Fees and Penalties

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?

Penalties and Fees
No More Fees and Penalties
VHS Tape
I will bet there are readers who have never used one of these
  • 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.

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Wanting the Big Piece of Chicken in the Financial World

Michael James, inspired me to write another rant/commentary on the financial industry. He wrote about Mouths to Feed in the Financial Industry and it reminded me of a very funny monologue by Chris Rock: Bigger and Blacker (Amazon Link) about how Fathers don’t ask for much in life:

What does daddy get for his hard work? The big piece of chicken at dinner! My mamma would kill us if one of us ate the big piece of chicken by accident!

Daddy's piece of chicken
That is a BIG piece of Chicken

What does this have to do with the Financial System? Everybody in the financial system thinks they are Daddy, they all want the big piece of chicken.

  • Mutual Fund managers want you to pay the front-end, back-end and high MER fees because they are doing that much work to invest for you. That is a whole chicken, not just part of it.
  • Banks think they are the Daddy, just for taking care of your money. There are banks in Europe giving negative interest on your money. The money shrinks if you leave it in the bank.
  • Any Cell Phone Company (in Canada) is your Daddy, how much do you think their service really costs, but they are making sure you get quality service.
  • Internet Service Providers are plumbing, but they want a big piece of Chicken for the way they count your packets (and charge you if you use too many)

Let Daddy have that big financial piece of chicken? No way! They get enough, without taking the big piece of chicken too!

 Image courtesy of piyato. at FreeDigitalPhotos.net

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Is Your Toilet Flushing Hot Water ?

That is a very odd title, but it did happen.

My Brother had just moved into a new town-home complex, and there were a few idiosyncrasies that he found in his new place, but he didn’t notice this issue for a little while after moving in. He only noticed one day when he sat down and felt the warmth emanating from the commode, and only then realized that his toilet was connected to the hot water system for his house (not a huge issue, but it would waste a little money for a long time).

toilet flushing hot water
No, it wasn’t that hot

Financially Flushing Hot Water?

Are you flushing hot water in your financial world? How many fees are you paying that you are unaware of, or worse, are ignoring? What kind of fees am I commenting about?

  • Bank fees, do you still pay those? There are so many banks that offer zero fee accounts, why are you flushing that hot water (money) down the toilet?
  • Entry fees, exit fees and high MER Mutual funds? Seriously, how many times do we (pretty much everyone writing about investing) have to write about this topic? Evidently, we have not hit the maximum count yet. They are called Index Funds, look it up.
  • What are you paying in Insurance rates? Are you shopping around? Remember that insurance is only for ” … in case stuff happens …” (to paraphrase Chris Rock).  If you are overpaying for insurance your money is flushing away.
  • Memberships that you are no longer using? That fitness club membership, are you using it? Do you really read the newspaper?

Am I missing any other Financial Toilets that flush hot water ?

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TFSA Transfer Fees

I wrote about things to do at the end of the year, and I “poo poo’ed” someone who mentioned (in a comment) that you could skirt the TFSA transfer fees  if you took the money out at the end of December, and then deposited it in your new TFSA at the start of January. I thought, “How expensive could that transfer fee be?“, and luckily my friends at TD sent me a helpful update on my accounts that helped clarify it.

TFSA Swap
TFSA Year to Year Swap to Change Providers

“… TD Investment Services Inc. is introducing a new Transfer Fee of $75.00 plus taxes per transfer, effective March 1, 2016. This fee applies to each transfer of a TD Mutual Funds TFSA to another financial institution. The fee does not apply to a transfer to another TFSA within TD Bank Group. This fee will be collected from the bank account associated with your TD Mutual Funds TFSA that is currently used for purchases, pre-authorized purchase plans and redemptions. If you do not wish to accept this fee you may close your TFSA or transfer it to another financial institution without cost or penalty.

You can do so by informing us no later than 30 days after the date the fee comes into effect. Please note that, by using your TFSA or keeping it open after March 31, 2016, it means that you have accepted this fee. If you are considering a TFSA transfer, or require additional information, please visit your TD Canada Trust branch or call us at 1-866-222-3456 to speak to a Mutual Funds Representative today….”

Seventy Five Dollars? $75? Holy cow, talk about, “don’t let the door hit you on the way out customer service. Notice that you can avoid this fee, if you choose to close or transfer your account from your TD Mutual Funds TFSA vehicle. As I have mentioned I have had many interesting issues with my TD Mutual Funds RESP account. My opinion would be to open an account elsewhere in the next month or so, and transfer your account there.

Also, my sincerest apology to any commenter who mentioned the idea of the transfer TFSA at end of year gambit as well. There are situations where this might make perfect sense.

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More Reasons to Change Banks

Last year I wrote about how my daughter got a Student Line of Credit, to help pay for her second degree, as a Chiropractor. Remember, I am the one that talks about being willing to change banks, but unfortunately, my daughter is changing banks due to the mistakes of the local branch of National Bank of Canada (which is the reason I changed banks a while ago as well).

The problems started when the line of credit was first set up, and has compounded since then:

  • It took 3 visits to get the student line of credit set up (we thought) with the local branch. Once the application forms were set up, the first application for the account was declined, because the young lady at the local branch was unaware of how to do the application, it was declined  because the application was asking for the entire value of the loan (for all 4 years of the school). There had to be a reapplication to get the loan set up (finally).
  • The Student Line of Credit was actually set up as a standard unsecured line of credit. This caused the National Bank head office to call (more than once, and somewhat irate) to ask why weren’t the minimum payments being made to the account? It then would take an hour of explanation, and investigation for someone to figure out that the account had been set up incorrectly (by the local branch). The only way it could be fixed was by the local branch, and they failed (more than once) to remedy this issue. The account should be set up so that the interest payments do not need to be paid until my daughter graduated (but yes, they still compound).
  • There was an inability to make payments from other banks to the National Bank for this loan. This meant all banking would have to go through the National Bank only (or use Interac transfers to do things). This is also a shortcoming with the CIBC Student Line of Credit.
  • The on-line banking at National Bank, never really worked correctly for my daughter, she had to keep calling their on-line help folks to get access to the account (just to see what the balance was on the account). This happened every time she tried to access the account, and each time she would ask, “So with the information you have just given me, I can get access to my account”, and the help line person would say “Yes”. It worked that time, and then the next time, she had to call back in, because it would not let her in.
  • The straw that broke the camel’s back was that the National Bank Head Office decided that the “ceiling” (maximum for the loan) for students in Chiropractic College (for their entire program) was  dropped by 33%, and because of this, the line of credit would not have covered the cost of the entire program. The reason for this change (we theorize) was that the Chiropractic College in Trois-Rivieres was consulted to see how much their program cost, and the maximum for the line of credit was lowered to reflect that program’s total cost. This is an issue, as my daughter is going to the College in Toronto (which has higher fees and costs). This meant my daughter had to change to another bank or she would have run out of money, so she is now in the process of changing to CIBC for her Student Line of Credit (and Free Banking too). There were inquiries made to the local National Bank branch to figure out why the Loan Cap was lowered, no real answer was given, just that it was being put in place, and that even though my daughter had been enrolled last  year, and the loan agreement included the higher cap, her cap was being lowered in accordance with the new rules.

Change your bank

Keep this in mind if you want to change your Bank

Good Reasons to Change Banks

As you can see a great deal of frustration and confusion lead to my daughter changing her accounts over to CIBC. Naturally I was involved in the decision to change, as I am a guarantor on the student line of credit (or as Michael James would say, I have a Student Line of Credit). The change of the maximum loan limit was the main reason, but the other frustrations certainly made the decision to change, a simpler choice.

Remember, never be afraid to change banks, especially if you feel that you are not getting a very good deal. Also, this is why student debt is so darn high.

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