Last week the Bank of Canada issued their bank’s monetary policy report. Kind of an outlook on the near-term future or a state of the economy report, and some of it was very interesting.

The bottom line of their report is that it’s going to become more expensive to borrow and that credit standards are certainly still tightening.

I know the media calls it a credit crunch. But the crunch is banks being reluctant to lend to each other. For us consumers and for businesses, it’s that the days of loose credit standards are gone and won’t be back for a long time. Higher risk equals higher rates. That’s something that I learned the second day I was in the banking business and that was about a hundred years ago. It’s just that the last five years or so – nobody remembered that – or chose to ignore it…

Now, in a time of dropping rates, why would the Bank of Canada state that credit will become more expensive? Simple: The bank losses they’ve had will become ours. In the words of Mark Carney from the Bank of Canada: “We do expect that ultimately they will be passed on.”

What? Did you think all of these lenders all over North America were going to just bite the bullet? No chance! Here’s a couple of examples already:

Bank of America upped their ATM fee to non-bank customers to $3.00 a couple of months ago. Sure there was some whining – but it didn’t affect their volume at all and lots of other U.S. lenders are now following now.

Two of the Canadian banks that I know of, and there may be more, have all increased their service charges on a huge range of things effective this month. Business accounts went up at a couple of them by 25%, and some personal account packages are up over 50%.

Yup, three or five dollars at a time, you and me are going to be paying. It might sound slow, but with millions of customers getting charge it won’t be long at all before you and I pay for all those stupid lending mistakes.
Now wouldn’t it be nice if you or I had someone to rip off when we make a mistake of this size…