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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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. Interesting that this fee went away, but that is because the entire “VHS Rental” business disappeared. 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. The fee finally went away after Bell was shamed into removing it by the CBC.
  • How about that fun “paper charge” if you still got your bill mailed to you? 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 really only noticed one day when he sat down and noticed 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.

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

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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 an up and coming 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 banking and the Hustler.

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”

That is how banks have done it for years. Now 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).

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, think about it.

Am I Just Being Bitchy ?

My apologies if I sound like I am picking on the Banks, this is actually true of all the Service Industries we deal with, especially the Cell Phone Companies, the Internet Providers, the Phone Companies, and the Insurance Companies.

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

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