I read an interesting article in a not-so-recent copy of Harpers Magazine about bank machine user fees. For me personally I tend to withdraw a relatively large sum of cash at the bank machine (~$100+) because of the user fees related to a withdrawal - a typical charge of $1.50 on a withdrawal of $100 is a 1.5 percent fee. Even though this seems low, it is VERY annoying since a) the bank is making money on my money while it is in my account, and b) it is actually cheaper for the bank to provide this type of service through a machine instead of through a teller. For me my choice of bank is purely based on the service charges applied to my account. I moved all of my accounts out of the Royal Bank when they changed their accounts to all have service fees and I currently run all my banking through my CIBC line of credit account - yes, through my line of credit. The only service fee applied to my line of credit is the interest applied to an outstanding negative balance - there are no fees applied when the account has a positive balance and I can still write cheques against the account either way. I have my paycheque deposited directly to this account every payday - which counts as making a payment so I don't have to worry about making regular payments - its done. As well, when the account is negative, the jump in the balance when my paycheque is applied reduces my interest amount until the balance slowly goes down as I use money - and the longer I wait between the deposit and withdrawing funds, the less interest I pay. I use to have a regular chequing account with a few hundred dollars in it, and my line of credit with a few thousand dollars owing, until I realize that the $400 sitting in my chequing account was a) only generating about 1/4% in interest, b) costing me ~$5 a month in account "service" fees (don't recall getting any service for these fees....), and c) was effectively costing me 7.5% in interest because it could have been placed in my line of credit and then I would have been paying interest on a balance that was $400 dollars lower. Now I'm not making the 1/4% interest, but I'm effectively saving 7.25% on this money in my line of credit + saving the $5 per month... Deal !!!
Back to my original post - for me, I have enough cash in my account to reduce the relative % cost of a bank machine withdrawal, but the Harpers article reminded me of my earlier and less lucrative life where there were times that I could not make a withdrawal because my account balance was less than $20 and the minimum withdrawal was $20. Back in those days when my account was much lower, and I could only really afford to withdraw $20-40 at a time, the relative withdrawal fee for taking out $20 is just about 7% (getting $20 costs $21.50). Wow, this is a lot to pay to get access to YOUR money. In my case now where I would be withdrawing from a negative line of credit account balance, this results in a 7% immediate charge plus 7.5% in interest per year on the same amount going forward. So if my account balance stays at this level or lower for a year, I would have effectively paid 14.5% interest on that $20...
For people with some money (a group to which I have been fortunate enough to belong for the last little bit - until the pool install anyway...) this is a relatively insignificant amount - and in many cases the bank waives some fees for "higher value" clients. For people who are not as financially secure, this is a significant cost. And again I am struck by how people who have money end up needing to spend less of it to get the services they need because they are "good customers", while those who could really use some help will always end up paying full price - and then some, for everything...
I don't know how to fix it, but it annoys me and it isn't fair...
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