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Four annoying things banks do, and why

A woman leaves a Bank of Montreal branch in downtown Vancouver. Darryl Dyck / The Canadian Press

There’s a good chance you’ve been annoyed by your bank at some point. Maybe you were dinged with an unexpected fee or had to use your lunch break at work to visit your branch.

But there are reasons why banks do what they do, and if you don’t like it — ways you can fight back.

Here are some common gripes customers have with banks.

1. If you deposit a cheque, they might not give you the money right away.

Banks sometimes place a “hold” on a cheque, meaning that they do not release the full value to the customer for up to a maximum of four business days for a cheque deposited in person, with a few exceptions.

That can be inconvenient to someone who maybe needs that money right away for a mortgage or other bill payment, said Scott Hannah, president and CEO of the Credit Counselling Society.

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Banks do this to mitigate risk, said Maura Drew-Lytle, director of media relations and communications for the Canadian Bankers Association. When you deposit a cheque, your bank has to check with the issuer’s bank and make sure that the money exists in the account. Then, that money is sent along. This takes time, she said.

Advancing you the funds before the cheque is verified could be risky for the bank if the cheque bounces.

“It’s just a practice that from the bank’s perspective helps them mitigate risk, but it doesn’t make it easy for a lot of consumers,” said Hannah. “As a result, some consumers turn to these cheque-cashing places that may charge them one, two, three per cent of the face value of the cheque before they approve it.”

Banks might hold your cheques if you are a new customer, or if you’ve had financial trouble in the past, or for a number of other reasons.

If you don’t think this is fair, you should talk to your bank about it, said both Hannah and Drew-Lytle.

And if you don’t like the answer you get and it’s too inconvenient to have all your cheques held, find another bank, said Hannah.

“Consumers need to stand up for themselves, and if they’re not happy with the bank they’re dealing with, go elsewhere. There’s lots of choice.”

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Drew-Lytle and Hannah also both recommend that you consider email fund transfers rather than cheques, as they don’t have hold fees.

2. They charge you fees for debit transactions.

A typical chequing account gives you a set number of transactions per month, then charges you each time you make an additional transaction, like buying a new shirt with your debit card at the mall. Usually, if you pay a bigger monthly fee, you get more transactions included.

But given that all of this is processed electronically, why do they need to charge you for transactions at all?

“That’s only one part of the cost of banking. Most banks have branches. They have to pay for all of that network. They have to pay for giving you a variety of ways to bank. You can go to a bank, you can go to an ABM, you can bank online, through a mobile app, through telephone. It costs money to provide all of these services. It costs money to have this state-of-the-art technology that allows you to do those transactions quickly and safely,” said Drew-Lytle.

Or more succinctly: “It’s how they make money,” said Hannah.

READ MORE: Sick of bank fees? Here are some alternatives

Setting up the network to allow you to use your debit card anywhere is expensive, he said, and account fees are how the banks pay for it. It’s also one way they make a profit for their shareholders, he said.

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If you think you’re paying too much, he recommends examining other account options. “It’s really about looking at: what are my banking needs? How many transactions do I normally have? What could I change? And it’s worthwhile speaking to your bank about that. It is a good question to ask: I want to reduce my costs as much as possible. How can I accomplish this?”

The Financial Consumer Agency of Canada has an online tool for comparing different accounts and their associated fees.

Hannah said some people also make purchases using a credit card instead of a debit card, and therefore avoid fees on each transaction. As long as the balance is paid off once or twice a month, this can be a good option too, he said.

3. They charge you fees for overdrawing your account, or if there isn’t enough money to pay.

If you have $50 in your chequing account, and you try to pay a $100 bill, you will get dinged a fee for “non-sufficient funds” and the payment might be denied. The fees vary somewhat, but at TD Canada Trust, for example, it could be $48.

To avoid this, many banks offer “overdraft protection,” generally for a fee. Overdraft protection allows your account to go into a negative balance, said Drew-Lytle. You will get charged for going into overdraft, and also interest on the amount.

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“When you go into overdraft, you are borrowing money from the bank, so it is actually a loan,” she said.

Overdraft fees and interest are typically less than you would be charged for non-sufficient funds, said Hannah. So, some people opt to have overdraft protection. However, he thinks it’s smarter for people to avoid this situation in the first place by being aware of how much money is going in and out of the account.

Setting up automatic payments for all your utility bills might seem convenient, he said, but if they’re set to charge you on a day where you don’t have a lot of money, it could cause you trouble. “I think as consumers we need to be better-managing our accounts,” he said.

4. They call all the time to offer products you don’t want.

When you hear that your bank is calling, you’re inclined to listen. But, sometimes they’re trying to sell you something: a new account, some insurance, or maybe to raise the limit on your credit card.

Sometimes you might be interested, sometimes not.

“They’ll each have their own strategies so it’s a way of informing their customers about products,” said Drew-Lytle. You can always refuse the offer, she said.

Banking has become a more competitive business, said Hannah. You used to be a bank’s customer for life, but now you might have accounts or credit cards with several banks. And so, banks try to sell you things.

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“They sell products. That’s what our banks are: they sell financial products. That’s their sole objective,” he said.

When you get an offer, think about whether you need the financial product, he said. And if you want them to stop calling, “Contact your bank and say, ‘Please stop all solicitations and offers, by telephone, by mail.’ And they’re obligated to stop. They’ll make note of it in your account.”

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