I have no professional affiliation with any of the institutions discussed below.
Up to the late 1970s, banks existed to provide a service to their customers. They used the money deposited by their customers to provide loans and mortgages to other customers. The banks' interest rates were reasonable and competitive. The customer depositing their money got paid a few percent below prime, and the customer borrowing the money paid prime or above. The differential went to pay for the premises, staff, and a tidy profit. Customers could deposit, withdraw, and enquire about their account at no cost.
Key points: reasonable interest, no service fees, banks make a profit.
Through the 1980s and 1990s, interest paid to customers decreased and fees for services were introduced. The banks explained that the 'cost of doing business' was increasing due to new technology. By 2000, several financial institutions were offering 0 % interest, 2 free ATM withdrawals (1.50$ per additional withdrawal), 70¢ per check, and a fee for any service provided by a teller. Of course, much of this could be waived by agreeing to a fixed 12.95$ monthly service fee. (It would take 60 000$ at 0.25 % interest just to cover the service fee!) The cost of new technology may have increased expenses, but fewer staff and more customers offset these costs. By the late 1990s, banks were reporting multi-billion dollar profits.
Key points: no interest on deposits, user fees, mega-profits.
Companies that offer travellers checks still make money off of a 2 to 3 % differential, even after paying the person selling the travellers check (banks or credit union) a 0.5 to 1 % commission.
It is readily evident that the customers are no longer the most important business consideration, the shareholders are. The customers are being fleeced to satisfy the greedy shareholders.
Do you want more interest and less fees? Check out President's Choice Financial. PC Financials' mantra is simple: NO FEES. No fees for ATM transactions, telephone and internet banking, checks, point-of-sale purchases, etc. NO FEES, PERIOD. PC Financial gives 3 % interest on their savings account (any balance) and tiered interested up to 3 % on their checking account. Not bad...
If you are considering starting a small or home-based business, check out BizSmart.
Interestingly, President's Choice Financial and BizSmart are subsidiaries of CIBC!!! Maybe CIBC has realized the short-sightedness of the conventional banking system.
There are some drawbacks. PC Financial and BizSmart do not have branches; all transactions must be done via an ATM (CIBC ATM's are free), the internet, or the telephone. Kiosks in most Real Canadian Superstores (PC Financial) and Staples stores (BizSmart) are manned with agents to help but they do not conduct financial transactions. This is not a problem if you live by your ATM card.
I had had accounts at the Royal Bank for many years. In 1994, the Royal Bank sent me a letter changing my existing account types (which had limited fees) to new accounts with more and higher fees. They were not instituting charges on my existing account, they were changing the type of account. I went into the bank to complain about these changes and found that, while they were changing my accounts, they were still offering the old type of account to new customers. I got angry. After several faxes to various Royal Bank offices in Victoria, Vancouver, and Ottawa, plus a few local newspapers, I received a 'special' account with the old fee structure. I still have these 'special' accounts. Most of the time, there is one cent in each of the three accounts. No interest, but I get three monthly statements — mailed separately — stating there was no activity in each account.
The avid television watchers may have noticed more advertising from the major financial institutions. Good, their existing customers must be switching to an alternative bank. I came up with this saying during one such commercial:
It probably applies to other financial institutions as well.
Our mortgage is at TD Canada Trust. In 1999, I had a chat with the Branch Manager. I told him about Presidents Choice Financial and he was impressed with their range of services and fee structure [although I believe he didn't quite believe me]. He was saddened to see us leave TD Canada Trust and promised to inform head office of our conversation. Three weeks later, Canada Trust significantly hiked their service fees. Ouch!