Bank Vaults Bursting - Piggy Banks Empty

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Amazing ain't it - banks pulling in record profits year after year and yet charging us to deposit and withdraw the very cash we give them so they can make their profits. That's just not fair, no matter how you look at it. The Federal NDP has already proposed that banks remove ATM withdrawal fees (the Liberals balked at this while the Conservatives had a lunch with the bankers and asked them to look into it). Wait a sec ... this sounds like the NDP is promoting good old market interference!

But wait a second: (1) Banks profits are in the BILLIONS, (2) all bank service fees account for just 5% of bank revenues, and (3) banks in Britain operate without ATM withdrawl fees and still make handsome profits.

Don't let them tell you it can't be done!

So, where might we go from here?

This election, I decided to shift my mindset. I'm not just a candidate, I am a potential MP. And potential MPs propose legislation. So, here's my idea to help limit crippling credit-card interest rates.

In Canada, concerns over credit card interest rates have been expressed since 1993. The MacKay Report (1998) eventually led to the creation of the Financial Consumer Agency of Canada and changes to the Bank Act, but credit card rates still remain in the 11.5-19.5% range for the major cards, and over 20% for some store cards. While I agree that banks should be allowed to make money, it is not clear to me that these interest rates are at all competitive.

I think I have a solution, but I'd like your feedback. Suppose we created legislation which did not limit a card-issuing company's right to set an interest rate, but rather said that cardholders shall be permitted to save money with the card-issuing company at a rate equal to the charged interest rate less prime plus four percent. For instance, if my credit card charges me 18%, and prime is 6%, then I would have the right to deposit money onto my credit card at the rate of 8% (i.e., 18-(6+4) = 8). Higher interest rates on the card means higher interest rates regular working Canadians can earn on depositing to their cards. Lower interest rates lessen the chance that working Canadians will go into debt. I am not sure whether "prime plus four percent" is the best value, but I think you can see my point.

What do you think?

** recent issues for you to check out:

(1) VISA and Mastercards from major banks have a hidden penalty. Suppose you are a habitual full-payer; you pay your entire bill every month to avoid all interest charges. Now, just suppose you are one day late in your payment (e.g., the due date falls on a Sunday and your cheque clears on a Monday). Many cards now charge full interest for THE NEXT TWO MONTH'S CHARGES even if your payments are on time.

(2) Suppose you overpay your bill - just to make sure you aren't penalized for cases like number (1) above. Many of these same cards carry a flat $25 handling fee for overpayments.

Rob Moir (NDP Candidate)