Why are banks raising rates on lines of credit?

February 7 2009 by Ellen Roseman

Interest rates have been falling, thanks to the determination of central banks around the world to stimulate their economies. So, why are some Canadian banks raising rates on lines of credit and telling us it’s because of higher borrowing costs?

BMO Bank of Montreal and TD Canada Trust are both sending out letters to notify customers of the rate increases. Some people are puzzled and some are angry. They think the banks have a whole lot more explaining to do.

CIBC is also raising rates on lines of credit, as you can see in the later comments below.

Here are some indignant reactions from customers and explanations from bankers, trying to make sense of what seeems insensible.


  1. Louise

    Apr 18 2010

    I have a TD HELOC. It matures in July 2010. I talked to a broker. A credit union offers prime plus 0.5% for HELOC. TD won’t compete. Won’t try to keep me as a customer.

    I suspect getting new customers is order #1. Keeping existing customers is not so important.

    I have $80K in RRSPs with TD that I started investing with them in 1980. Lip service is that they don’t want to lose customers. As the rep said today, they know unhappy customers will go elsewhere, but they expect to get the unhappy customers from other institutions as new clients.

    So, off to the credit union for me. Check out your credit unions…got to show the big banks who’s boss.

  2. Mickey

    Apr 21 2010

    Same problem here … been with RBC for 40 years.

    I transferred about 75k in RRSPs from the RBC to ING Direct (getting a much better return now).

    I am going to get a Visa credit card from somewhere else and I’m shopping around for another chequing account.

    … and the first bank who gives me back prime + 0 for my LOC gets my business.

  3. Keefer

    Apr 26 2010

    Now that rates are rising (mortgages going up for the 3rd time this month), does anyone know whether this return to “normal conditions” might result in a reversal of the 1% LOC hike we’ve had to endure since last spring?

    I tried complaining and got nowhere…my contract said Prime + 0%…I’d be very pleased to see that rate again.

  4. SM

    Apr 26 2010

    I think what we all forget is just because the nice representive sitting on the other side is smiling at us doesn’t mean they are our friends! Even if they promis you prime +0 doesn’t mean they can’t increase later…remember it is a VARIABLE rate not FIXED.

  5. Mickey

    Apr 27 2010

    The prime rate is variable … the +0 should not be

  6. Kevin

    Jun 2 2010

    Just wondering with today’s interest increase are we going to see the +1 go down.

    to SM & Mickey — as much as I would like +0 I did sign papers allowing up to +5. Check your papers you signed with the Land Title Transfer Lawyer.

  7. Grace

    Jun 22 2010

    From what I’m reading, it seems that all the big banks have done the same – increasing the interest rates on lines of credit. In some other industry, wouldn’t this be considered “price fixing?”

    We’ve had a line of credit account with RBC for quite a number of years and have used it only once. We also received a letter regarding an increase when the prime rate was not changing. I’m puzzled also. But where can we go when all the banks are doing the same?

    I wonder when they all got together to decide to do the same thing.

  8. Mickey

    Jul 12 2010

    I checked my contract and no where does it say that the + portion can rise.

  9. Wealth

    Jul 19 2010

    My family came to Canada almost a year ago and we have been dealing with CIBC since then. I have a steady job and a good track record with the bank.

    I recently asked for a line of credit and even though prime rate is 2.5%, the bank insists they will grant the line of credit at 11.5%.

    All my financial dealings have been with the bank since we came to Canada. I have a US dollar deposit, well over $10,000, sitting in the bank for over four months yielding cents.

    How on earth would the bank want to grant me a line of credit for $5,000 at 11.5%?

    I feel so abused and I think this is taking undue advantage of newcomers to this country in the name of being new. It is not fair.

  10. Mickey

    Jul 25 2010

    Banks take advantage of everyone equally.

  11. Calculate Credit Card Interest

    Nov 6 2010

    Raising rates on the public is extremely ridiculous at this time! Banks are all about taking advantage of the situation, when people need a credit line more badly than ever.

  12. Mickey

    Dec 11 2010

    Why are banks raising rates on lines of credit?


  13. TP

    Jan 28 2012

    I have always been curious to understand why people believe that personal credit is a right. Banks are not public feeding troughs that anyone can waltz into and borrow money anytime they feel like it.

    The money you borrow has to come from somewhere. And what do you think happens when a larger number of Canadians are declaring bankruptcy? The bank loses most of its money. That is why some of the rates went up. They need their profit for the shareholders and to recapitalize.

    To everyone who is complaining, you do have choices:

    1. Find a different bank. Shop around. Griping online will not get you a better rate. Credit unions are an option worth pursuing, as they are not for profit, but do not think they are immune from covering their costs either.

    or my favorite…

    2. Don’t buy crap you can’t afford. Beyond a home, transportation, and education, MOST LOC’s are full of consumer over-spending and people living beyond their means.

    Just like ‘MRV’ posted… Oh, they raised the rates on my cottage that I just bought… Get over yourself. Kwit yur bitchin, life ain’t that bad if you bought a cottage.

  14. TD customer

    Feb 23 2012

    TD unsecured line of credit

    TD Prime rate = 3.00%
    My current variance = 3.25%
    New additional variance = 1.75%
    ** (For every $1000 in outstanding balance) **
    My current credit limit = $20000

    Balance; Add variance; Total annual interest rate
    $1,000 1.75% 8.00%
    $2,000 3.50% 9.75%
    $3,000 5.25% 11.50%
    $4,000 7.00% 13.25%
    $5,000 8.75% 15.00%
    $6,000 10.50% 16.75%
    $7,000 12.25% 18.50%
    $8,000 14.00% 20.25%
    $9,000 15.75% 22.00%
    $10,000 17.50% 23.75%
    $11,000 19.25% 25.50%
    $12,000 21.00% 27.25% * This is what credit cards charge
    $13,000 22.75% 29.00%
    $14,000 24.50% 30.75%
    $15,000 26.25% 32.50%
    $16,000 28.00% 34.25%
    $17,000 29.75% 36.00%
    $18,000 31.50% 37.75%
    $19,000 33.25% 39.50%
    $20,000 35.00% 41.25% * This is what I would have to pay
    $21,000 36.75% 43.00%
    $22,000 38.50% 44.75%
    $23,000 40.25% 46.50%
    $24,000 42.00% 48.25%
    $25,000 43.75% 50.00%
    $26,000 45.50% 51.75%
    $27,000 47.25% 53.50%
    $28,000 49.00% 55.25%
    $29,000 50.75% 57.00%
    $30,000 52.50% 58.75%
    $31,000 54.25% 60.50% >=60% is illegal in Canada

    Do the math. How much is TD going to charge you?

    What does the VP of personal lending from TD have to say about this potentially illegal rate increase?

  15. Marilena Masella

    Jan 15 2013

    I also experienced the same treatment from TD Canada Trust in Quebec.

    I had a HELOC with TD that my husband and I signed at prime + 0. We received notice for a rate increase, which was to take effect in November 2009.

    We tried to get the TD to reverse its decision on the increase by speaking with several individuals at the TD, including the TD Ombudsman and the Ombudsman for Banking Services and Investments. But the answer was always the same.

    I live in Quebec and have found a law firm here that has filed a class action lawsuit against TD Canada Trust, in which I will be representing the class members.

    If you have been subject to the same treatment by the TD bank, please email me at tdclassaction@live.com