One of the most annoying fees consumers have to pay is bank fees.
Account fees, inactivity fees, plan fees are just some of the ways banks can charge us just a little bit more each month.
Related: Things I Refuse to Pay For
What’s even worse is that many of the fees are hidden and you have to review your account activity regularly to find them. For someone who doesn’t check their statements regularly, the fees could add up quickly without them even noticing.
I get frustrated when I see a bank charge on my account statement. I haven’t paid a bank fee in over 9 years, but I still have to go through the hassle of checking my statements to make sure I haven’t been incorrectly charged. If I do see an incorrect charge, then I have to make an extra trip to the bank to explain why the charge should be reversed.
Convenience is Key
I am not willing to close my accounts because I rely on banking for everyday things like direct deposits, paying bills and transferring money. I do enjoy the convenience that banks provide, but I’m not willing to constantly pay small fees for every aspect of the convenience.
My solution is simple – buy the banks.
Performance of Canadian Banks
As far as share price goes, Canadian banks have proven to be a solid investment. Here’s how much the big banks have increased in share price over the last 5 years:
- Bank of Montreal – 118%
- Royal Bank – 70%
- Scotiabank – 104%
- TD Canada Trust – 125%
- CIBC – 79%
Related: 5 Advantages of Dividend Stocks
And the above amounts don’t even include dividends. All of the big banks pay a dividend and during the economic downturn of 2008-09, the dividend payments were maintained by all big banks.
Here is the current dividend yield of the big banks:
- Bank of Montreal – 4.0%
- Royal Bank – 3.94%
- Scotiabank – 3.91%
- TD Canada Trust – 3.64%
- CIBC – 4.1%
Performance Looking Ahead
According to one analyst, Canadian banks are set for another banner year in 2014 – specifically TD, Scotiabank and Bank of Montreal. This is because they create a larger proportion of their sales outside of Canada compared to the other banks.
Since Canadian consumer lending is expected to slow down this year, this could mean banks that are more diversified are able to see more growth. For investors this usually means an increased dividend.
My strategy is simple – buy shares in the big banks when they are valued attractively and hold for a long period. In the meantime, I plan on using the dividend payments to buy even more shares.
A return of 4% per year may not seem like much, but compounded over 20 years it can grow to over 6% per year and since I manage my own investments, my fees are kept as low as possible.
Over time I am hoping that I can get a slice of the profits the banks currently enjoy – rather than helping to create those products by paying bank fees.
Have you considered buying bank stocks to compensate for bank fees?