Banks count on your complacency as they raise fees
It is often hard to compare old packages with new
My heart skipped a beat last week when an annual survey of attitudes toward the big banks landed and the gist of it was that we’re satisfied with the fees they charge.
How can you be satisfied with a bank fee? That’s like being satisfied paying sales tax.
Fees come up frequently as the top source of annoyance in dealing with these institutions. Yet the annual survey of bank satisfaction by J.D. Power revealed a higher level of comfort in 2016 than 2015.
Happily, the survey’s findings don’t show that we’ve lost our minds. Rather it’s a case of less pain, being interpreted as some pleasure. We don’t like bank fees, says Jim Miller, senior director of banking for J.D. Power, we just saw fewer changes this year.
In 2015 when all the banks raised fees, discontent was high. This year TD Bank and CIBC did some tinkering, but that was it.
The number of fees is increasing as banks feel pressure to maintain profits and boost dividends. Fullservice lenders are under pressure from more nimble financial technology firms. Discount banks are after core savings. Mobile banking technology is expensive and banks have to support thousands of branches and vast ATM networks.
On top of that, as interest rates have fallen the spread between what the banks charge for a loan and what they pay for savings has narrowed. So they need other sources of income. Fees are fertile ground.
The changes are usually pitched as something customers want, but ultimately they are just a way to raise money. The banks know the irritation will quickly pass and here our inertia works for them, says Miller.
However, the group that fights back often gets a better deal, he says.
One reason we give in is that while we understand the purpose of big fees for mortgages, or to set up lines of credit, for example, small fee changes come as a jumbled shopping list. They are confusing, hard to compare with current charges and the numbers seem quite small. Advantage: your bank.
“You will sometimes see increases in services, but in the end it’s about making money,” Miller says. “No bank adds a new fee for its customers’ benefit.”
The Canadian Bankers Association says fees make up 5 per cent of industry revenues, which seems small as a percentage. But in their latest three-month reporting period, the Big Five had revenues of $33 billion. That means they generated $1.65 billion through all fees in that three-month period.
You can’t avoid paying fees, but you can minimize them.
Complain: Miller says customers with several accounts and other business including RRSPs and RESPs can usually get a better deal. “Banks are pretty responsive to complaints,” he said.
As an example, my irritation level reached the point of action this spring when my bank started charging $1.50 per e-transfer for no reason I could discern. Not a lot of money, but I asked them to waive these charges and they have.
Bundle: Take a look at the charges and ask for something better. Packages are often cheaper. In the same way you review your insurance, once a year review your banking.
Share your wealth: Discount banks are paying up to 2.25 per cent on a basic savings account. Compare that to about 0.50 at the chartered banks. Websites such as Fiscal Agents, RateSupermarket and RateHub can help you compare.
Avoid inertia: The banks count on the fact that reaction to the changes is short-lived and most people do nothing, Miller says. Don’t give in.
My son spent the winter in the adventure tourism business in Antarctica and was paid in U.S. dollars. He recently received $6,000 US and wanted to convert that into Canadian funds. He compared the quote from his bank with Knightsbridge Foreign Exchange, one of several nonbank currency services I’ve written about. He ended up with $150 more in his pocket with Knightsbridge.
Small potatoes, you say. For him that’s a couple of weeks of groceries or two nights on the town. Why give that to your bank?
It pays to stay on top of bank fees. It’s another example of the power of small numbers. Make them work for you, not against you.