Sometimes rate negotiations are a battle not worth fighting for with your personal banker. This past week I had a client book an appointment with me to invest in a Term Deposit. When I greeted him in the waiting room the first thing he said to me was “Are you ready to fight?” My stomach cringed as we walked to my office.
The key to negotiating with banks is to know exactly what they can negotiate and what is out of their control. Unfortunately, clients cannot win every battle, and that’s what it is for most of us…a battle. We just want to beat the big, bad, bank. Let’s be honest, the $6 monthly fee is really not a big deal to most of us, we just want the satisfaction of winning against a major corporation. I am here to help you and as a bank employee I will let you know in general what is worth fighting for and what is a waste of time.
Banks can negotiate any type of fees that are directly charged by the financial institution. These fees include monthly account service fees, safety deposit box fees, as well as fees for bank drafts and wire transfers. These types of fees are always negotiable and can be waived at the banks discretion.
It is in a client’s best interest to negotiate these types of fees when asking for something else that the bank cannot offer. As an example you ask for a higher rate on your term deposit? If they say no, then ask for a year free of monthly account fees. When you do ask for fees to be waived remind your personal banker that you do not do so very often.
When you invest in Term Deposits the rates are negotiable…to an extent. Of course banks have a spread that guides them through interest rate negotiations for investments. Banks will always offer you the base rate (even if they tell you they are offering you the best rate) because they expect you to negotiate. You can also ask to see their rates, even if they tell you its confidential!
Banks have a spread between a minimum and a maximum that the bank allows their employees to reach. The maximum allowed for employees to negotiate is never the break even rate at which point the bank actually makes no profit or loses money. As an example for the last two months my (Canadian) bank has been offering a base rate on a 5 year term deposit of 2.5%. The maximum rate allowed to be offered was 3.25%, and we were never able to offer more than that because the bank would be “losing money”. However, over the last two weeks the bank has been offering 4.00% on a 5 year term deposit. This is a lot higher than the apparent breakeven rate, and much higher than the base rate of 2.0%.
For certain clients (usually with a large amount of money to invest) banks will break their breakeven rate. This is because the client relationship may be more valuable than the monetary “loss”. Banks do not do this often but it is possible. My financial institution is only offering the special rate for 5 years on investments of $250,000 or more. Banks will very seldom negotiate rates on special term deposit rates or promotion rates.
The best time to negotiate term deposit rates is near the end of the month, and especially at the end of each fiscal quarter. Banks are vulnerable during this time because they are preparing to report their growth over that time period. If you need to invest, it may be to your advantage to wait until the end of the month.
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