Monday, September 05, 2005

Why Canadian Banks Suck

Why would anyone want to charge you a fee to hold onto your money? That has been my question about the Canadian banking system for quite sometime. Why wouldn't the Canadian banks be fighting amongst themselves to attract new customers and hold the customer's money until the customer requires it?

Instead Canadian banks have service fees for banking at the ATMs, banking with the teller, making transactions, looking at the teller with one eye closed, looking at the teller with one eye closed and standing on one foot...well you get the point.

While I was working in the United States for the New York City Department of Education I loved the American banking system. Not once during the year I lived in the United States did I pay one cent in banking fees. No I didn't worry about how many transactions I made a month in order to avoid banking fees like I do with CIBC. In fact I could use my bank card anywhere Mastercard was accepted because the American banking system has figured out that the more versatile you make the card the more people are likely to use it. Also, when you walk into the front entrance of any American bank, as one Chase commercial put it, "you fall over ATMs". In fact the most I have ever lined up for an ATM in the United States was just less than a minute.

In contrast, I have to wait in line to use the CIBC ATM machines because the bank refuses to install more ATMs at their branches. I also must pay fees through the nose in order for the bank to hand over "MY" money when I need it.

Add to this the fact the Canadian banking system pays zero percent interest after the service fees have been taken out, it only frustrates people even more. You can save more of your money by hiding it in a dirty sock underneath your bed than by having the bank hold onto it for you. Figure that one out. You would think Canadian banks would want to hold onto your money in order to be able to have cash to loan back out in the forms of lines of credit, credit cards and mortgages in order to make large sums of money. Nope, not the case. The only thing Canadian banks are interested in are nickeling and diming Canadians to death.

Contrast that with my experiences with the American banking system. I can go into any branch of a bank where I have an account and ask any question and get a straight out answer at no cost to me. I can do things online, at the teller and/or at the ATM while not paying a dime in service fees. Add to this the fact that the banks pay interest rates, even how low they are, on the savings accounts only adds to the competition between the banks. However, the interest rates on your savings accounts increases with the larger the balance you have in your combined accounts with the bank.

Need a teller service? I hope you have time to spend fifteen to thirty minutes in a long bank line in Canada. At Citibank in the United States? Maximum 5 minute wait to see a teller! So why are Canadians paying service fees? I don't know considering in comparison to their American counterparts, who pay nothing in service fees, Canadians seem to get poorer banking services in terms of numbers of ATMs and longer bank lineups.

The issue of bank mergers amongst the Canadian banks have come up in recent years. But why should Canadian banks merge and reduce competition in the banking industry in Canada? American banking firms have strict guidelines for operating in Canada, so there is really no competition there within the county. Canadian investment firms with ties to Canadian banks do operate in the United States (e.g. CIBC Wood Gundy, TD Waterhouse, ScotiaMcLeod, etc.) Thus, I believe if Canadian banks want to merge in order to become "more competitive in a worldwide market" let them. However, the newly merged banks should be prepared to face competition in Canada. That means removing the required laws banning foreign competition and letting the likes of J.P. Morgan Chase and Citibank to operate branches in Canada.

Perhaps, following the mergers and the new competition, maybe the Canadian banking system will finally get the clue that their customers have had enough of paying service fees on everything. Then perhaps the Canadian banks will also smarten up and learn to value their customers hard earned money and not try and figure out new and innovative ways of taking their money while providing worse and worse service levels. Besides isn't that the job of the government via the taxation systems to rip off Canadians and mismanage operations?

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