Back in the late 1990's Frederik de Groot started appearing on TV pleading with Canadians to save money.
ING Direct now Tangerine was the first such institution that began to promise to do things different. In fact what they were suggesting was they would do things the way that they got done before. This was for you to loan your money to the bank to safeguard. So preventing the money under your mattress turning to ash if your home went up in flames metaphorically speaking.
The bank was grateful for this loan as it helped them to earn a sizable profit, as they would then lend it to others who would have to pay high rates of interest. In turn you got paid a healthy amount of interest on the funds you invested.
For example in 1981, the prime rate of lending topped out at 22.75%. The interest rates on typical savings accounts rose in conjunction with these. Plus the banks wouldn't charge you fee for accessing your money which was the typical practice in the 1990's.
But with the move to a user pay system. Where we as customers pay for the services that we do use things changed. Increases in fees charged by banks have become an important part of their revenue model. So when RBC announced their new fees commencing June 1st a great many of their customers became annoyed.
The question being asked isn't why RBC, TD, Scotiabank, CIBC and BMO have raised their fees this year. But why is it that we Canadians are continuing to pay them when there are better alternatives available.
As a nation we are much founded on being loyal and averse to taking a risk. It is these qualities that have helped the banks to remain unscathed when the recession hit. Plus it helped to make them more powerful.
At present the five main banks offer interest rates of between 0% and 0.80% on their savings accounts. These also come with high variable fees of up to $5 on each debit transaction you carry out.
Yet if you had an account with AcceleRate Financial they charge a variable fee of just $1 for such transactions. Whilst at the same time they offer an interest rate of 1.95%. This rate is higher that you can get on a 5 year GIC account as offered by the 5 banks discussed above.
So maybe now is the right time to think about looking elsewhere to place your savings.