HOW TO GET THE BEST DEAL FROM YOUR BANK
Be a savvier consumer and better advocate for your money by getting familiar with your services — if you’re unhappy, try shopping around, writes Melissa Leong.
When it comes to their financial institutions, Canadians are loyal — maybe to a fault.
According to a report by RateHub, 59 per cent of boomers and 25 per cent of Gen-Xers have held their bank accounts for 20 years or more. A recent survey commissioned by LowestRates. ca shows that 77 per cent of millennials prefer having all of their financial products and credit cards with their primary bank.
Given how integrated they can become in our lives, sometimes it’s easy to forget that banks and other financial institutions are trying to make money too.
“Consumers need to realize that banks are a business,” says personal finance expert Rubina Ahmed-Haq. “Nobody is a better advocate for your money than you.”
Recent questions raised in the media about aggressive sales tactics were a good reminder to be on top of your financial services and, if you don’t like what you’re seeing, to consider shopping around. To help you advocate, here are six tips to make sure that you’re getting the best deal from your bank or financial institution.
LOOK INTO YOUR SERVICES
Make a call to your bank and discuss your services. What accounts are you signed up for? What do they include? Ask them to review your activity to ensure that you have the most suitable accounts.
“It’s an annual ritual for some Canadians to call up their telecom provider and negotiate a better deal on their cable, Internet, or phone charges,” says Robb Engen, a fee-only planner at Boomer & Echo. “We should be doing the same for our banking. You always see awesome deals and promotions to attract new customers. What about an incentive for their existing customers? Since the bank is not going to just freely offer everyone a better deal, it’s up to you to ask (or demand) one.”
For example, Engen’s bank kept increasing the minimum balance required to waive its monthly account fee (from $1,000 to $1,500 to $2,000); so he got fed up and tried to leave. “The rep granted me free chequing with no minimum balance requirement. So I stayed put.”
If you didn’t sign up for something, such as a safety deposit box, bring it up to your bank immediately. If you have an issue and you haven’t been able to resolve it with your bank, then involve your bank’s ombudsman. And if that doesn’t work, take your complaint to either the Ombudsman for Banking Services and Investments or the ADR Chambers Banking Ombuds Office.
SHOP AROUND
Twice when Justin Thouin’s mortgage came up for renewal in 2007 and in 2010, his bank increased his rates.
“I took the time to call a bunch of banks and got better rates. My bank said, ‘We’ll beat it,’” says the 39-year-old Toronto father of two, who started LowestRates.ca in 2012 to help consumers compare different financial services.
In 2015, when his bank notified him that the interest rate on his line of credit would be going up, again, he went to a competitor. “I got a letter from another bank who said, ‘We’ll give you prime.’ I brought that into my bank and they matched it.”
“People are walking into their banks and accepting the first offers that they’re given,” Thouin says. “Canadians need to shop around.”
The Canadian government offers online tools to help you compare financial services and products. Sites such as RateHub. ca, LowestRates.ca and insureye. com provide customer reviews and compares rewards programs, monthly fees, bonus offers, etc., for products such as chequing accounts, credit cards, mortgages and insurance policies.
BE AWARE OF FEES
Every bank provides information online and in paper form outlining its fees; so it is your responsibility to be aware of them. For example, some banks charge customers up to $2 per month to receive statements by mail. Also, regularly check your bank statements for unexpected fees, such as dormant fees; if your account is inactive for two years and you do not reply to a notice, you’ll be charged $20 or more.
To take advantage of free services, Engen suggests opening a no-fee chequing account at an online bank such as Tangerine or PC Financial or at a local credit union, in addition to your basic account at a big bank.
“With the free-banking combo you can use the free account for any transactions such as bill payments, debit purchases, email money transfers and cheque payments. Then you still have access to a full-service branch to get a bank draft, cash a cheque without a long hold, and have a wider network of ATM’s from which to choose.”
UNDERSTAND HOW MUTUAL FUND FEES WORK
“I hear people say, ‘My bank doesn’t charge me for my investments.’ Oh, yes they do. Sometimes as high as five per cent,” says Ahmed-Haq. “Ask for the fund facts, every mutual fund provider should have it for each of their funds.”
The management expense ratio (MER) on mutual funds are collected before returns are reported. Mutual fund fees include those paid when you buy or sell shares in a fund; called sales loads (a front-end load or a back-end load), they could be a couple per cent to 10 per cent. If you invest $100,000 with a two per cent front-end load, a onetime fee of $2,000 goes to the investment firm/adviser. With back-end loads or deferred sales charges, you pay a fee if you sell a fund within a certain time frame. (A typical DSC starts at about six per cent of your investment in one year, declining to zero per cent by year seven.)
To avoid funds with higher MERs, consider a do-it-yourself approach with your portfolio, or opt for passive investing or indexing.
DISCUSS YOUR PORTFOLIO WITH YOUR ADVISER
Make sure that you create an investment policy statement with your adviser and that you touch base with her every year. “It will not only outline your risk tolerance but also many other important factors such as time horizon, income and liquidity needs, etc., that will set the rules around asset allocation ranges between stocks, bonds and cash,” says Martin Pelletier, a portfolio manager with TriVest Wealth Counsel in Calgary.
“I recently reviewed the investments of a retired senior citizen that lived off the income being generated from his portfolio,” he says. “He was shocked when I told him that nearly the entirety of his portfolio was not only in Canadian stocks but 90 per cent was in four banks as his broker told him he had a very conservative and safe portfolio.”
NEGOTIATE YOUR INTEREST RATES
Don’t just accept the rates offered by your bank; look at what others are offering. Consider using a broker when you’re shopping for a mortgage.
When it comes to debt consolidation or debt transfers, read the fine print. “Promotional transfer interest rates are a marketing ploy meant to bring your debt over and then charge you a much higher rate once the promotional period expires,” says Scott Hannah, CEO and president of Credit Counselling Society. “To make transfers work, consumers need to have a plan to pay off the debt within a specific period of time.”