Sunday, March 18, 2007

Don't Bank On It.

That the banks will voluntarily concede on the issue of ATM fees.
If ATM fees were eliminated, customers would be subsidizing the customers of other banks who use their machines, argues the Canadian Bankers Association. If people want to forego the convenience fee, they should use their own bank's machine.

A red herring, a straw man, and a spurious argument since the oligopoly of the five banks already share their customers since the jointly own Interac, Cirrus, Plus etc. the ATM operating systems. And as such charge fees to stores using Interac, and to private ATM operators. They are literally cash registers for the Big 5 Banks, if not one arm bandits.

But banks don't seem to have convinced either the broader public or their political masters why a fee is necessary.

John Lawford is one lawyer eager to argue against the banks in upcoming finance committee hearings. "There is no need for fees at all," says Lawford, who represents about 4,000 Canadians through the Public Interest Advocacy Centre.

Banks collect an estimated $154 million annually in convenience fees, based on figures supplied by the Canadian Bankers Association – a tiny sliver of their overall profits. But it's an issue that gets Canadians' blood boiling.

A drop in the bucket, but don't forget this is only one set of user fees. There are service charges and exorbitant credit card charges which the Banking Committee needs to look at. Since the banks love to get us to pay for their screw ups.

But if the government were successful at getting the banks to eliminate fees, it might not solve consumers' pocket-book problem.

Banks might just shift the fees to another service, says U of T's Booth. Previously, banks raised service fees to recoup losses on 1970s loans to foreign countries such as Brazil, Argentina and Mexico, he says.

While the banks and others advocate you take out large amounts of money at one time from the ATM to avoid withdrawal charges, I point again, that this is simply shifting the burden on the consumer who is being gouged. You are charged by your branch, the ATM you use and further a monthly service charge. The ATM's were instituted to reduce branches and staff costs. The private ATM's were approved by the Competition bureau to provide competition to bank ATM's, though the Big 5 run Interac/Cirrus/Plus that ATM's use.

In February, the Toronto marketing research firm TNS Canadian Facts announced that 81 per cent of Canadian adults surveyed in the fall of 2006 had used a bank machine during the previous month, up from 78 per cent a year earlier, and that nine out of every 10 cash withdrawals had been made at a bank machine.

Furthermore, deposits of cheques and cash at ABMs doubled those made in branches, and in fact only 53 per cent of Canadian adults had visited a branch in the previous month, the lowest percentage since 1994.

So the solution is that the Big 5 banks eat the costs and make it back from stores that use ATM for your purchases, which they charge .50 for. And from the private ATM's, who can charge you whatever they want.

And if this is not solved by the Bank Act Review, it will be real money in your pocket issue that will dwarf any tax break promises the Conservatives make in the next election.




Service Charges


Bank Profits

Credit Cards

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