It is politically smart to pick on the big banks: after all, they are reporting quarterly profits of billions of dollars and you can score easy brownie points by claiming that they are gouging customers who are withdrawing their own money. But, really how bad is this problem? According to the NDP, the banks are earning $420 million from ABM fees. If we assume these figures are correct, ABM fees are costing Canadians an average of $21 a year, hardly worth all the bellyaching.

ABM fees would be an issue if we did not have any other option. But we do have plenty of options even if we are seniors, students or disabled:

  • We could open a checking account at the nearest bank. When I was a student, the only bank on campus was Bank of Nova Scotia, so naturally that’s where I kept my account.
  • We could avoid white-label and other banks’ ABM machines altogether.
  • If we are out of cash, almost every business accepts a debit or credit card.
  • We could request a cash back when shopping at our favourite retailer.

The government’s responsibility is to ensure that there is competition and choice available in the marketplace, not to regulate everything. Banking is certainly one area in which customers have plenty of choice and can arrange their affairs so that they don’t pay any fees to withdraw money. If they don’t it is their fault, not the banks.

Here’s a thought: how about being a smart consumer by opening a no-fee chequing account with PC Financial and buying the shares of your favourite big bank? You’ll avoid the high banking fees and thank everyone else who want to keep funding a portion of your dividend cheques.

This article has 19 comments

  1. This really annoys me. The banks are providing a service. If you don’t want to pay for that service, don’t use a bank. You have to use a bank you say, well then only use your bank. Don’t go to another bank and expect them to provide a service for you free of charge. Are the fees to high? maybe, but that isn’t the point. The fees are avoidable it is a choice you make to suffer those fees.

  2. Brilliant post! Couldn’t agree more.

  3. I work at a bank and it’s getting annoying hearing about people complaining about fees. They do have a choice about which machine to take money from and have no idea how much fraud is out there costing the bank each year.

  4. I, too, often wonder about those who complain that their choices are costing them too much, and the government (or someone) should step in and fix their problem. It’s almost funny to see how angry they get when it is suggested that the choices that they have made are of their own doing. I’ve engaged in ‘discussions’ with folks complaining about the cost to heat their monster house; fuel their Hummer, or the commute from the country-side to their city job.

    There was an article on the ‘net somewhere a while ago where an author preaching frugality wrote of being out Pubbing with a friend one summer evening. They decided to go to another place some small number of blocks down the road. The frivilous friend (always complaining of being broke) went to an ATM not of his bank, withdrew $60, & hailed a cab. They rode the few blocks (passing the friend’s bank along the way) then exited the cab and entered the next Pub. I have little sympathy for Mr. Frivilous.

    Intelligence has a Quotient….Stupidity knows no bounds.

    I would be interested to learn if a bank would discount ATM fees if a customer moved to a community where the bank was not represented? With all the services that banks offer now, transferring all the bill payments, etc. might be quite a chore.

    David

    David

  5. Great post and great comments! I bank at one of the big banks and pay nothing, 0, nadda in service fees each month – except a monthly $2 cheque return fee (which I requested). I keep the minimum balance in my account (and thus no fees) and also withdraw money from my banks machines (and thus no fees)…but if you are one of those whiners complaining about bank fees then just hedge your bet…buy a bank stock…

    Cheers,
    MCM
    http://middleclassmillionaire.blogspot.com/

  6. Capitalist, I do exactly what you preach – I love PC Financial and own various amounts of the big 5 banks.

  7. Yep, haven’t used a bank machine in a long time, my branch is a 10 min. walk, use debit, cash-back and my 1% cash-back credit card for larger purchases (always pay off balance before due), and own stock in 3 of the banks.

  8. The double dipping on the ATM transactions is the part that gets me though. I can understand why the white label machine charges $2 for the use of the machine but why does my bank get to charge me another $1 or 2 on the same transaction? They always talk about the cost of maintaining the network which I think is bunk. The reason ATMs came on the scene was to replace human tellers. They are still much cheaper then humans.

  9. Canadian Capitalist

    Bryce: Actually, if you use pay-as-you-go banking, you would pay another 50 cents or whatever your per-transaction fee is, in addition to the $2 fee. And of course, these fees are a cash cow and fat margins are built into them. But, the key point is we should be smart consumers and avoid these fees. We have the right to complain and protest these fees but regulation is a bad idea.

  10. Actually using PCFinancial if you take out money at a white label machine the white label will charge you $2 and PCF will charge you a

    ABM INTERAC CHARGE $1.50

    I just copied that from my online statement (I had to go back 4 months to find one). I think this kind of crap can get regulated away.

  11. I think people who complain about the free market should be regulated away.

    Open your own bank and not charge any fees and make no profit. Have fun.

  12. Free market? Where is that? Not in Canada or anywhere else in the world. And you won’t see it anytime soon. ‘Conducting Business’ is not in the charter of rights. The government and communities can place restrictions on how a buisness operates. The ‘Big Banks’ did not get that way out of pure business savy. They are the result of government structure. CDIC, CMHC, etc. There is a structure that the banks work under and we define it. We can add to it or take away. Free market? Bologna.

  13. Regarding fraud charges: It bothers me that we are paying high fees for inferior technology. I have already fallen victim to debit fraud by a card reader at a major movie theatre. Thank God PC bank was able to catch it. But shouldn’t the ATM fees go towards better debit technology like Europe has. i.e Smart Cards have a built in chip that prevent them from being copied.

  14. It’s unfortunate how people envision “the banks” as corporate monoliths, and not as publicly traded companies that are owned by tens of thousands of Canadians in their retirement portfolios or employer sponsored plans. In fact, given that the CPP holds Royal Bank, TD, BNS, BMO, etc., every Canadian that has ever earned income owns at least a tiny piece of the banks.

    If people can’t take elementary steps to avoid these charges, I have zero sympathy for them. You can’t legislate against stupidity, after all.

  15. Canadian Capitalist

    Bryce: Let me get this straight: you have a PC Financial account, which charges nothing for issuing cheques, no minimum balance and no Interac charges for direct purchases and withdrawals at their machines or at CIBC and you want regulation because you were charged $1.50 four months back? How far are we going to go with regulation? How much regulation is enough? And finally don’t forget that the banks are going to find a way to make up their fees elsewhere plus the cost of complying with new regulations. Not to mention, the extra bureaucrats we’ll be supporting through our taxes to enforce the regulation.

  16. We already do regulate against stupidity – see usury laws. Even if someone was stupidly willing to borrow money at 50% it is against the law. Regulations don’t allow it. I probably wouldn’t even be able to find where it states that my bank will charge me the $1.50 (we aren’t talking about the charge you have to agree to on the machine). If this fee is not transparent to the user of the machine (yes some people are stupid) should it be allowed? I’m not saying it shouldn’t be but when you take out $20 it constitutes a 7.5% fee. That is pretty high.

    CC. I’m sure that the database setting, or whatever they have, is dialed down to zero just as easily as it is cranked up. Yes CIBC machine are almost everywhere which is why I only had the charge once in the past 4 months. But what about the AISH recipient who’s check gets deposited at some obscure credit union? Every time he takes out $20 he should be charged (2+1.5)/20 = 17.5%? Well he probably does only have an IQ of 60 the sucker. Maybe the machines should have a more nominal percentage based charge? I don’t know what the answer is but I can see cases where it needs to be looked at. For me, yes I am smart enough to avoid the fees and I care enough about $1.50 that I usually do.

  17. I am for free markets as much as the next guy but I would consider our ABM network somewhat of a natural monopoly, along the lines of hydro telecommunications, mail delivery etc. I think we do a really bad job with this stuff in canada, just look at your next cell phone bill and compare it to similar usage in the states. Walking 4 miles to get cash, not being able to send data economically with your cell phone has real affects on productivity (which all ready isn’t that great). I’m not saying government can regulate it away, but as a society if we built more of this modern infrastructure, and let private companys go to war to provide the services it would be a lot more competitive, which is better for everyone. If we don’t I think we will really get beaten by some of the developing nations in the coming years

  18. Also, sorry about the spelling and grammer. Whos who’s … terrible.

  19. Ben,
    Puleeeeeeeeeese, don’t compare USA costs to those charged in Canada, US marketeers are as good or better at stripping a dollar from your pocket as Canadians. Fer instance, my latest phone bill was $12 higher ’cause my wife made a one minute phone call to me from a point a few miles away. I am used to paying about $0.02 per minute for long distance, so you can imagine my shock at the 600% premium for using the US telephone network.

    If it wern’t for a few good drinkin’ buddies south of the border, …….

    David