What the Hustler Taught Me About Banking

One of my favorite movies is “The Hustler” (the original with Paul Newman and Jackie Gleason). Mr. Newman played “Fast Eddie” Felson a hustler who wants to be a success, and his goal was to beat Minnesota Fats (played by Mr. Gleason). The movie is an intricate set of stories, one of which is the thematic premise about how to deal with your victims (patsies, marks, etc.,):

The Hustler at Amazon
The Hustler at Amazon Canada

“Always leave a mark with some money in their pocket, that way they keep coming back”

The Hustler

That is how banks have done it for years. They are finding new and more exciting ways to bleed some money out of you, but not so much that you decide to bank somewhere else (also, they are all doing it, your only other option is to put it in your mattress).

The scary part is that Insurance, Telecomm Companies and most service providers have gone to this model. Bleed out as many fees as they can, until you threaten to leave.

My opinion of the banks’ thinking in this area? Let me quote Fast Eddie from the Colour of Money:

“Money won is twice as sweet as money earned.”

They aren’t earning all this extra money, they are winning it off you.

Whining?

These days, it is hard to find a service not attempting to extract extra service fees. Airlines, have gone berserk with fees, we shall see if COVID somehow reforms their fee lust.

Learn how the game is played, or you will get hustled.

This was originally written many years back, I have added a bit more to it.

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The Perils of Automatic Payments

Automatic payment systems are convenient, but convenience always has a cost. It is important to audit your automatic payments regularly or you may get an unhappy surprise.

I noticed a charge on my PayPal account. An email arrived confirming the payment had been made. I investigated, and saw it was for a service I no longer used. This concerned me, as I don’t like squandering my income.

The convenience of this service is obvious. You have a fire and forget system that makes sure you pay your bills on time. The problem I have run into is with PayPal I have not managed these payments. Operator error is the main issue here, not the services offered by PayPal.

PayPal allows you to set up automatic payments to various services. This is very convenient, but it also offers an ability to Manage Automatic Payments. You can find it in the Menu for Payments.

automatic payments

There were many automatic payments on the list, and some were payments dating back over 10 years. I busily cancelled all the transactions I didn’t recognize. There were payments from demised companies like TigerDirect.

Perils of Automatic Payments?

If you do not cancel these payments, companies can take your Paypal payment without notice. You gave permission to them already. It is possible to recuperate if a payment is taken (via PayPal’s resolution process), but your money may not come back.

Are there companies that snap up demised companies assets, and PayPal accounts? Do these companies maybe try to take money when they shouldn’t? I hope not, but I would not be surprised.

Remember, that phishing scams can be hidden in emails that look like automatic payment emails.

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How to Open a Kids Bank Account in the time of COVID

In these days of COVID, many bank services are not as easy as before. We are trying to open a bank account for my son. All we wanted to do was open a Kids Savings account, that would give him a bank access card too.

Our family has done allowances this way for a long time. We automate the money going to the child, as a weekly deposit to a no fee TD bank account. This method worked well with my daughters.

My son, being on the autism spectrum, we weren’t sure how this would work. Happily he has asked about banking and wishes to have an allowance, so we are now trying to open a bank account for him.

Looking for your next great read?

For Tangerine, you have two options:

  1. For a kid who is less than 16 years old you can open a straight savings account. This can be done over the phone. We didn’t want to use this because it would not include a bank access card.
  2. For a student 16 years and older they have a student chequing account. This comes with a bank card, however, my son is not old enough and he does not need chequing capabilities, yet. This is done on-line.

We decided we were going to try to create a TD Kids Savings account. I called Easyline and was told this can only be done at a bank branch face-to-face. This is how we did it for my daughters. I was hoping we could do this on-line or over the phone, but no, this is not possible.

To book a face-to-face meeting with our local branch, takes at least 2 weeks, thanks to COVID. All bank branches are running with smaller staffs, and they are not open for as long. Banks are closed on Sundays, during the pandemic.

I had to wait 2 weeks to open my son’s bank account. Patience is not something my son has mastered yet, so there was a lot of nagging on his part about his bank account.

Epilogue

Finally managed to set up the account, but a few interesting new wrinkles.

  1. The account is a TD bank account. This type of account no longer is automatically on my Easyweb. Previously all my older kids’ accounts were visible.
  2. Still a lot of “paper” work. The amount of physical paper in the banking system must make Domtar proud.

Addendum

A few folks have asked, I had to have 2 pieces of identification for my son. In our case we used a valid passport and his birth certificate.

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Banking Security

While trying to log into my Banking Web site (from a PC), after I had successfully remembered my log-in ID and password, something different happened. The site put up a Pop-up window saying it was testing security and wanted to send me a code to my Cell phone (or call me with the code).

After my initial confusion and then annoyance, I was heartened to see this kind of security come up. Banking security is very important, and the edge of the network (i.e. users logging in) are where the system is usually the weakest. The Desjardins Data breach is a good example of the need for banking security and data security.

Good Test ?

My hope is that this is simply a test, and you will see why.

After I realized I did not have my Cell phone handy, I simply cancelled out of the Security Message screen, which then took me back to the regular bank log-in screen. I thought for a second, and decided to see what would happen if I tried to log-in again. What I saw underwhelmed me. I was able to log-in, no problem, and no “challenge”.

My sincere hope is this is simply a test by my bank, because if I have been “challenged” for an alternate log in, I should not be allowed to log in after an initial failure. The application should continue to challenge me, until I pass the challenge, or until I fail a set number of times. Once someone fails I would hope my account access would be locked.

Banking Security ?

My hope is this is my bank attempting to test out new security for authentication (without enabling 2 factor authentication), and when they do a full roll-out, the rules will be stricter. I like the concept, but if this is how it will work it isn’t a great data protection system.

More Banking Security Resources

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Exposed on Banks

Even as a simple country Index Investor (to paraphrase Bones McCoy), you need to understand the Index you invest in. If you own a TSX-based, Canadian S&P Based or Dividend Royalty based index you hold a lot of Banks.

Two examples of this are:

  • S&P/TSX Composite Index, (OSPTX) which holds 36 % “Financials“. The top 10 holdings 4 are banks (Royal Bank RY, Bank of Nova Scotia BNS, TD Bank TD and Bank of Montreal BMO).
  • S&P/TSX Composite High Dividend Index ETF (TXEI) which holds 30% “financials”. You find 4 banks in their top 10 holdings (Bank of Montreal BMO, Bank of Nova Scotia BNS, Canadian Imperial Bank of Commerce CM, National Bank of Canada NA)
exposed on banks

Why this imbalance? Banks are doing very well lately, and have done well for over 15 years.

Are banks likely to “Nortel out“, in the near future? No, but realize that you are holding a lot of Banks if you are investing in Canadian Indexes.

My problem is that I am highly exposed on Banks. From my days as a Stock holder, I still hold TD and BMO in one of my larger investing portfolios. In this same portfolio I also hold a TSX index fund, which means my exposure to banks is too large (given I may retire within the next 10 years).

As Interest Rates slowly rise to more normal rates, I should start thinking about some more stability and start building a GIC Ladder in my portfolio. I should be looking for more stability given I am within 10 years of retirement.

Treat This as Informational

I am not offering advice. I am simply pointing out that many passive investors are heavily exposed to the Financial Sector in Canada.

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