Yahoo Finance Would you know it if your bank was overcharging you?
It’s easy to count your change at the market or examine that sweater you just pulled off the shelf for loose threads. And if you feel the restaurant is marking up that bottle of Niagara VQA cab sav a bit too much, you can either suck it up or go with tap water.
But what if your bank was overcharging you? Would you know? In fact, given the degree to which we depend on the banks to manage our money and handle our transactions, would you even know where to start?
Just last week, CIBC agreed to refund $73 million in mutual fund and investment fees that it had improperly collected from clients over 14 years. According to the Ontario Securities Commission, there was no evidence of dishonest conduct by CIBC, and the bank self-reported the problem. But it underscores how easy it is for errors to fall through the cracks at massive institutions like banks, and how difficult it can be for anyone to spot it happening.
But there are other, more obvious ways in which the banks maximize the money they charge you, and many ways you could be getting the short end of the stick.
Overdraft fees
Canada’s banks made nearly $10 billion in profits in the third-quarter alone, and fees made up a big chunk of it. Banks love fees because they don’t depend on interest rates or economic trends. They just depend on customers using bank services.
Overdraft protection is a common feature of many personal accounts, but it will cost you a few bucks a month, even if you don’t use it. Worse, if you don’t’ have protection and you dip into negative territory, your bank may ding you to the tune of $5 or so each time you do so, and charge a high interest rate on the overdrawn balance.
With many people juggling several accounts and credit lines, letting an account slip into negative territory is more common than you might think. And while these fees are outlined in the fine print, the bank won’t be tripping over itself to remind you of them.
ATM Fees
In days of yore (meaning before ATMs), people used to go up to a bank counter and deal with a real person to get their money. Now we use ATMs, which are more convenient and save the banks the hassle of paying all those people. But somehow, customers pay steep fees for the privilege of making a withdrawal. It’s easy to lose track of every time you reload the wallet, but it adds up fast.
Transaction fees can be as much as $7.40 per withdrawal, depending on whether you use your bank or a competitor’, according to the government-run Financial Consumer Agency of Canada.
You may have a certain number of free transactions per month, but it can be easy to exceed that if you’re not paying attention. And when we travel, the fee goes nearly off the charts. Go over your bank statement one month and add them up.
Advisory Commissions and costs
Getting a financial advisor is a natural step for many people who don’t feel confident enough to manage their own portfolio. But unless you’re a high net worth individual (if you are, Salut), you’re not getting the A-team down at the wealth management office. Instead, you’re probably getting an advisor who gets paid for selling you investments. That can lead to a portfolio assembled in part to benefit the advisor in the short term, rather than you in the long term.
And it can be tricky for a layperson to get a sense of the real cost of their investments, such as management fees for certain mutual funds that can eat into your returns. Unless you’re persistent in getting info from your advisor, that nest egg you worked so hard to build may end up being smaller than you expected.
