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Banks Increasing Line of Credit Interest Rates and other Fees

7 February 2012

Over the weekend I came across an interesting article on Moneyville, which explained that line of credit interest rates would be rising.

Ellen explained that TD Canada Trust is raising interest rates on personal line of credits that are not secured by collateral. A TD customer, Ed explained to her that his line of credit rate was going up to 7.35% from 4.25%; the most shocking part of this interest rate increase was the fact that not once was there a late payment.

From what I read and understand, Ed did not make a mistake, and by mistake I mean miss a payment or pay late.

Why would their have been an increase on the line of credit interest rate?

TD explained that the adjustments were intended to ensure that a risk based approach that evaluates factors, which includes both a customer’s credit situation and their relationship with TD.

Ellen’s understanding of the comment was that if you were to have more high value products, then you would receive a better interest rate.

I understood the comment as it was said, your interest rate is given according to your credit situation and relationship with TD. That being said, I do not understand why Ed, or anyone else who is in good standing with TD see a rate increase. If anything, a decrease would make more sense to reward clients with upholding their agreement.

What could happen to my interest rate?

TD clients who hold a unsecured line of credit are probably getting notices at this time, and of that group 60% will see their interest rate go up and 40% will see a decerase.

The increase will range anywhere from 0.5% – 3.75% above their current rates and the decreases will range from 0.5% – 3.00%.

This rate change will go into effect April 2nd, 2012.

Are any other banks making changes to their line of credit?

Canadian Imperial Bank of Commerce (CIBC) will be adding a $260 discharge fee for loans and lines of credit that are secured by real estate.

The only silver lining to this increase in this discharge fee is the fact that it will not take effect until April 1st, which means if you are interested in leaving CIBC, whether it is because you found a better product elsewhere or you want to avoid the increased discharge fee altogether, now might be the time to get out.

That being said, CIBC is not the only bank that is increasing their discharge fees for products; we here at BankNerd have heard of a rumour that Royal Bank of Canada (RBC) will be increasing their mortgage discharge fee to $250 (from $200). If this change does happen it is expect to happen as of June 1st, 2012. On a side note, RBC might be planning on increasing bank account fees, but this is another rumour we have been hearing on our end. If we hear any more information on this we will be sure to share it.

What do you think of banks raising interest rates on their line of credits?



About the Author


My favorite weapon of choice is the samurai sword. I use it to cut my chicken during dinner, cut my hair and periodically carve my name into stone when I am bored. I love meditating on top of a 15ft high pole and eating those sushi’s with smoked salmon on top. I love everything there is about Canada and everything financially related to Canadians. I write deily posts from Canadian Banks to Credit Card information.

Comments (20 )

AskRoss Wrote:

Thanks bank nerd. I also ran a series of posts about this very same topic and received comments from many passionate readers upset by the changes. Rob Carrick also ran a Globe article. Surprising TD would endanger goodwill right during so called RRSP season.

Sensei Wrote:

I am also in shock as to how TD would increase their rate like this. I enjoyed your article a lot, particularly because you had so many situations for this credit increase; the increases for some were quite high.

Samir Wrote:

Hi Sensei,
Yeah, I got the same letter here. 1% increase.

DS Wrote:

We were sent a notice from TD that our LoC will decrease by 0.5%. We will be paying it off this month. This LoC was used to consolidate some debt and we have not once made a withdrawl – consolidated and paid it off… finally and about 3 years early!

Near as I can figure they are dropping the rate as an incentive to keep the account open and active in hopes that we will use it for something. I guess if you are using it they can squeeze more out of you.


NQ Wrote:

We got a notice from TD that interest rate on our unsecured line of credit would go from 8% to 11%, we never missed a payment.

We went to our TD branch to get an explanation but the rep. said it was head office decision and offered no rational explanation to justify the increase. She did not even open up our account to see the history.

We then went to Scotiabank around the corner and they offered us 7%, go figured.

Paul Wrote:

TD Canada Trust raised our rate by 3.75% effective April 2012. Paid it off in full, and we are closing all accounts with them. Very disappointed with this bank.

Andy Wrote:

My question is this: If I have an existing lending agreement with a floating rate of prime plus X percent and they arbitrarily increase the interest rate to prime plus X+3 percent is this move actually legal? Don’t we have a contract? is there some government agency regulating the banks that we can approach to put a stop this? There must be some lawyers out there who are experiencing this who might be able to jump in here.

Paul E Wrote:

I got a 2% raise on my Line of Credit with TD and have been a good customer of theirs for years. I called to ask why and they would not give me a specific reason for the increase, just blah blah blah, so I switched my banking to President’s Choice – NO FEES and I got a lower rate on my line of credit than I originally had with TD. I guess TD is banking on the fact that most people won’t take the time to switch….

Sensei Wrote:

It is a shame that TD will be losing customers over this unwarranted interest increase. At least you were able to find a bank that has exactly what you wanted :)

tall Wrote:

My RBC LOC just went up a full 3%. This is the 3rd time I got screwed by the Royal Bank with higher interest rates on short notice, and most certainly the last time. I will shop around and explore if I can transfer all my RBC business to another bank at a better rate.
Any suggestions on which banks have a fair and somewhat honest approach?

Ed Wrote:

I just reviewed my LOC online and discovered that my rate increased from 5% to 8.75% April 1st. I have had this instrument for over 20 years and have been a TD client for 40 years. Obviously customer loyalty means nothing to TD. I will subsequently be moving all my business dealings from TD.

todd Wrote:

TD just upped my interest rate 3% from 9.5% to 12.5% in April. I told them i will pay it off and shop at another bank and close all my personal and business accounts. thanks for your loyalty for over 20 years

Sensei Wrote:

That sounds about right, their increases in my opinion will only hurt them in the long run. Loyal customers like yourself are leaving because of it.

Sensei Wrote:

TD is definitely losing a loyal client and what makes it even more disappointing is the fact that it is over an interst rate increase that has been locked in for 20 years

Jana Wrote:

Can we fight this at all????This just can’t be legal.Any ideas out there?


Sensei Wrote:

To my knowledge, there really isn’t anything we can do about this. :(

Nicole Wrote:

CIBC has twice now hiked our interest rate on our line of credit (with no notice whatsoever). We too had never missed a payment. We took our complaints up with the company and were stonewalled. I even tried to lodge a complaint with CIBC’s ombudswoman, to no avail. Since the last hike we’ve paid down a big chunk of our loan, but just this month received notice that they were lowering our credit limit by $10 000. We’re shopping around and trying to move all our business to another bank, but I’m blown away by this latest move. Are we just bad business, or is it sheer ignorance on the bank’s part that they are severely pissing off long, long, long term customers?

John Warner Wrote:

There is lots everyone can do about it……this is the first thread that I’ve come across as I explore who has the best deal for a line of credit. There are lots of institutions out there eager to obtain your business, not just the big banks. Had my mortgage with TD for eons, never missed a payment, it came up for renewal at 1.5% higher than BMO, and when the day came to sign on the dotted line, they extended it from a 10 year term to a 15 year term, with baffle-speak. That was eventually cleaned up by a supervisor when I went to pay it off early and she was able to waive the discharge fee. However, as much as I love her now, there are the credit unions who are regulated more so that our world class banks. The friendly faces we meet at our local banks are worried about their jobs, but they do not set the rules, their head offices set the rules in their ivory towers and for whom, their shareholders who are our pension funds! How many of us do not do anything, bad habits, would rather watch TV or whatever. Get on the internet and dig deeper, tell the banker you like to deal with the deal you have found and they come around or you move, it’s simple, but you need to make time in your life to save hundreds, maybe thousands of dollars!

Ryan Wrote:

Sept. 15 2012 –
I have carried a balance on my Royal Bank Credit Line for 3 years of $15K.
My interest payments were approx $100/mo at 6% interest.
Just recently i realised that RBC had raised my interest rate to 11.95%, so i contacted them.
They explained to me, that they had sent me a letter to explain they have re-evaluated my loan.
I am quite frustrated. Is there any recourse? Can they change the interest rate, even while i am in good standing with the company?

John Warner Wrote:

You are borrowing money, not saving it(no worries here), so move to a credit union or similar institution. My son has a chequing account in Eastern Ontario with the local Caisse Populaire, they pay him interest on his chequing account! They gave him a mortgage on his house that allows him to pay down as much as he wants whenever he wants, etc.

Banks make money with their flexible interest(line-of-credit) option, they are in business to do this, this is their reason to exist. They have a license to do this to you, set in stone by their lawyers in the small print. Take action, move if you can! Good luck!

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