5,000 to waive a $120 credit card annual fee, which effectively represents a 2.4% return on your principal over the course of a year. If you can earn a higher return through other means, you’d come out ahead by skipping the premium chequing account, putting that principal elsewhere, and swallowing the credit card annual fee.
Also, by parking the money, you lose liquidity. Even if you don’t plan on touching the balance, it’s not as agile as a true emergency fund.
You can always move the money out if you need to, but you’d have to go through the hassle of downgrading or closing the chequing account and credit card, if you’re not willing to start paying ongoing fees.
Credit Card Rebate Packages
Each of Canada’s major banks offer multiple ways to reduce credit card fees through their banking products. Not all packages are created equal, however, and the details of the fees, benefits, and requirements vary widely.
BMO
The Bank of Montreal offers two accounts that provide a credit card fee waiver.
The higher tier Premium Plan requires a $6,000 balance to waive the $30 monthly fee, and offers a full annual fee waiver on one BMO credit card of your choice. This includes $150 on BMO Ascend World Elite Mastercard, or $120 on the BMO eclipse Visa Infinite* Card, the BMO AIR MILES®† World Elite®* Mastercard®*, and the BMO CashBack World Elite®* Mastercard®*.
The mid-range tier Performance Plan requires a lower balance of $4,000 to waive the $15.95 monthly fee, but only gives a $40 rebate on the credit card fee.
Unfortunately, neither tier offers even a partial rebate on BMO eclipse Visa Infinite Privilege, nor any rebate on supplementary cards. That’s a shame, as the combination of the two BMO eclipse cards is a powerful way to increase your rewards.
Between the two tiers, the top-tier Premium Plan is a better proposition. The rebate on the Performance Plan is only 1% of the minimum balance, whereas Premium will net you 2–2.5%. Better to go all-in if you’re going to bother at all.
BMO also provides a Family Bundle for up to 20 accounts at the same address. This allows you to extend some of the benefits of a premium account to other members of your household, including unlimited transactions. Sadly, the credit card fee waiver is only for the primary account – imagine the possibilities!
Instead, a Family Bundle may be a better choice if you are teaching your teenagers about money management, rather than enlisting your young adult children to earn extra AIR MILES.
Speaking of enlisting, members of the Canadian Defence Community can get the Performance tier for no monthly fee, with no minimum balance. With the $40 credit card rebate, that would bring your net annual cost to $80 for a keeper travel insurance card, with no opportunity cost on your principal.
CIBC
CIBC offers two premium banking tiers: Smart and Smart Plus. Only the top-tier one has a rebate for one credit card of your choice.
You can save up to $139 – a full rebate for the CIBC Dividend® Visa Infinite* Card, CIBC Aventura® Visa Infinite* Card, or CIBC Aeroplan® Visa Infinite* Card, or a partial rebate of $139 for the CIBC Aventura® Visa Infinite Privilege* Card or the CIBC Aeroplan® Visa Infinite Privilege* Card.
With a minimum balance of $6,000 to waive the $29.95/month banking fee, the credit card rebate represents a 2.3% rate of return for Aventura and Aeroplan cards, or 2% for Dividend.
Alternatively, CIBC waives banking fees with $100,000 in eligible savings and investments. Rather than leaving your principal withering away in chequing, you could benefit from free banking if you have a sizeable enough portfolio at CIBC.
A wide variety of investment vehicles are available, including registered and non-registered accounts, both managed and self-directed.
If you go this route, you and your partner can double-count investments in joint accounts. As long as you both reach the $100,000 threshold as a sum of your own individual and joint assets, you can both waive your premium banking fees.
Smart Plus accountholders also get a $50 fee rebate on up to three authorized users – either free with Visa Infinite, or a net cost of $49 with Visa Infinite Privilege.
Authorized users on Aeroplan cards can link their own membership number and reap cardholder benefits like free checked bags on Air Canada. Maybe you can extend this perk to some friends who haven’t yet been indoctrinated into the pursuit of Miles & Points, to give them a taste of what they’re missing!
For existing cardholders looking to later take advantage of this chequing package, you’ll even receive a pro-rated retroactive rebate if you’ve already paid the credit card annual fee.
CIBC’s co-branded Aeroplan cards are useful for insurance on Aeroplan award tickets. While the CIBC Aeroplan Visa Card has no annual fee, the meaningful insurance benefits don’t kick in until you reach the Infinite tier or higher, for which a fee waiver may prove valuable.
National Bank
National Bank offers four different tiers of chequing accounts: The Minimalist, The Modest, The Connected, and The Total.
Of these, The Connected and The Total offer credit card annual fee offsets. National Bank takes a bit of a different approach to offsetting credit card fees with an eligible chequing account, as you’ll get a credit applied to your statement instead of having it waived outright.
You’ll get a $30 credit with The Connected account, and a $150 credit with The Total account. These credits apply to a handful of National Bank’s credit cards, including the flagship National Bank World Elite Mastercard, as well as the bank’s Echo, Cash Back, Syncro, Platinum, and World products.
The Total comes with a monthly fee of $26.95, which is waived if you have a minimum balance of $6,000 at all times, while The Connected has a monthly fee of $15.95, which is waived by keeping $4,500 in your account.
This represents a rate of return of up to 2.5% in the first year, assuming you sign up for The Total and get a $150 rebate for the National Bank World Elite Mastercard.
You’ll need to open your credit card account after signing up for an eligible chequing account, and unfortunately the rebate doesn’t apply to supplementary cards. The rebate applies to the first year only, meaning that you can’t benefit from the fee waiver year after year.
RBC
RBC has two tiers of banking packages with credit card fee reductions: Signature No Limit Banking at $16.95/month, or VIP Banking at $30/month.
Signature No Limit Banking offers partial rebates that varies depending on the type of credit card:
VIP Banking extends a $120 partial rebate on the RBC® Avion Visa Infinite Privilege†, and a full annual rebate on the other cards mentioned above. The RBC® British Airways Visa Infinite† is a quirky case, as you can get the entire $165 fee rebated here.
Unlike other banks, RBC doesn’t have an option to waive chequing fees with a minimum balance. Instead, they offer a “Value Program” with different qualification criteria for account fee rebates.
To benefit from the reduced chequing rate at the tiers that reduce credit card fees, you’ll need to pair your RBC bank account with two or three other products, which include RBC personal credit cards, personal investments, residential mortgages, and linked small business relationships.
On top of having eligible products to qualify for a monthly fee rebate, you’ll need to perform two or more specified account activities each calendar month to or from your enrolled account. These include a monthly direct deposit, a monthly pre-authorized payment, or an eligible bill payment made at least once per month.
While the mortgage is a bit of big ask if you’re not set up already, you can fulfill the investment requirement rather easily with recurring pre-authorized contributions, a minimum $500 value, or any amount in an RBC Direct Investing account.
If you tick all the boxes, your annual banking fees after the credit card rebate work out to about $85 for Signature No Limit Banking, or $120 for VIP Banking, plus the cost of the credit card itself.
Any way you cut it, there’s no way to reduce your net credit card costs by adding a bank account at RBC, and I can’t see the appeal unless you value their premium banking services.
Scotiabank
Scotiabank has two levels of premium banking, the mid-range Preferred Package, or the top-tier Ultimate Package. Preferred requires a $4,000 balance to waive $15.95/month fees, while Ultimate takes $6,000 to waive $30.95/month.
Cards eligible for a fee waiver include their core roster of the Scotiabank Gold American Express, Scotiabank Passport Visa Infinite, Scotiabank Momentum Visa Infinite, and Scotiabank Value Visa Card. Most of these options provide an array of long-term appeal, including high earn rates on groceries and restaurants, lounge passes, and no foreign transaction fees.
The Preferred Package grants a full annual fee waiver on one card up to $150, but only for the first year. This is still an improvement compared to other banks, where it’s usually not worth going for the mid-range chequing account for only a partial fee waiver.
One strategy would be to open a Preferred account in your first year with the card, then upgrade to Ultimate in the second year for an extra $2,000 minimum balance. Your rates of return would be 3.5% in the first year, and 2.5% thereafter.
Also, if you open the chequing account after the credit card, Scotiabank will still give you a full retroactive rebate on the credit card. This is definitely a step up from CIBC’s pro-rated incentive.
Indeed, it’s quite rare to see a big bank give you flexibility with the timing of your money movements, while still awarding the full benefits that come with your premium commitment.
TD
TD follows the same structure as Scotiabank. At the mid-range level, Unlimited Chequing requires a $4,000 balance to waive $16.95/month, with a first-year rebate of $139. At the top, All-Inclusive Banking requires a $5,000 balance to waive $29.95/month, with an ongoing $139 rebate annually.
The rebate is available on any one of TD’s Visa Infinite or Visa Platinum cards, including the TD® Aeroplan® Visa Infinite* Card, the TD® Aeroplan® Visa Platinum* Card, and the TD First Class Travel® Visa Infinite* Card. Unfortunately, the TD® Aeroplan® Visa Infinite Privilege* Card isn’t eligible for a partial rebate. If a top-tier Aeroplan card appeals to you, this is one area where CIBC is stronger.
All-Inclusive Banking also gives a full rebate for one authorized user. Again, CIBC shines brighter, offering triple the benefit on a comparable product.
As expected, TD’s Aeroplan cards are good keeper candidates for insurance and free checked luggage. If CIBC’s advantages don’t tip the scales, I’d look to capitalize on TD’s lower minimum balance requirements instead.
Comparison of Premium Bank Accounts
As you can see, the differences are quite nuanced. Here’s a quick breakdown of the key points for each bank:
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Other ways to waive bank fees |
Investments and mortgage (partial rebate) |
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Visa Infinite Privilege partial rebate |
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Retroactive for open cards |
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Credit card rebate with mid-tier banking |
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Conclusion
Bank accounts with credit card fee waivers are a useful piece in an award traveller’s toolkit, as we seek to reduce costs while increasing our rewards.
If the opportunity cost of an idle minimum balance isn’t too high, we can leverage these accounts to save fees on cards that offer us sustained value over the years. While we’re at it, we may even try out other features of premium banking included in these packages.
