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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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I got a very good comment from someone who calls themselves Anon Banker, about the Tied Selling Banking Regulations and how that should stop banks from forcing you to have a chequing account with them if you have a mortgage with them. The Tied Selling regulation is quite clear about this:

For example, if you apply for a mortgage at a bank, the institution cannot make you buy another product or service as a condition for obtaining the mortgage.

Bank Accounts and Loans

You don’t have to open an account, but the bank may not give you a great deal either.

Luckily for the banks there is a little wiggle room, with the following statement:

However, banks (and their affiliates) are allowed to offer consumers, in conjunction with one of their products, another product or service on more favourable terms than they normally would provide. This is similar to a company offering a deal or discount to its customers if they purchase more than one item from the company. For example, if you obtain a loan from a bank to purchase a Registered Retirement Savings Plan (RRSP) investment, the bank might offer you a better rate on your loan if you also purchase your RRSP investment from them.

Better Deals if You Get an Account?

So the bank can not deny your mortgage application if you decide not to have a bank account with them, however, they can offer you a better mortgage rate if you do open an account with you. I suppose that sounds fair.

 

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Stop Spending Money on Bank Fees

Back in the good old days, my office at Nortel had a banking machine on site. This was before banks started playing silly games with non-subscribers, charging them White ATM fee charges. Even then, I did open an account with CIBC, and back then they had a Zero Fee Account. That stopped working when the CIBC ATM changed to a Credit Union machine.

Stupid Bank Tricks
More Stupid Bank Tricks

My current employer has an RBC machine in the lobby, however, RBC doesn’t really have a zero fee banking account (unless I move all my banking there). No chance to resurrect my earlier brilliant idea there.

I did finally notice that across the street there is a Scotiabank branch, from my current office. After 2 years the light finally went on, I have a Tangerine Bank Account. As I have pointed out, Tangerine is owned by Scotiabank, and I can use their ATM machine with no fees.

This now means, I can use the Tangerine account which has zero fees (for now), and do transfers to it (for no fees) and withdraw money without fees, which seems to be ideal. You could also do this with Simplii and CIBC machines I assume.

Another stupid bank trick to add to my list of stupid bank tricks? Maybe, but if you have enough of them, you will have more money left in your bank account. Another way to live, is to simply take enough cash out every pay cheque that you need.

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Bank Accounts and Loans

It seems to be normal practice for most banks these days to attempt to maximize their business with you. Many try to upsell services to you, but others go with a simpler strong-arm tactic, if you want the service you must bank with us. This is within the rights of the bank to demand this, but you don’t have to capitulate either.

An example of this is the practice of forcing anyone opening a debt vehicle with the bank, to also have to open a chequing account. This situation arises if you use a Mortgage Broker or have bargained with many banks for your Mortgage.

Bank Accounts and Loans

You don’t have to open an account, but the bank won’t let you play either.

Creating the chequing account typically forces the user to have to pay a monthly fee to have the account (not in all cases, but in some cases). I have seen this with Student Lines of Credit, Mortgages and HELOCs as well.

This “policy” seems a throwback to the days when banking was done during bankers’ hours, but also another cash grab to make consumers pay more for services they aren’t using. This implies that transferring money from a different bank is hard for banks. The real reason would be they can then see the funds are available to pay the loan in question.

A reason I have heard quoted by bank representatives is that if the customer wants to have access to  on-line banking (e.g. to check their loan balances) they will have to open a chequing account. Seems a bit thin, as a reason, but I am not a bank.

Are All Banks Like This ?

These examples I have heard are from the “Big Banks” I am not sure about the on-line banks or trust companies.

As a stock holder in the banks it seems like a good business practice, but as a consumer I am tired of dying a death of a thousand paper cuts. Having to pay service fees to many banks a month does add up.

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Stupid Bank Tricks (revisited)

Previous Stupid Bank Tricks

I enjoy strategies to use the banking system to your advantage. With this in mind, I have written a few articles on Stupid Bank Tricks.

Stupid Bank Tricks
More Stupid Bank Tricks

More Stupid Bank Tricks

A co-worker told me about a stupid bank trick (with my apologies to David Letterman) that has helped him a few times. This one struck me as particularly good strategy.

Create a bank account where deposits will go. Deposits such as,

  • Pay cheques
  • Tax Refunds
  • etc.,

This account is solely in place as a deposit point. The account information is given to your jobs payroll department and the CRA.

The strategic part is to have a working account which scrapes this account, to build up funds for do day-to-day banking. This account is banking main street, where bills get paid, cheques written, groceries paid, and other normal banking tasks.

Why separate these two accounts? In the case of my co-worker, he found out he was going to be “Phoenix’ed”, as something had gone wrong with his pay, and they wanted to take back money from the account. His “scraper” functions had already taken the money from the account, so his wages could not be taken back, as there were insufficient funds in the account.

Why This Strategy ?

Compartmentalized bank accounts is an interesting idea. I have done this for saving, but had not thought of the ramifications of a “scrape back” on my account.

I assume there is a way to tell your bank not to allow withdrawals from your account by specific folks? This is not a topic I had ever thought about.

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