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The financial industry has officially stopped babying the tax-free savings account.

On March 1, Toronto-Dominion Bank will become the last of the big banks to introduce a fee to transfer a TFSA held at one of its branches to another financial company. The price of freedom is $75 plus tax for clients with TD Canada Trust TFSAs.

Investment firms have had TFSA transfer-out fees for a while. Lately, they've been getting creative in squeezing account administration fees from clients with small TFSAs. It's all part of a process of treating TFSAs for fee-generating purposes like other registered accounts, mainly registered retirement savings plans and registered retirement income funds.

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Introduced in 2009 with a $5,000 annual contribution limit, TFSAs were initially too small for investment firms to apply fees without looking grabby. The maximum accumulated TFSA room, going back to the beginning and including 2016, has grown to $46,500, and investment gains will have increased the TFSA assets of some people well into six figures. The financial industry is adjusting to the fact that TFSAs can be much larger now – and so should you by avoiding or managing admin and transfer-out fees.

The most irritating aspect of TFSA fees is how hidden they are. Banks are huge TFSA cheerleaders on their websites, but you have to dig deep to find fee information. The good news here is that fees don't generally apply if you want to make a simple cash withdrawal from a TFSA while leaving the account intact. Where you will pay is if you shut the account down and move the contents elsewhere.

TD's TFSA transfer-out charge is part of a series of March 1 fee increases for individual and small-business clients. The bank says it set its TFSA withdrawal fee at the midpoint of what its competitors charge ($45 to $100). "Until this change, we were the only bank to offer TFSA transfers to another financial institution for free," TD's media-relations people said in an e-mailed answer to questions. "After much consideration, we have made the decision to implement this fee to reflect the costs involved in processing and moving the assets to another institution."

Transfer-out fees at investment firms range as high as $135 plus tax. As for annual administration fees, $50 is a typical amount. Your online brokerage firm has no admin fees specifically for TFSAs? Then check for another layer of fees that may apply to small accounts of all types – typically with holdings worth $10,000 to $25,000 or less.

Some online brokers have moved to a fee structure with a charge of $25 a quarter for accounts of this size. Others apply inactivity fees to TFSAs among other types of accounts – if you don't make a trade over a set period, quarterly fees kick in. TFSAs used to be exempt from these sorts of fees; now, they're seldom excluded.

The prevalence of TFSA fees suggests some new rules for account holders. Before opening a starter TFSA account at an online broker, check to see whether any quarterly maintenance fees would apply.

If you're opening a TFSA at a bank branch, give some thought to whether you'll outgrow the account in the years ahead and have to pay a fee to move it elsewhere. You can typically hold savings accounts, guaranteed investment certificates and in some cases mutual funds in bank TFSAs. If you have broader ambitions, try a self-directed TFSA at an online broker.

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Be especially vigilant about fees if you set up a savings account TFSA. Transfer-out charges can easily eat up close to or all of a year's interest at today's low rates. If you like to set up new TFSA accounts to take advantage of periodic high rate promotions offered by banks, give some thought to how you'll get your money out when the rate falls back to the low levels that today are normal.

To avoid transfer-out fees, consider withdrawing money in cash rather than moving the account elsewhere. Note: If you move money out of one TFSA and into another over the course of a year, you may run into overcontribution issues with the Canada Revenue Agency. Avoid this potentially costly hassle by waiting to recontribute cash to TFSAs until the next calendar year.

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About the Author
Personal Finance Columnist

Rob Carrick has been writing about personal finance, business and economics for close to 20 years. He joined The Globe and Mail in late 1996 as an investment reporter and has been personal finance columnist since November 1998.Rob's personal finance columns appear in The Globe on Tuesday and Thursday, and his Portfolio Strategy column for investors appears on Saturday. More

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