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.
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.
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.
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.
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.
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.
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,
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.
Fees and penalties are the staple of many service industries. Remember that great expression from your local video store.
“Be Kind, Rewind”
Back then, some places even charged a penalty if you didn’t rewind your VHS tape. The fee no longer applies, as there is no tape industry. That sounds like a fairly sarcastic commentary, but how many fees disappear?
My home telephone bill (yes I still have a land line) had a “Touch Tone” charge on it (up until July 2015), but if I tried to use a rotary phone I get nasty remarks from Bell, pointing out the technology really isn’t supported any more. This fee no longer applies, after Bell was shamed into removing it by the CBC.
Paper billing charges was a thing for a while. Wasn’t that Green and cool? That went away (mostly) after the Government said they were not allowed. I actually can see why that charge was there.
Account fees for day-to-day banking continues at most major banks, even though many smaller banks offer free banking (PC Financial, Tangerine and others), yet we continue to pay for the services at major banks? Michael James has pointed out that eventually the Major Banks will take a dive and may finally stop charging these fees? Nah, never gonna happen.
On line trading fees started at $29.95 and it has dropped steadily since (and is around $9.95 or lower). Since I am pretty sure the trading houses are still making money on this, it does make me wonder how low could these fees go?
The airline industry seems to have completely built their profit structure around service fees, gas fees, take off fees, sitting in nice seat fees, not getting broken cookie fees, etc.,etc.,. and not many of those fees are going away. Aren’t they charging for carry on luggage now?
Fees That Are Not Long For This World ?
Are there any fees that may go away some time soon? I can’t think of many (maybe gas taxes once gas cars go away). Pretty sure overdraft fees will never go away.