You deserve to know why we are changing banks

I mentioned earlier this week that we began the transition to a different bank here in Canada. We have been with TD Bank for over 30 years, but their fees were no longer the best deal for our lifestyle.

During this transition though, I became frustrated with the fact that I had to do this at all. It's a pain in the butt changing banks. But my math said that we would save around $700 a year... so it's worth it!

I decided that after such a long relationship, the bank needed to know why we were leaving. So I wrote an email to the CEO of TD Bank.

This guy made $15 million in salary and benefits last year. So I figure he's probably way out of touch with us little guys. But, the little guys make up a huge chunk of the bank's customer base.

TD Bank itself announced their quarterly earnings a little while ago, topping the big five Canadian banks at $3.25 billion CAD. They are doing really well.

But, they will no longer make money from me!

Here is what I wrote to the big guy himself...

You deserve to know why we are changing banks

Good afternoon Mr. Masrani,

As a long time loyal retail customer of (originally) Canada Trust and then TD Bank, I feel it is important to let you know why my wife and I are changing banks after more than 30 years.

We travel a lot. And when I read last year that you quietly increased your ATM foreign exchange fees to 3.5% from the industry standard 2.5%, I thought that sounded just a little bit greedy. But, I stuck with you and made a commitment to use my TD First Class Travel Visa as much as possible to keep my fees at the 2.5% level.

But, when one of your major competitors (Scotiabank!) recently came out with a travel Visa credit card with ZERO foreign exchange fees, I knew it was time to make the switch.

And reading your recent earnings report was the final impetus I needed to get on with the  transition!

Having said all of that, I think that during the next recession, I will buy some shares in your bank despite the fact that I will no longer be a customer!

A frustrated little guy,

Kevin Read

I would have been surprised to get a response from him personally, and of course I did not. However, I did get a phone call from the Customer Care Manager in the President's Office.

She and I spoke at length, and I explained in more detail my concerns. She said that she appreciated the fact that I took the time to write, saying that sometimes they really don't know unless the customer tells them. And, that my suggestions do go to a round table discussion by the higher ups.

One of the reasons banks can make so much money from foreign exchange is that they are under no obligation to disclose how much their fee is when they do a transaction with the public. Their "fee" is simply built into a poor foreign exchange rate. And, I've learned that the general public doesn't understand foreign exchange, so it's easy for the banks to take advantage of them.

I'll give you an example. (I use an app called xe.com for true spot rates)

If I have a check for $1,000 USD, and I want to deposit it to my bank in Canada in $CAD, the true spot exchange rate says that I should receive $1,326 CAD at Friday's closing rate.

However, the amount deposited to my account would only be $1,295 CAD because the bank pockets $31 CAD doing the transaction. But nowhere do they tell you their fee... you only see the exchange rate.

Now figure that they also take 2.5% of every debit transaction in foreign currency. When you take $500 CAD out of a foreign ATM, the bank pockets $12.50 on the deal.

Canadian credit cards are the same. The vast majority of them charge 2.5% foreign transaction fees. Canadians as a percentage travel much more than the Americans so the Canadian banks have a bigger incentive to take advantage of this. Many American credit cards do not charge this fee, although some do.

Anyhow, I hope you've learned something today, and maybe will be able to save some money as well!

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