Canada's largest bank has decided that it's not enough to charge clients interest when they borrow money.
Starting June 1, a limited number of Royal Bank of Canada customers will pay a fee when they make their regular monthly loan or mortgage payments from various accounts. The change is contained in a list of service fee and account changes that is notable for the way it affects people of all ages – from seniors to students and kids who have the bank's Leo's Young Savers Account. You won't find a better document of bank creativity in mining its customer base for more fee income. Study it here and watch for other banks to do something similar.
RBC does not currently count mortgage and loan payments toward the one debit transaction it offers for free in savings accounts each month or as part of the set number of debits included in a few other account packages. When the new fee schedule takes effect, clients who have used up their free debit transaction will pay from $2 to $5 to make a loan, mortgage and/or credit card payment in RBC savings accounts.
The bank says savings accounts are designed for clients who have short-term savings goals and need their money only occasionally. But loan and mortgage payments are typically a blend of principal and interest, which is to say the bank makes good money off them without charging additional fees.
In RBC's student and young savers accounts, a fee of $1 will be charged if you've used up your regular monthly allotment of debits and make a payment on a loan (or, unlikely, a mortgage). The same fee applies for contributions to RBC investment products, which is quite the unfriendly message to send to young people who are getting an early start as investors.
An RBC spokesman said in an e-mail the June 1 round of fee increases results from the bank's annual review of pricing on various products and services. "We work hard at keeping costs down," he wrote. "However, from time to time, we reprice our products and services to reflect the cost of doing business."
Seniors are the most notable group affected by this repricing because the changes affecting them speak to the issue of offering discounts to a group that is, first, comparatively well off financially and, second, growing rapidly in size. Many banks long ago dispensed with free banking for seniors and replaced it with discounts or rebates. RBC's rebate is 25 per cent or $4 off the regular fee, whichever is higher. To get this benefit, RBC clients will have to be 65 as of June 1, up from 60. Those under 65 who currently get the discount will continue to do so for as long as the account is open.
"We are adjusting the age for seniors' eligibility to be more consistent with the age that most seniors' benefits generally apply, including many government programs," the RBC spokesman said in his e-mail.
Rebates are also available to RBC clients with a range of monthly chequing account packages. Basically, the deal is that you get between $4 and $10.95 off your regular monthly chequing account fee if you have a credit card, investment and mortgage at the bank. Apparently, you just need to have the card or investment, not actually use or contribute to it on an ongoing basis.
As of June 1, RBC will require an active credit card and active investment to get the rebates. As for the rebates, some are improving and others are shrinking by close to half.
Another fee change affects overdraft protection. On several of its accounts, RBC charges the higher of $4 a month for overdraft protection or interest set at 22 per cent. On June 1, it will charge $4 a month plus interest if a client overdraws an account.
One last change concerns Interac Flash, which I wrote about in a recent column. Flash lets you pay for purchases of less than $100 by tapping your client card on an electronic reader instead of keying in your PIN. Flash transactions are now free in RBC's young savers, student and day-to-day bank accounts; as of June 1, the bank will charge $1 if a Flash transaction goes above the monthly allotment of debits. No rock goes unturned when a bank mines its customer base for more fee income.