Savings Motivating System

Consumers rarely do anything unless they feel they get something out of it. I keep wondering what savings motivating system banks could put in place?

Canadians are notorious for loving rewards systems, where they can accumulate points for later purchases, maybe something like that? A points system that would pay more monthly, the more money you had in your savings account?

I think I am on to something here, if banks paid people these points that they could use to purchase things, that might motivate people to save more money.

A Savings Motivating Refinement

What if this point system allowed you to swap points for money? Better still what if you didn’t accumulate points for having more savings, you accumulated money? Money that would be added to your account balance, and then the next month you might accumulate more money because of this added money?

This is possibly the greatest idea ever to motivate consumers to save money, isn’t it?

Click here to find out more about this Interesting Idea

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Banking Regulations our Friend

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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Banking and Saving 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.

If you want to join Tangerine, use my code and I make some money too ( 47979477S1 ).

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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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How Do Banks Differentiate Themselves?

I have run across a few interesting things that caused me to wonder what exactly are the banks in Canada doing to make folks want to be their customers? Given they continue to have enormous profit margins, do banks differentiate themselves in Canada?

All of the banks advertise (I don’t have their numbers spent on advertising, but no bank in Canada does NOT advertise). You can see some of the ads on this very web site some times, so they must have very deep advertising pockets, I do like the TD ads with the cranky old men, but that wouldn’t cause me to change banks for that reason alone.

Cheques

The first thing I noticed while collecting dues for a basketball team is that  I received 4 cheques from different parents, but I noticed the cheque design for all 4 cheques were EXACTLY the same, even though they came from 3 different banks. The security patterns on the cheques were exactly the same (I compared them under a strong light), the differences were:

  1. Bank Information about which bank this is, address and logo
  2. Customer information (name and such)
  3. What was included in the MICR lettering at the bottom of the cheque

Other than that, there is no difference in the cheque.  In fact most of the banks use the same printer for cheque designs they simply order them, and thus this service is the same.

On Line Bank Interface

This is very different in terms of who designed the interface and such, but my guess is the “back end” of the software is exactly the same. What you can do is remarkably the same, typically there is a lot of advertising around it to get you to try new services with the bank.

Tomorrow, we continue this interesting case study.

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