Fight Back: 81 Ways to Help You Save Money and Protect Yourself from Corporate Trickery

By Ellen Roseman

Money-saving advice from Canada's leading consumer advocate

In this book Ellen Roseman distills the financial advice she gives in her columns and blogs into 81 quick tips that all Canadians can use to help them spend sensibly, save money, and avoid costly consumer traps. This book of "personal finance greatest hits" is filled with illustrative examples and cautionary advice from Roseman and stories from her faithful readers. Filled with a wealth of information, the book includes the low-down on dealing with banks and car dealers, cutting costs of communication services, improving your credit, buying and renovating a home, fighting online fraud, ensuring you have the right insurance, and more.

• Offers an easy-to-use guide for being smart with your money
• Includes how to advice on handling the most common financial pitfalls
• Contains the best advice from Ellen Roseman's columns and blogs
• Written by Canada's most popular and savvy consumer advocate

Don't spend another dollar until you read Ellen Roseman's best-ever tips for saving money and making wise financial decisions.

• Language: English
• Publisher: Wiley
• Release date: Dec 19, 2012
• ISBN: 9781118301487

Book preview

Part 1

Outsmarting the Banks

As Canadians, we love the convenience and personal service we get at the big banks. We know our banks did a solid job during the recession and stock market crash in 2008-2009. They withstood the stresses that sunk some financial institutions in the U.S. and overseas. We're proud of their strength and conservative lending practices.

But there are many things we don't like about the big banks. They can make us so annoyed that we head off to smaller financial institutions, hoping to find a more caring attitude and more respect for customers.

Why do banks keep increasing their service charges and adding new charges, despite making billion-dollar profits? Why do they impose fees on products and services we already own without asking for permission or even notifying us?

Suppose you're moving your registered retirement savings plan from one bank to another. You may not see the fees that your bank charges to transfer the investments elsewhere until after doing the paperwork. These fees may not even have existed when you opened your RRSP.

Why do banks play games with interest rates? They often post rates that apply only to customers who don't make an effort to negotiate a better deal. It would be nice if they gave us their best rates right away and didn't force us to grovel.

These fictitious posted rates can come back to haunt you if you make an early exit from a closed mortgage in order to sell or refinance. Banks often calculate the penalty using the higher rate you didn't have to pay, rather than the discounted rate you actually did pay.

Why do banks offer such a dizzying array of credit cards? You can easily get confused, trying to pick the best card for your needs and juggling the competing demands of interest rates, service charges, annual fees, warranties, cash back and travel or merchandise rewards.

Finally, why do banks try so hard to sell you insurance to protect your credit card balance if you get sick or lose your job? They used to do it in a sneaky way, adding it to your account and making you responsible to cancel it. Now the law has changed to outlaw such negative option billing. But some cardholders still say yes to telephone pitches for insurance, not knowing that it pays only the minimum balance each month and costs too much for the benefits that it offers.

It is clear that Canada's big banks can turn off loyal customers with their high-handed behaviour. But they do value your loyalty when you say you are ready to go to a competitor. They do not want to lose you.

You can get a better deal from your bank by playing on this desire to boost market share.

First, you describe what you want and what is available at other banks (after doing some research).

Second, you suggest that you will open new accounts or move accounts from other financial institutions if you get what you want.

Third, you will make an effort to encourage your friends and family to open or move accounts to the bank.

Fourth, you will use social media to talk about your good experience. You will not send negative comments to your Facebook friends and Twitter followers.

You get the picture. Banks want to get a greater share of your wallet. They negotiate with you and make concessions if you promise to send more business their way. They value the influence you have on people in your social and business networks.

If you sit tight and accept what you are offered, you will not get the best deals on products and services. You may only hear about them when you are on the way out the door.

Treat the bank as you would treat a telephone company or car dealer. Do not accept the posted price. Ask for what you want. Keep pushing for more. Explain your worth as a customer. Suggest that you will leave. Then, make the bank beg you to stay.

Chapter 1

Get a Higher Interest Rate on Your Savings

The Interest Rates that big banks pay on your savings are rather low. In some cases, they're downright pitiful. So why do many of us keep our extra cash there, instead of moving it to a low-cost competitor that pays a higher interest rate?

I'm talking about the five big banks that dominate the industry: Royal Bank of Canada (RBC), Toronto-Dominion (TD Canada Trust), Canadian Imperial Bank of Commerce (CIBC), Bank of Nova Scotia (Scotiabank) and Bank of Montreal (BMO).

The Big Five have thousands of branches across Canada, which provide personal service, financial advice—and, yes—sales pitches for mutual funds, RRSPs (registered retirement savings plans), TFSAs (tax-free savings accounts) and other lucrative investment products. The cost of keeping branches open and staffed during the week (and often on weekends) forces them to offer lower rates on savings accounts, term deposits and guaranteed investment certificates than virtual banks.

The Big Five just can't compete with smaller banks that do business with customers by phone or Internet. It's much cheaper for rivals to operate without the expense of bricks and mortar. When the Big Five do offer a higher-than-average savings rate, they usually require high minimum balances or punitive fees for transfers or withdrawals.

Look at the book publishing business and how it has changed. You save a few dollars when you buy a book online, even after paying the shipping cost. You save even more when you buy an electronic book online and download it to your reading device.

Banking has the same issues with higher costs in the real world and lower costs in the virtual world. The Big Five banks have a strategy of offering low posted rates to all their customers and then offering better rates for those who have more value to the bank. They keep their bottom line a secret, so you have to negotiate for the best deal that you can possibly get.

You don't have to settle for peanuts on your savings accounts, term deposits and guaranteed investment certificates. If you're a customer of the big banks, you can do better than the posted rate, as long as you're prepared to shop around and negotiate.

Here's how to get better rates:

Compare the rates paid at smaller banks compared to those paid by the big banks. You can find a comprehensive list of rates on savings products at the Toronto Star's website, www.thestar.com (go to Business and then to Loans and Rates).

Try Cannex, another comparison shopping site (www.cannex.com). It's aimed at brokers, but does have some free information (such as the rates paid on Canadian deposit accounts).

If you find a better deal at another big bank or a smaller rival, ask your own bank to match it. Suggest you will walk if you cannot get a matching offer.

As bargaining chips, talk to the bank about your long-time loyalty as a customer and your family members' loyalty. Talk about the network of people you can influence.

Argue that if you get what you want, you intend to open new accounts at the bank and transfer existing accounts from other financial institutions. Your network may do the same thing.

If you suggest that you will take your money elsewhere if you cannot get a decent rate, be prepared to walk away. This cannot be an idle threat, nor can it be delivered in a hostile manner. Your aim is to be friendly, courteous and non-confrontational.

Decide what to do if your bank refuses to match the savings rates offered by smaller institutions. Will you compromise? What is your bottom line? Will you settle for half a point more than the bank's posted rate? Or will you settle only for a full point?

Work out your strategy in advance. If you are told that the bank has little room to negotiate on savings rates, ask for a deal on another product. The bank may be keen to sell mortgages and able to help you switch your mortgage from another institution with the appropriate inducements.

Chapter 2

How to Fight Back when a Bank Cuts the Interest on Your Savings

Canada's Big Banks use a two-pronged strategy with savings products. They offer a low posted rate for most customers, but boost the rate for those who have more assets or who negotiate a better deal based on their value to the financial institution. In this way, the banks enhance their profits by market segmentation.

Never assume that you are getting the best rate because you are a long-term, loyal client of the bank. You have to keep asking your bank about savings rates. Never stop bargaining about rates and never stop keeping track of what you are being paid.

Rob Young's story shows what can happen with a bank savings account if you take your eye off the ball. As a TD Canada Trust customer, Young received a letter in 2010, telling him about what appeared to be a minor change. His account (called a Guaranteed Interest Account) was being transformed into an Everyday Savings Account with the same interest rate. He was told that if this account no longer suited his needs, he could book a free assessment at his branch.

Unfortunately, Young did not know that TD Canada Trust was launching a new and better account (called a High Interest Savings Account) at the time. He did not know that he was getting a lower and lower rate on his old account. Nor was he told that he could boost his savings rate by switching, despite many trips into the branch to update his passbook and transfer money between accounts.

Only in 2012 did he learn about the growing gap in interest rates. While his Everyday Savings Account was paying only 0.5 per cent, the new High Interest Savings Account was paying 1.2 per cent. That made quite a difference, considering that he had a $45,000 balance.

I made about $240 in interest last year, but could have made $540, he said in a letter to TD. Over the years, I've been asked if I'd like to make an appointment with a TD adviser for mutual funds. But I've never been told about the High Interest Savings Account. Will TD make up the difference since the account's inception?

Young did not get anywhere with his request for compensation, even though he wrote to the chairman of the board and to the ombudsman. He was told that it was a customer's responsibility to look for other savings opportunities at the bank.

When he wrote to me, I asked if he had other accounts at the bank. Yes, he had a mortgage and he was planning to move his mortgage at renewal time. And yes, he had been a customer for 25 years.

Bingo. I knew I could help him recoup that missing $300 in interest. TD spends millions to show it cares for clients. How could it turn down a request by a long-time client who felt that the bank had tricked him and who was prepared to air his grievances in a public forum?

Luckily, the bank said yes to my request for reimbursement.

We train our branch and phone staff to have regular conversations with customers to ensure they're in the right account for their needs. We also provide full information about account options on our website (as well as in-branch) and have an account selector tool, said TD spokeswoman Barbara Timmins.

Unfortunately, the customer did not benefit from either. In this case, we are prepared to make a goodwill gesture to compensate him for the interest rate differential between the two accounts.

Not only Young received an interest bonus. Many other TD customers read my column about the savings account switch and also made a successful appeal for their fair share of interest.

This is another example of the two-pronged strategy used by banks. They launch new products to attract clients or match the competition, while keeping long-term customers in older products that may have fewer benefits. Moreover, they do not tell you about the new products unless you ask.

So, if you miss out on a deal that you think you deserve, always play the loyalty card. Tell the bank that you plan to leave and take your friends and family with you. That can turn the odds in your favour, especially if you talk about your other options and make a credible case for leaving.

Finally, contact the media if you feel you were the victim of a dirty trick. Reporters love stories about corporate wrongdoing. They will be happy to help you tell your tale, as long as you show that you did your best to get the facts. Contacting the media can lead to reimbursement for you and for others caught in the same trap.

Chapter 3

Look Beyond the Big Banks for Higher Savings Rates

You can get Higher Savings Rates by negotiating with your bank and playing the loyalty card. But if bargaining is not your strong suit, there's another option: Hire a deposit broker to do the bargaining for you.

Deposit brokers specialize in finding the best rates on savings products. They have a database of constantly updated rates on different types of products and they can get deals that you cannot get on your own.

Compensation for deposit brokers comes from financial institutions, not from your pocket. They earn commissions from the companies with which they place your deposits. You still get a competitive rate, since the financial institutions treat these commissions as a marketing cost. Thus, your comparison shopping costs you nothing. (Travel agents are compensated in a similar way.)

You may not have heard about deposit brokers before. Do not worry. They have a low profile in Canada. But they are legitimate businesses that have a self-regulatory organization, called the Registered Deposit Brokers Association, www.RDBA.ca. You can search for members in your area and get contact information for the financial institutions with which they do business.

Why do financial institutions deal with deposit brokers? They want to get new business and they want to minimize their advertising costs. Companies such as Concentra Financial in Saskatoon, Bridgewater Bank in Calgary and B2B Trust in Toronto are looking for exposure and use deposit brokers to get their names out to the public.

Deposit brokers often deal with online banks that have few branches or no branches at all. By dealing with customers by telephone or Internet, they can offer higher rates without requiring a high minimum balance.

But there's an important difference between some financial institutions and others. As a customer, you have to ask about deposit insurance. This is designed to protect your savings if the bank goes out of business.

Most of the large banks with branch networks are members of the Canada Deposit Insurance Corporation. This is a federal crown corporation, which was created in 1967 to cover eligible deposits if a financial institution fails. CDIC guarantees deposits for up to $100,000 each. It does not cover foreign currency deposits or those with terms exceeding five years.

You can find out easily which banks belong to CDIC. Go to their website, www.cdic.ca, and click the first box on the home page banner called, Where are my savings insured by CDIC? You will see an updated list of member institutions.

With some online banks, you need to know the parent company's name in order to find it at the CDIC's website. For example, Ally Bank is listed under its parent company's name, ResMor Trust Co. Canadian Direct Financial is listed under Canadian Western Bank.

You can find many online banks that offer higher savings rates and that belong to CDIC. They include ING Bank of Canada (soon to be part of Scotiabank), President's Choice Bank, ICICI Bank Canada, Manulife Bank of Canada, Canadian Tire Bank and Peoples Trust Co. This means that they are federally regulated.

You can also find many online banks that are not CDIC members. They are owned by credit unions and they are provincially regulated. This means that your money is protected by a provincial deposit insurance organization. For example, First Ontario Credit Union is a member of the Deposit Insurance Corporation of Ontario (DICO), as is Meridian, Ontario's largest credit union.

However, you have to do your research to find out which institutions are CDIC members and which belong to a provincial deposit insurance organization. Alterna Bank, based in Ottawa, is owned by a credit union and yet it is a CDIC member.

You may find an interesting anomaly while hunting for higher rates. Some of the best deals are from online banks that are owned by Manitoba credit unions. Their names include Achieva Financial, MAXA Financial, Outlook Financial, AcceleRate Financial, Hubert Financial and Steinbach Credit Union.

If you save with an online bank owned by a Manitoba credit union, you are covered by the Deposit Guarantee Corporation of Manitoba (DGCM). Started in 1965, it covers 100 per cent of the deposits held with Manitoba credit unions and caisses populaires (compared to CDIC's limited coverage of $100,000 per deposit). It also covers deposits in foreign currencies and those with terms of more than five years (which CDIC does not cover).

DGCM was established under a Manitoba law and its board members are appointed by the province's lieutenant-governor. However, it is not backstopped by the provincial government. The separation occurred in the mid-1980s after a few provincial financial institutions went under. The Manitoba government does not have to provide financial support to DGCM if it runs out of money.

This is different from CDIC, which has legislated protection for de-posits. This means that the federal government must step in to cover CDIC if it cannot reimburse all the depositors in failed member institutions. And most provincial governments offer guaranteed support to credit unions in case they cannot cover the failures of member firms.

So, are you at risk when putting money with a Manitoba credit union? This is a question you should consider.

As the prudential regulator, we make sure that credit unions never get to the point where we have to pay out, said DGCM chief executive Vernon McNeill in an interview in 2011.

DGCM is fully funded according to actuarial guidelines, with reserves equal to about 1 per cent of its insurable deposits, McNeill added. Moreover, there have been no credit union failures in the past 25 years in the province.

Potential customers of Manitoba credit unions are invited to call DGCM's toll-free number (1-800-697-4447). We answer two to three calls a day about our guarantee, the chief executive told me.

If you are seeking higher rates at online banks, you can find out how your deposits are insured at the website www.HighInterestSavings.ca. You can compare rates at more than a dozen financial institutions and see whether they belong to CDIC or provincial deposit insurance plans.

This website, Canadian High Interest Savings Bank Accounts, has frequently updated rates on both regular accounts and tax-free savings accounts (TFSAs), plus an active discussion forum. It is run by an interested volunteer named Peter Keung, who also has a helpful website on prepaid phone plans, www.speakoutwireless.ca.

Chapter 4

How to Get Higher Savings Rates without Getting Burned

Before Depositing Money with a financial institution, whether you deal with it on the phone, on the Internet or at a bricks-and-mortar branch, you have to ask some questions. Interest rates are not the only factor. You also have to look at transaction costs. You can end up paying more in fees that you earn in interest on your savings.

Here are some questions that you should ask a bank:

Is there a fee for withdrawals?

Can you get access to your money any time from an automatic teller machine?

Do you have to transfer your money from a savings account to a chequing account before you can withdraw it?

Can you transfer funds to accounts at other financial institutions by Internet or by telephone?

The Financial Consumer Agency of Canada is a federal organization that has a mandate to enforce banking laws and provide information to bank customers. It has a Savings Account Selector Tool at its website, www.fcac.gc.ca, where you can compare rates offered by banks and credit unions across Canada.

You begin by saying how much money you keep in your savings account during a month. Then, you see the rates offered on different balances and you see how the interest is calculated. Is the highest rate applied to the whole balance? Or is a different rate applied to each tier of the balance?

You can compare the features available with each savings account, such as debit card, direct payment, preauthorized debit, cheques and record-keeping options (electronic or paper). Most importantly, you can find out which services are free and which have extra charges.

Some banks have unlimited free transactions. Some banks have limits on free transactions. And some banks charge fees each and every time that you withdraw or transfer money from your savings account and you pay a bill at a branch. The cost can range from 75 cents to $5.

Make sure that you get updated information on fees when opening a savings account. Ask questions, since you may not find what you need in the fine-print terms and conditions. Service charges can wipe out your interest earnings pretty quickly.

Here are other tips from the FCAC on comparing savings account rates:

Most financial institutions advertise an annual interest rate, but interest is usually calculated daily or monthly. Ask the bank about how often your money earns interest. Each interest payment is added to the principal and also starts to earn interest, a process known as compounding. The more often interest is compounded, the more your account will grow.

Find out if the financial institution offers a higher interest rate for an introductory period and a lower rate afterward. If so, make sure you know what the lower rate will be, when it kicks in and whether or not it is a competitive rate.

Your financial institution must provide you with a copy of the account agreement, which lists terms and conditions, plus fees. Ask questions about anything you don't understand. Keep a copy of the account agreement for your records.

Make sure you understand how the account works. You can run into big problems if you do not read the small print.

You may be surprised to learn that even lawyers do not always read the fine print in their contracts. I once wrote about an Ontario court judge, who found that his bank had frozen him out of his chequing account after he ran an overdraft for six months in a row. He did not know that his agreement had a limit on borrowing through an overdraft.

Things did not improve for the judge. The bank asked him to cover his $2,500 overdraft balance within one day. But he did not want to charge the amount to his