The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The three Canadian-owned banks charge the highest fees for late mortgage and credit card payments, it has been revealed, with all bank levies decreasing during the 2022 first half due to the VAT rate cut.

The Central Bank of The Bahamas, in its latest semi-annual comparison of fees charged by the six commercial banks, found that Royal Bank of Canada (RBC), Scotiabank (Bahamas) and CIBC FirstCaribbean International Bank (Bahamas) all placed highest for fees charged over credit card late payments.

Both Scotiabank and CIBC levy a $44 charge, while RBC imposes a sum equivalent to 3 percent with a minimum floor of $55, making it the highest. However, BISX-listed Commonwealth Bank was also in the mix with a $49.50 monthly late fee. Both Bank of the Bahamas and Fidelity Bank (Bahamas) were lowest at $33.

When it came to late mortgage payments, RBC and its BISX-listed home financing arm, FINCO, again led the way with a 5 percent levy or minimum of $100. Comparing June 2022 fees with those charged in December 2021, the Central Bank said: “Delinquency charges were simulated for selected credit facilities for customers incurring missed or late payments.

“The scenarios consider customers with a mix of credit facilities and modest credit card debt, as well as ongoing payments against personal loans and mortgages. All estimated costs were maintained at end June 2022 vis-à-vis December 2021, once the difference in VAT was factored.”

The simulated scenario involved a borrower with a credit card featuring a $1,500 limit; a personal loan with a monthly payment of $800; and a residential mortgage with monthly payments of $1,375. “Although there was less variance across lenders for delinquency costs on personal loans, Fidelity Bank remains the least costly in all three categories, while Bank of the Bahamas had the lowest penalty for late or missed credit card payments,” the Central Bank said. 

“With respect to the higher end of costs, RBC, Scotiabank and First Caribbean all placed highest for credit cards, and RBC tied FINCO for mortgage penalties. Further, above certain thresholds of principal and interest payments, Commonwealth Bank would have placed highest for arrears or late penalties on personal loans.”

The Central Bank also assessed fees levied on deposit accounts for three theoretical customers. The first was a student with less than a $300 balance, and who performs two transactions per month; the second was for retiree with pension income, making two monthly transactions and with a maximum $400 account balance; and the final two were persons respectively possessing chequing and savings accounts, with balances of just below $500 and above $1,000.

The latter two customers conducted four transactions per month in the Central Bank’s example, with the study assessing the fees charged for electronic as well as in-person physical transactions. “In terms of deposit account maintenance, a profiled retail-banking customer assuming maximum use of digital or electronic services options would incur, based on the June 2022 fee structure, average monthly charges that range from a low of $2.49 per month to a high of $14.66 per month,” the regulator found of electronic transactions.

“Students receive the most concessions, followed by retirees. In comparison to December 2021, and largely reflecting the reduction of Government VAT from 12 percent to 10 percent on January 1, 2022, nearly all estimates fell. The one exception being the average on the chequing account profile, which remains the most costly to operate, while adult savings accounts remain in the middle of the cost range.”

As for physical transactions, the Central Bank said: “Profiled customers who either prefer or are restricted to accessing banking services through less efficient physical channels would, as of June 2022, be subject to average monthly charges ranging from $8.93 to $22.65 per month.

“Over the prior six months, rankings were unchanged, with retirees incurring the lowest profiled costs, followed by students and adult-profiled savings and chequing facilities, at the higher end of costs. Overall, all averages decreased on account of the lower VAT rate.”

Breaking the results down by bank, the Central Bank found: “Overall, student account transactions were simulated as remaining the least costly at Commonwealth Bank, with CIBC First Caribbean International Bank (Bahamas) delivering the second lowest cost alternative, provided that customers relied optimally on digital services channels.

“However, Commonwealth Bank does not issue ATM cards to student account holders. Therefore, the cost was significantly less than the other banks. Costs at CIBC were also the lowest when the same customer profiles relied most heavily on physical channels for transactions.

“Further, with regard to non-preferential adult clients, Bank of The Bahamas offered the lowest cost for customers operating a chequing account who made use of digital delivery channels, while CIBC was the least costly for adults with a savings account. Fidelity Bank, however, maintained the advantage for both simulated chequing and savings account services when choosing physical services delivery,” the Central Bank said.

“With regard to the higher end of costs, simulated customer profiles placed adults with both savings and chequing accounts at Scotiabank as the costliest. This instance was observed for both clients that fully utilise the digital channels and a typical customer with significant reliance on physical transactions.

“RBC FINCO ranks at the upper end of costs for retirees and students who use digital channels, and ranks second highest for physical services options levied towards standard adult savings accounts, while RBC ranked second highest for adult chequing accounts.”