Thursday, May 14, 2015

New Bank Fee Strategy

Canada’s big banks have been creating new types of fees and increasing the size of existing fees lately. But this all shows little imagination. The banks need to think more creatively about increasing profits.

It’s common for bank customers with chequing accounts to have to pay a fee of a dollar or so for each withdrawal beyond some maximum number of withdrawals each month. I think of it as getting dollared to death one little cut at a time.

What if the banks counted the deduction of the dollar service charge as a withdrawal as well? This would create another dollar service fee and another withdrawal. And then there would be another fee and withdrawal and so on. Depending on the speed of the banks’ computers, this could add up after a while.

Critics might say that this would lead to an infinite number of charges, but I’m sure bank representatives could explain that this isn’t true. The charges would stop once the account is drained or the overdraft protection is exhausted. Then the customer could show up at the bank with a loonie to end the chain of service charges.

Okay, that’s enough sarcasm. It should be obvious that I’m annoyed by all the new service charges. Most of my withdrawals require no human interaction. It’s hard to see why I should be charged anything close to a dollar for a few computers to do their work. That’s why I made the move to Tangerine.


  1. Especially when you consider we are in 2015 and it's never been easier and cheaper for Banks when you trade by yourself online. What if they charge for branch or counter services?

    Our family got 5 accounts (checking, kiddys, US etc), 3 credit cards (DW, me and job expenses puposes), 7 investing (RRSPs, TFSAs, RESP and taxable), 2 LOC (personal and HELOC) and a mortgage for a total of 18 financial products.

    We visit the branch once every 2-3 years and its getting less and less often over time. ATM once every 2-3 months. What does all the branches get so busy and open hours getting longer? What all those people doing there? Its not my business but I kind of feel like they try to make me pay for this...

    My fees are 0$ actually but it seem they're gonna jump to 5,95$/month in june. I adressed them about that and wait for a proposal. I still mingle to open my Tangerine account, for convenience purpose only.

    1. @Le Barbu: I assume the bank branch hours are there for selling purposes. They get people walking who want to "buy an RRSP" and so on. I tend to think that all my fees go to profits rather than to subsidize other bank customers. I don't think the banks aim to have unprofitable customers unless required by law.

    2. Maybe I was a bit ironic here because I know a lot of people with not much $$ visiting the branch and ATM all the time.

      If those fees are 100% profits, so be it! We own for more than 50k$ of the big Canadian banks shares (through ZCN). My 5.95$/month may come back in a way or another

    3. All th ecompanies, banks, telcos, etc are trying to nickle and dime us to dead (poverty). Thisngs like it is only two dollars a day for this, 50 cents a day for that, no interest charges, etc. If you take the time to figure out all these miniscule charges you just might see that you are spending a couple of pays per year on these "inexpensive" needs. Even charities (big business now) only ask us for a few dollars a week.

      Time to sit down and see what you really need to live life the way you want. You might be surprised how many nickels a day you are spending.

      Nothing against charities but I give a lump sum to 1) know how much I am giving and how much is left in the bank account and 2) get my charitable donation receipt.


  2. It's almost as if the banks want people to avoid using lots of little debit card transactions and go to credit cards. If people use credit cards, they are more likely to pay interest and they cause retailers to incur higher interchange fees.

    Seems to me those of us with more income, higher balances, and better credit scores can easily avoid service charges while those with less money and bad credit will have to pay up for cash transactions. Kind of sad, if you ask me.

    1. @Gene: My guess is that banks try to make all their customers profitable, which means they need to take a higher percentage of the income of poorer people. I agree that it's kind of sad.

    2. @gene: The solution is simple: open a chequing account at Tangerine or PC Financial. Unlimited debit card transactions, no minimum balances, plus they even pay some interest on account balances (open a savings account with them for higher interest rates).