Banking Service Fees

Tomorrow is the 2014 deadline for contributing to your RRSPs.  Not sure how many people still go to an actual branch to do their banking with a human teller but I still do for certain transactions.  Inevitably, at this time of year the teller will ask me if I have contributed to my RRSPs yet.  So I tell them, "I can't.  I need to save my money to pay for all the bank's service charges."

I heard that joke on the radio several years ago so I can't take credit for it.  But I like to use it every year during RRSP season, or whenever the bank tries to get me to invest in whatever new product they're offering.  You know, like those "high interest" accounts that pay you 1.3% if you keep $25,000 in the account.  Yeah, I just happen to have 25 grand lying around!

I know banks rely on service fees to make money because the spread between their lending and borrowing rates have decreased over the years.  But some of the charges are a bit ridiculous.  I'll let them have the mutual fund fees and fees for trading stocks because you could argue those are a more specialized service.  But I would like to focus on the more basic services like withdrawing cash and maintaining a savings account.  Many years ago, there would be no charge for either of these basic banking services.

Today, in some cases when you withdraw cash, you need to pay a service charge.  One case is when you withdraw from an ATM that does not belong to your bank and a second case is when you don't have a minimum balance in your account.  So sometimes you can get nailed twice on one withdrawal.  Talk to the bank and they'll tell you that the ATM charge is from the other bank. That's a load of crap!  The banks just got together and created this service charge in order to rip off customers then blame it on another bank.  CIBC gets service charges from RBC customers and RBC gets service charges from CIBC customers, etc.  I guess they are an oligopoly so they can screw the public and get away with it.

There are also certain types of accounts that charge you if you make more than a certain number of withdrawals a month.  Remember back in the old days when you filled out a deposit slip at the bank to deposit a check.  On that slip you could fill in the line called "less cash received" to take out some spending money.  The net amount would be deposited in your account.  For example, if you had a check for $300, you could get $200 cash and the bank would record a $100 deposit to your account.  Today, they make you deposit the $300, then withdraw the $200. This way they can charge you for the withdrawal!

So any time I have a chance to talk about service charges with bank employees I will tell them how I feel.  I know, the teller has no say in this and it doesn't really bother them.  So I usually just leave it as a joke.  But if a manager talks to me I will bring up the fact that CIBC (my bank) made a $4 billion profit before tax in 2013.  $800 million of that came from service charges.  Surely they can give their customers a break from their ludicrous service fees!

Big Oh