Canada’s big banks are among the world’s most successful. Two are in the global Top 20. Four are in the Top 50. The biggest five romped home with a profit of $35 billion in 2015. That exceeds the annual budget of Ontario’s education ministry by almost 50 per cent.
And despite deteriorating conditions, three of the big banks raised their dividends last month. That’s all good news, since most of us own their shares directly, or through our pensions and RRSPs. We want them to succeed.
The bad news is that to keep making that kind of money, they’re looking under every rock for revenue sources, including fees.
The Canadian Bankers Association says fees make up 5 per cent of bank revenues, which seems small as a percentage. That changes when you make it a number. CIBC, the smallest of the big banks, had revenues of $13.9 billion in 2015. Five per cent of that is $695 million.
The banks raised their consumer-based fees last year, which contributed to their profitability. Some modest increases are in the works this year, and it pays to keep an eye on them because they add up.
RBC, Scotiabank and Bank of Montreal are leaving things alone. TD and CIBC are raising some fees and, coincidentally, both raised their dividends last month.
Two weeks ago, TD Bank became the last of the group to charge you if you transfer your Tax-Free Savings Account (TFSA) somewhere else. TD also increased the charge for using a non-TD bank machine by 50 cents. That doesn’t seem like much, but it’s a 33 per cent increase from $1.50.
CIBC’s changes take effect April 1 and are the most substantive. The bank’s widely used Unlimited Chequing Account becomes the Smart Chequing Account. The big difference with the changed account is unlimited e-Transfers and a sliding scale of transaction fees, where fewer transactions mean a lower cost. The fee level starts at $4.95 and is capped at $14.95, higher than the cap on the account it replaces.
When it comes to fees, readers wonder whether there’s anything they can do. They feel helpless about a situation that’s always changing.
But you have more leverage right now. The banks are worried about cheaper mobile banking options that don’t include many fees, no-frill options that appeal to young and old alike. EQ Bank recently launched an online service, and one of its new customers is 100.
Financial technology innovations are making it cheaper and more convenient to bypass the banks. This is why they are pushing customers toward their mobile technologies. TD, for example, lets you deposit a post-dated cheque for free with its mobile app; on the other hand, the bank just introduced a $5 fee if you leave that same post-dated paper cheque at your branch.
You can’t avoid bank fees because — like it or not — the services they provide cost money. But you can minimize these charges. It pays to ask for something better. Let someone else pad your bank’s bottom line.