A Great Financial Idea Dies

When I first started writing, I wrote about how when I was at BNR, they brought an ATM into the office space, and initially it was with CIBC, however at the time, the charges for using a non-BMO (who I was banking with at the time) ATM machine was costly (although nothing like what it is now), so I decided to open a bank account with CIBC, to save that withdrawal charge. Later CIBC closed their office and took away the ATM machine and it was replaced with the Telecommunication Technologies Credit Union and I wondered whether I should open an account with them (I decided against it due to their yearly subscription fee).

The premise of this simple idea was:

Open a bank account with a bank with the banking machine closest to work, so that you can save the “Other Bank” ATM charges if you need some cash at work. Set up the “direct deposit” from your employer to put a small amount in that account which is then available to you.

Currently, my new office is very close to an RBC, so I figured I’d look at the numbers and see if it was worthwhile, opening an account with RBC so that I could avoid the extra charges that arise by using their ATM machines (which act like “White ATM Machines” for non-RBC customers). Unfortunately the numbers do not add up, even with the free iPad Mini 2 that might come with the account (if I either pay bills automatically out of the account or have part of my pay put into the account).

The big stumbling point with this simple theory is, the monthly banking charge on the account being about $14 a month. The equation to look at would be:

Monthly Bank Fee Z < (N withdrawals * $3 service charge per withdrawal)

In this instance if you withdraw from your account more than 4 times, it is better to have the “near work bank account” (for lack of a better term).

For me, I have decided to simply withdraw money from the bank near my house if I need it (and thus no charges for ATM access) and if I am short when I am at work, I work around it (i.e. go without lunch, or make sure I bring my lunch every day).

The better rule to live by is:

Withdraw enough cash for the week from your bank and never use ATM’s that are not associated with your bank, and never use a “White ATM” either.

 

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Thank You TD

I figure I should write an official thank you note to TD, TD Mutual Funds and TD Waterhouse, because without them I would not have some of my most popular articles.

TD Toronto Dominion Bank

TD

I went back over my archives and I realized that not only am I a customer of TD, TD Mutual Funds and TD Waterhouse (and a shareholder as full disclosure), but I write about their services a great deal.

Many (if not all) of the articles in my RDSP page talk about TD Waterhouse’s RDSP, which while currently one of the only RDSP Investing Vehicles that gives you the freedom to choose whatever portfolio you like, it still has many shortcomings that need to be addressed.

The RESP page is all about the RESPs that I initially set up with Canada Trust Mutual Funds, that got transferred to TD Mutual Funds, and I should have moved them over to TD Waterhouse (but that is my own fault).

Then there are the many discussions about Bank Fees and my begging for cheaper rates.

A Bill Paying Solution

I also note that the TD Banking Web Page has added a very useful tool to their web bill paying and that is the ability to show you the last time you paid a specific bill. Remember I lamented about getting inundated with bills from various sources, but with this page, I can at least go and check to see when the last time was that I paid a specific bill.

TD Bill Payment

New TD Bill Payment Page

Having the record of when you last paid a bill and how much you paid will make life a little simpler for me at least.

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Interest Paid – Bank Fee = Shrinkage ?

I was looking at the various tax forms appear this Tax Season and I received my “Interest Earned T4A” forms for a savings account, and I am going to get Taxed on that “income” however, I am not just not as far ahead, I think I am way behind, thanks to bank fees.

Remember that:

Net Growth = Interest Paid – Bank Fee – Tax on Interest

In this instance, it is Net Shrinkage (like my money was in a cold swimming pool (bad Seinfeld reference)). Not only do I lose income thanks to Income Tax on it, thanks to Bank Fees I am losing money by putting it in my bank, due to low-interest rates (1.9%) and high bank fees ($14/month).

Now THAT is some financial shrinkage

Now THAT is some financial shrinkage

No, I am not espousing putting your money in your mattress (although sometimes I wonder), maybe find a lower fee (or no fee) model if you are not going to carry minimum balances in your accounts (where you usually get no fees charged if you leave $5000 as a minimum balance in your bank account). There are plenty of on-line banks and PC Financial that give that to you without having to threaten to leave.

Maybe taxes could be written off against Bank Fees? Don’t make it a full credit, if you don’t have any interest income to write it off against, but it really does seem to be an ever shrinking savings world.

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When Cheques are Stolen

Last week Mrs. C8j and I found out that our son’s school had been a victim of theft (from their main office). The school is private, and we pay the fees with post dated cheques. All of the cheques (from all the students) along with a quantity of cash was stolen from the office.

The school informed us of the theft right away, and told us that we should cancel all the post dated cheques (a good security measure to take in all circumstances similar to this), and they supplied us with a Police Case number, to give to the bank. The school also said that if we were charged any fees for canceling the cheques, the school would reimburse us, however, they also told us that one parent had already checked that Scotiabank was waving any fees in this situation.

I trundled off to my local TD branch, to extricate more money from my daughter’s RESP (this time fairly quick, but I had to go to the branch to do it (and include a proof of enrollment)). While I was there the Rep I spoke to also took care of the cheque cancellations. She was not sure at the time how the fees might work out, so I left unsure of whether this was going to cost me money or not, but I found out on Sunday the importance of following up and watching account balances closely.

I looked at my account and saw the following:

9/11/2013 STOP PAYMENT FEE  $         12.50
9/12/2013 STOP PAYMENT FEE  $         12.50
9/12/2013 STOP PAYMENT FEE  $         12.50
9/12/2013 STOP PAYMENT FEE  $         12.50
9/12/2013 STOP PAYMENT FEE  $         12.50
9/12/2013 STOP PAYMENT FEE  $         12.50
9/12/2013 STOP PAYMENT FEE  $         12.50
9/12/2013 STOP PAYMENT FEE  $         12.50
9/12/2013 STOP PAYMENT FEE  $         12.50
9/12/2013 STOP PAYMENT FEE  $         12.50
9/12/2013 STOP PAYMENT FEE  $         12.50
9/12/2013 STOP PAYMENT  $       120.50
9/12/2013 STOP PAYMENT  $          4.50
Totals  $       137.50  $       125.00
Total fee paid  $         12.50

As you can see there are 11 stop payment charges, however there was only 10 cheques that needed to be cancelled.

I called the Easyline folks, and after a little bit of sleuthing by a helpful young lady on the line, we found that yes one cheque had been cancelled twice (must have been an extra nasty cheque), so another refund was given and now we no longer owe anything for having the cheques cancelled. Good on TD for finding the error and fixing it.

Remember if you don’t ask the answer is always no, so it never hurts to ask if fees can be waived in exceptional situations.

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No Bank Would Do That!

Found this classic post about what a Bank might think is an ideal customer.

It has been pointed out that my post yesterday about a Real Service for Chronic Over Spenders is at best naive at worst unlikely to ever happen. Why wouldn’t a bank run a service like this? The answer is simple, it does not make them any money.

Banks make money on:

  • Customers who carry balances on their credit cards.
  • Customers that use the over-draft service available to them.
  • Folks with bad credit that don’t get preferential interest rates.
  • Consumers who do not carry the minimum balances in their bank accounts to get free banking (and thus pay $25 a month in service fees)
  • Debtors who do not pay back their loans quickly (i.e. they do not make over payments)

This is an interesting paradigm for the Banks.

They must portray themselves as being helpful, trustworthy and someone who wants you to succeed in your financial journey, when in fact anyone who does succeed, does not make the bank a lot of money. I have friends who have paid off their mortgages in 5 years instead of 25 years, saving themselves tens of thousands of dollars (but in turn costing the bank tens of thousands of dollars in lost interest earnings), yet the bank must publicly say that this is a good customer, even though they are bad for their business.

A good bank customer makes minimum payments on their debts (especially their credit cards), incurs many service fees (or penalties) and rarely if ever talks to anyone in the bank about their issues. Reading that sentence it seems to be an oxymoron, in that it seems to be a description for a bad client, but if all you look at is the bottom line banks will fight over getting these customers.

How do they fight over them? They offer interest free credit cards (for the first six months), and lower interest rates on loans (for the first year), and other interesting marketing gimmicks (free iPods even). These customers make banks much more money than someone who is careful about their debt load, and that keep meticulous records of every purchase and pay things off quickly.

Conclusions

This week I have let my imagination run a little wild, on the problem of how to help people who spend too much or that are chronically in debt, but at the end of it the answers are evident:

God helps those that helps themselvesAnonymous

The banks will help you, but be careful of the help you get Big Cajun Man

It is kind of like the guns don’t kill people, people kill people argument the NRA uses, in an obtuse way of thinking. People get into debt trouble because they can’t control their spending, and try to fix their spending issues with more debt, which the bank gladly obliges, and the financial death spiral (TM) begins.

Final conclusion:Getting out of debt is hard work, choose your tools to get out of debt carefully (unless you would like to try out a prototype Financial Shock Collar, then contact me).

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