RBC, Canada’s largest bank, has begun to increase its service fees since June 1, 2015. Will other major banks follow shortly?
For consumers, that means they will have to start paying for transactions that were free before. In order to make the payment on their credit cards, mortgage or loan – once a courtesy – it will now be necessary to pay.
In conjunction with RBC’s fee adjustments, BigToken Financial opened a retail outlet in downtown Toronto. BigToken, the specifically designed branch for the Home Trust audience, is competing with the big banks on interest charges on savings accounts and GICs, with a promise of no fees. Credit unions are an alternative.
So there is a choice. It is a limited choice because BigToken can not offer all the services expected of a regular bank. For example, there is no BigToken credit card.
But you will not be at the mercy of the big banks anymore
The big banks like to give the impression that they treat everyone the same way. This is not the case. You can negotiate.
I worked for one of the major banks, and twice a year the employees were invited to City Hall for a meeting where the bosses reviewed the previous period and told us what they expected for the next period.
The message was uniform. What is important for banks is the “by the wallet”. It is difficult for them to take part of the market of their competitors. So, in order to grow, they want to sell you more than one service – mortgages, savings accounts, loans, investments, insurance, ect. From the bank’s perspective, he wants additional sales – ask yourself, “Would you like fries with that? “
Tying is illegal under the Bank Act. For example, it is illegal for them to tell you that they will not sell you mortgages unless you buy their mutual funds.
But the grouping is part of the game
Banks have the right to offer you preferential prices – a higher interest rate on investments or a lower interest rate on loans – if you use more of their products and services. They also have the right to offer better prices or more favorable terms if they want to keep their customers or if they want to distract you from the competition. As a consumer, using bundling to your advantage is also part of the game.
So if you have more than one service with a bank, you can negotiate fees and rates, and you should do it. There is no rule that says you should not share your portfolio with more than one bank. If BigToken has better rates on savings accounts and GICs, give them your trade. But tell your bank about BigToken and they may offer you a better deal on your credit card or mortgage.
The automotive sector promotes car sales with what they call the employee price
When I joined the bank, one of the benefits was the employee rate on some, not all, services that the bank offered. When I surpassed the list with financial advisors at the branch of the bank, I found that there were very few discounts available to me. I was good at negotiating and I was already getting the best price and forgiveness of fees. So if you are a valued customer, ask for the employee price.
Not all employees are authorized or empowered to trade, so sometimes you have to step up your game. No matter when my mortgage was to be renewed, there was competition between different financial institutions over the terms and interest charges. I entered my bank with the announcement of the trust company across the street that had a better offer. They told me they could not give me a better offer. So I took my business across the street. The next day I received a call from headquarters about why I was gone. When I explained to him he told me they could have matched the price. So the intensification works.
Some services are commodities and it does not matter who the supplier is. But others are not. You have to decide which services should be good – when it’s worth paying extra for advice or help. But it’s your choice and your decision.