Canada’s big banks rolling out higher fees on account holders

WATCH ABOVE:It’s Canada’s biggest bank, with an estimated 18 million customers. Now RBC is planning to charge those customers quite a bit more. Sean O’Shea reports

TORONTO – The country’s big banks are increasing fees on a range of accounts and transaction types, moves that will help pad the hundreds of millions in annual revenue each bank generates from such charges, but lifting day-to-day banking costs for customers in the process.

On June 1, Royal Bank of Canada will introduce new or higher fees on a wide range of accounts and transactions, such as debit purchases – even mortgage payments – increases that will lift costs on scores of account holders. The country’s largest bank will also move up its age eligibility for rebates provided to seniors on account fees from the current 60 to 65.

“I am surprised there has been very little chatter about it,” Mary MacPherson, a retiree who emailed Global News, said.

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MacPherson has been an RBC client for 45 years, she said. “Over the years [I] have had chequing accounts, car loans, mortgage, Visa, lines of credit, RRSPs, and when my husband was living we had small business account and vehicle loans — all from RBC.”

Under the new fee structure, MacPherson says her monthly rebate will be cut by more than half, to $5, and if she pays her Visa or line of credit from her savings account, she’ll be billed a new charge, according to her. “This galls me!” she said in an email.

MacPherson has made an appointment at her local branch next week and hopes the manager can get some or all of the fees waived.

RBC spokesperson Andrew Block said, “We understand that any change in pricing or fees is a sensitive topic for clients and we work hard to keep costs down.  On an annual basis, we review our products and services and sometimes adjust the pricing for some of them to reflect the cost of doing business.”

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Across the board

How many customers will find themselves in a similar situation to MacPherson isn’t clear, but what is: Each of the country’s five biggest banks has recently introduced new account policies and higher fees, or is in the process of doing so.

Bank of Montreal plans to implement account changes May 1. Part of the changes includes increasing monthly plan fees by at least a dollar, while debit purchases will be increased to $1.25 from $1 per transaction (after an initial monthly allotment is exhausted).

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Ralph Marranca, a BMO spokesperson, said the bank has been inviting customers to “sit down with us so that we can review their needs and suggest a number of strategies and plans that can help them lower and avoid fees altogether.”

TD Bank has already tweaked rates and terms as of April 1, a change that followed account alterations and fee increases at Scotiabank and CIBC. Together with RBC and BMO, TD, CIBC and Scotiabank comprise the country’s “Big Five” banks.

Not routine

Experts say the moves aren’t routine – banks don’t usually push through yearly increases like cable or phone companies typically do.

“This isn’t a very common event,” a stock analyst source who publishes research on Canadian banks said. “The banks don’t normally raise rates on an annual basis, there’s no set timeframe that they’d do something of this nature.”

Fees are nevertheless lucrative: RBC generated just under $1.5 billion in account service charges in 2014, an amount approaching 5 per cent of the bank’s total revenues. Many bank fees are considered “high margin” or highly profitable, experts say.

The fee changes come at a time when experts say banks face “headwinds” or pressure on high-growth areas of their businesses. Experts say lending for things like residential real estate and car financing is poised to slow as Canadian households curb borrowing and confront record amounts of personal debt.

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Consumer impact

The net effect of the rate hikes on consumers (and affected small business accounts) will be negative, with day-to-day banking costs becoming suddenly more expensive.

“These rates are really like interest rates – they’re a cost of money,” Don Mercer, vice president, federal affairs at the Consumers Council of Canada, said.

Mercer also questions the relatively lockstep nature of the hikes at each bank. “You can draw the conclusion that there’s a lack of competition in the market when they raise rates this way,” he said.

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