And this time, it’s consumers that are reaping the benefit! Ottawa has called for some pretty major bank changes that will make it easier for Canadians to do their banking, and help them save their money too. The new rules include how cheques are processed, how credit card cheques are advertised and used, and banks now have to be a little clearer with their customers about the mortgage products they’re offering too.
The first rule applies to the holding of Canadian cheques. As it currently stands, if you deposit a cheque the bank has the right to hold it up to seven days. But beginning in August, that wait time will be dropped to only four days for any cheque that is under $1,500. The change might not seem like a major one, but to many three extra days could mean the difference between rent getting paid or not, or a credit card bill being paid on time.
And speaking of cheques, credit card cheques are also going to be handled differently starting. Credit card cheques are basically a cash advance that one takes out on their credit card. These cheques have extremely high interest rates and, unlike the balance of the card, start collecting interest the very minute that you use them. Right now, any customer who has a credit card can be mailed the cheques whether they want to use them or not, but this is a problem. The problem is that customers, who might never have considered using the cheques before, are now given a choice. And given human nature, our choice is usually going to be to get what we want – even if we don’t understand all the repercussions of doing so.
When the new rules are implemented though, that will change too. A customer will have to specifically ask the bank for the cheques to be mailed to them, with no prompting or promoting from the bank at all. This means that the consumer would actually have to do all their research and really find out if these cheques are a good option for them, before they start writing them out at whimsy. It’s a measure that’s designed to cut down on the amount of interest Canadians pay, and how much money they can save.
Lastly, perhaps the greatest new rule imposed on banks is how they deal with their mortgage and second mortgage products. In the past, banks could just throw out a few options, with little explanation to them, and suggest one that’s best for the consumer. Now though, they’ll need to not only fully explain each product, but be totally transparent about them, including giving the customer options on prepayment and how to avoid mortgage-breaking fees. It’s undoubtedly still better to go to a mortgage broker but with the new rules, banks have to be clearer and more honest with their customers – and that’s always a good thing.
The new rules aren’t really that much of a shock; all the changes announced were ones that appeared in the federal budget, and fall in line with Stephen Harper’s continuation of changing finance rules in order to boost Canada’s economy, and get those debt levels down that Ottawa keeps warning us about. Once the changes have been instituted, the only thing that will remain to be seen is how Canadians handle them, and whether they change the way we think about how we spend our money. Let’s hope it does.
