# Is this the best credit card out there and free banking for all



## TheRootOfAllEvil (Mar 21, 2011)

I believe MBNA may have changed the name of it but I am currently using the MBNA world points world mastercard. 
2% cash back on everything, no teirs
annual fee - $0 (or at least they told me i will never have to pay a fee, have had it 2 years and no fee on the card)
interest rate - who cares

I've looked around and haven't found anything better, does someone know a better cashback card out there?


I've heard a rumour that the Canadian Tire options card will give rewards on balance transfers. This seems highly unlikely but I don't have one to try it out. Does anyone currently prepay their CTMC and then pay credit card X with their CTMC and collect the rewards?

I'm sure this must have been posted on here somewhere. I see a lot of talk all over the place about banking at ING or PCF so they don't have to pay any service charges. Every bank I know of offers an account with free transactions and cheques,no o/d fee, no fees whatsoever. Open yourself a $5000 PLC (minimum with most banks) and enjoy free banking for the rest of your life. Some banks won't let you auto debit your mtg from this account if its at the same bank but most banks also allow free debits to pay internal loans from a savings account.


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## leoc2 (Dec 28, 2010)

I am ditching the MBNA/TD cashback card for capital one.
http://www.capitalone.ca/credit-card/rewards/cash-back-credit-card/


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## the-royal-mail (Dec 11, 2009)

Are you a spammer or a troll? Seriously, how much research have you done? Neither RBC nor TD offer "an account with free transactions and cheques,no o/d fee, no fees whatsoever."

Your approach and inaccuracy of statements has me questioning anything you say.


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## Echo (Apr 1, 2011)

MBNA Worldpoints is not available for new customers.


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## TheRootOfAllEvil (Mar 21, 2011)

the-royal-mail said:


> Are you a spammer or a troll? Seriously, how much research have you done? Neither RBC nor TD offer "an account with free transactions and cheques,no o/d fee, no fees whatsoever."
> 
> Your approach and inaccuracy of statements has me questioning anything you say.


Thank you for your kindly worded reply. I am none of the above, perhaps you are just not able to understand my post. Actually, after re-reading my own post perhaps its not clear enough. A line of credit which is offered by EVERY bank can be used the exact same way as a personal bank account except the fact that it has no fees. End of story. The only difference is how the account is named when you log online and they even now let you nickname accounts. It can be placed under chequing on your debit card. Nothing I've stated is inaccurate, I work at a bank and do it personally. It does work, it is accurate, and you pay NO FEES of any kind on the account. Overdraft interest (ie line of credit interest) would be charged if you go negative but I assume that is a given, though its at 3-7% or so and not 20% like regular overdraft. 

I hope that clears things up.


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## MrMatt (Dec 21, 2011)

Actually you're being rude to someone with over 3000 posts.

Unclear? You called a Line of Credit (LOC) a PLC, which I've never heard of.
Also you state it is exactly the same as a bank account, which it is NOT.
It isn't CDIC insured, it doesn't allow setting up of direct deposits, payments and some other transactions.

The end of the story is you were confusing and wrong, with a follow up of rude. 
Just in case you're new to this internet thingie, that's not the best way to enter a new forum.


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## marina628 (Dec 14, 2010)

PLC = personal line of credit ,that is what they use to be called years ago


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## TheRootOfAllEvil (Mar 21, 2011)

Sorry Mr. Matt
I assumed people who regular finance blogs would be somewhat educated to the world of finance. The fact that the abbreviation PLC confused you and you use that as an point of argument is inane. And for the record the ONLY time you have a hassle with direct payments from a line of credit is a mortgage which I covered in my original post. You can direct deposit into it, you can have bill payments auto-debit from it. The fact of the matter is that it can be used 99.9% of the time the same way a chequing account can without fees. Your CDIC point is also completely off base. The whole point of avoiding the fees is so people don't need to keep minimum balances in their accounts, if you're worried that your minor amount in your account is not covered by insurance if the entire financial system crashes, there are other things to worry about. I'm am completely shocked and awed that a simple comment about how people can save on bank fees has spawned into something more. If you don't like my advice (as 100% correct as it is), don't follow it. If you ask your bank and they say anything to the contrary, they are lying to you because we aren't supposed to tell clients because our shareholders like your service fees too much. If you can prove me wrong, send me your email address and I'll send $100 your way and write a really nice post about how smart you are. Until then I'll keep my $100 in my chequing account where it is CDIC protected, thank you for that advice.


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## the-royal-mail (Dec 11, 2009)

Hi root, sorry for the way I replied to you. Maybe you're onto something here and it's us who are missing the point. I am certainly here to learn if you've identified a loophole for us. I think what has us a bit leery of your posts is perhaps your approach. Your first post seemed over-confident and was admonishing us for not doing things as you advise. Again, while you may be onto something I just think it's your approach which gets our defenses up. I dunno. But stick around - I am interested in what you have to say (despite not being a fan of quoting lol).


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## MrMatt (Dec 21, 2011)

I'm pedactic and was in a surly mood, which is no doubt obvious, but I'm pretty much always that way. I also got turned off by your aggressive, over confident, hyperbolic approach. 



TheRootOfAllEvil said:


> The fact of the matter is that it can be used 99.9% of the time the same way a chequing account can without fees.
> If you don't like my advice (as 100% correct as it is), don't follow it.


I agree that most of the time a LOC is effectively the same as a no-fee bank account.
But it isn't the same, it's a different legal entity than a bank account, there are the points I listed, I've even run into trouble trying to set it up as a source account for an Ally TFSA. You dismiss the differences as only be 0.1%, but they're there, and for some people they can be a bit more significant.

As far as maximizing service charges and fees, I don't know where you bank, but when I talk to my bank they give me advice on how to SAVE the fees. 
When the bank told me the LOC trick, over a decade ago, I thought it was odd, until I realized that the guy telling me gets a bonus, and having a LOC encourages me to borrow money (which is also more profitable for the bank). It's actually a big win, they make me happy by cutting fees, which makes me more loyal, and sell me a more profitable product, while sacrificing a relatively small service charge.

This makes me happy as both a customer, and a shareholder. 

Oh and keep your $100 in your CDIC insured High interest savings account (HISA) and transfer it to the LOC before the transfer clears. <G>


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## TheRootOfAllEvil (Mar 21, 2011)

Point(s) taken, I have been guilty of over confidence to the point of preachy, aggressive, etc. I think on the whole, it is good as an option and to know the option is out there and yes, perhaps it works a little less than 99.9% of the time. The majority of debitors will have no idea the account # given is a line of credit and thus should work the majority (but obviously not all) of the time.
On another note, I find one of your comments interesting (MrMatt) "...and having a LOC encourages me to borrow money..." I think any credit product is a double edged sword if that's the right term. Banks offer credit and yes, credit makes the banks money. However, clients can use credit to leverage and make money off the bank's money. The option is really up to the client. Having a line of credit shouldn't entice a client to spend money, there a many many benefits of always having a line of credit in your back pocket as well as multiple credit cards. The fine line comes in when people start complaining about their debt and then being approved for another credit card. Are the banks/card companies to blame for offering money or are the clients responsible for their actions/choices. Credit is generally never forced. 
At any rate, I'll try to be more careful in terms of the wording of my posts, I'm sure we all have better things to do, and it takes away from what the forum is meant for. My apologies


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## Eclectic12 (Oct 20, 2010)

TheRootOfAllEvil said:


> Sorry Mr. Matt
> I assumed people who regular finance blogs would be somewhat educated to the world of finance....
> 
> You can direct deposit into it, you can have bill payments auto-debit from it. The fact of the matter is that it can be used 99.9% of the time the same way a chequing account can without fees...Your CDIC point is also completely off base...
> ...


Hmmm ... everyone in the financial world (and blogs) throws around abbreviations like there is no tomorrow so it's not that surprising to me that someone either didn't know or has forgotten the abbreviation du jour. It's almost as bad as the computer jargon! :rolleyes2:


As for the using the PLC as a chequing account, let me see if I've got this straight. 

After I've setup the PLC, I can write a cheque to pay a bill on my PLC which starts charging interest as soon as the cheque clears and then transfer money from elsewhere to minimise the interest charged. Or are you saying pre-deposit money ahead of time (which won't be paid interest) to the PLC and then write cheques against the positive PLC balance?

How is this "free" banking and why do I want to give up my CDIC insured chequing account, which for the banking I do - has no fees or minimum balance required?


I'm also confused by "overdraft interest" on a PLC. The PLC is charging interest on any positive balances (i.e $0 = no interest, $1,000 = interest on that amount). The closest equivalent I can think of is where one has a limit of $50,000 and the cheque written puts the balance at $51,000. In this case, the two likely scenarios are that PLC limit is bumped up automatically or the PLC cheque is cancelled (I would think it would show up as NSF to the billing company).


Anyway, interesting idea but so far, it looks like it requires me to give up CDIC insurance for what I already have.


Cheers


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## the-royal-mail (Dec 11, 2009)

OK here are some questions/comments:

1. can I withdraw cash from the ATM from the LOC? It doesn't appear as an account on my debit card

2. can I write cheques on the account? are there fees for doing this?

3. won't I start incurring interest as soon as I withdraw an amount? or if I leave a + balance in the LOC does it draw interest?

4. I do feel banks are a bit too loose with the credit these days though. consumers are spending money and incurring debt at an alarming rate. the whole thing with the banks seems to be taking full advantage of that, which is a problem as lives are being affected.


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## Eclectic12 (Oct 20, 2010)

TheRootOfAllEvil said:


> ...I think any credit product is a double edged sword if that's the right term. Banks offer credit and yes, credit makes the banks money... The option is really up to the client. Having a line of credit shouldn't entice a client to spend money, there a many many benefits of always having a line of credit in your back pocket as well as multiple credit cards...
> 
> Are the banks/card companies to blame for offering money or are the clients responsible for their actions/choices.
> 
> Credit is generally never forced...


The problem is too many aren't financial educated and are playing the "pay CC number one debt by a cash withdrawal from CC number two" game. Or are falling for the "all I need to pay is the minimum payment listed on the CC bill" trap.

It's both the financial instituation and client's responsibility.

The client is ultimately responsible but the banks/CC companies do strange things. As an example, if they are using an objective evaluation of who to approve for a CC and how much of a limit, how come as a university student I was:
a) initially approved for a CC as I had demonstrated financial responsibility by consistently paying my car loan on time.
b) as I took too long to think about it, I had to re-apply as a regular applicant. I was amused that I was rejected for having too much debt.
c) I used an university student CC application from the campus centre & magically, I'm approved.

My financial situation did not change in the four months this took place - yet at various point I was either responsible, over-extended or a good risk. That part that was interesting was that it was the same financial institution/CC for all three views of my financial status!


As for the "credit is generally never forced" - that's a laugh! 

Based on my CC's - the CC limit is generally forced way above the levels I - as the client want. It's a chore to keep phoning to have the automatic upgrade reduced back to what I want. 


Cheers


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## Spudd (Oct 11, 2011)

One good thing, Eclectic, the government recently legislated that credit card limits can't be increased without the consumer's permission. You may notice your credit cards asking you nicely to accept a limit increase now instead of just upping it on their own.


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## Eclectic12 (Oct 20, 2010)

Spudd said:


> One good thing, Eclectic, the government recently legislated that credit card limits can't be increased without the consumer's permission. You may notice your credit cards asking you nicely to accept a limit increase now instead of just upping it on their own.


I'll have to check the last letter I received. If I recall correctly it was "if you don't call us, you are giving permission". Since the part I like the least is having to call, I'm not so sure the legislation is achieving what I'd like.


Cheers


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## yupislyr (Nov 16, 2009)

TheRootOfAllEvil said:


> I've heard a rumour that the Canadian Tire options card will give rewards on balance transfers. This seems highly unlikely but I don't have one to try it out. Does anyone currently prepay their CTMC and then pay credit card X with their CTMC and collect the rewards?


It wasn't balance transfers. You could literally pay off other credit cards using the Canadian Tire Options Mastercard. You could also do things like fund your Questrade and TD Waterhouse accounts using it. All of these actions earned you Canadian Tire money on the card. That fun didn't last all that long though once it became widely known and folks were taking great advantage of it.

The card is still good though to pay off any other bills that won't take credit card payments or charge a fee for credit card payments. I use it to make all my property tax payments and pay all my utility bills. So that's a good deal of money spent where I otherwise wouldn't be getting anything back for making the payment. Not to mention it's means extra time before I have to actually pay any of those bills and I can put the money to better use elsewhere.

Your mileage may vary though. As I said, after the free for all earlier in the year, they chopped down the payee list greatly.


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## Eclectic12 (Oct 20, 2010)

yupislyr said:


> ...Your mileage may vary though. As I said, after the free for all earlier in the year, they chopped down the payee list greatly.


Yes ... CC companies have been known to restrict or close popular features.

My aunt used to take a cash advance from one reward CC (call it A), pay off the balance on the second reward CC (call it B) and walk across the street to pay off the balance on the first CC (i.e. A) on the same day. 

That used to give her double the rewards on the same cash amount, with no fees or interest. 

As soon as they changed the CC agreement so that interest charged on cash advances as soon as the withdrawal occurred, she stopped.


Cheers


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## MrMatt (Dec 21, 2011)

the-royal-mail said:


> OK here are some questions/comments:
> 
> 1. can I withdraw cash from the ATM from the LOC? It doesn't appear as an account on my debit card
> 
> ...


1. Ask them to set it up as the "savings account" at the ATM.
2. No fees, and checks are often free (I have them from TD & BNS)
3. yes, but leave a positive balance.
4. Yup, be careful


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## MrMatt (Dec 21, 2011)

Eclectic12 said:


> Anyway, interesting idea but so far, it looks like it requires me to give up CDIC insurance for what I already have.
> 
> Cheers


Likely, myself I have a checking account with very few free transactions, I just transfer my paychecks out and then I run 20+ transactions a month through the LOC.


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## Eclectic12 (Oct 20, 2010)

MrMatt said:


> Likely, myself I have a checking account with very few free transactions, I just transfer my paychecks out and then I run 20+ transactions a month through the LOC.


So essentially, you are trading the CDIC insurance plus whatever interest you might have made for a free 20+ transaction on the LoC (or PLC).

As I say, in my case I can write as many cheques as I want for free (including ordering new cheques), have CDIC coverage and earn interest. So the tradeoff is not worth it.

YMMV ....


Cheers


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## Elbyron (Apr 3, 2009)

I find that a PC Financial account does everything I need to, but there is some appeal in switching to using a LoC as my primary chequing account. So far the concept discussed seems to involve carrying a positive balance, and having the ability to go negative without paying 20% overdraft fees is a bonus. But the positive balance is earning no interest - compared to PC Financial where it earns almost no interest. So how about another option, for those who have a mortgage:
Intentionally put the LoC into the negatives by withdrawing $10k or some other amount and using it as lump-sum mortgage payment (assuming you haven't maxed them out). Now instead of having say $4000 sitting there gaining no interest, you have the $4000 causing your balance to be -$6000 and thus saving you interest that you would have otherwise paid on your mortgage. Sure, the LoC rate will likely be a bit higher than a variable rate mortgage, and maybe even higher than a fixed rate, but it's only 10K that's being moved so the rate difference isn't significant. And should your $4000 "savings" grow to $10000 and put you back in the positives, just do another lump-sum payment! You're effectively getting a chequing account that is doing the equivalent of paying you interest roughly equal to your mortgage interest rate, tax-free!


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## Eclectic12 (Oct 20, 2010)

Elbyron said:


> ...So far the concept discussed seems to involve carrying a positive balance, and having the ability to go negative without paying 20% overdraft fees is a bonus. But the positive balance is earning no interest - compared to PC Financial where it earns almost no interest.
> 
> So how about another option, for those who have a mortgage:
> Intentionally put the LoC into the negatives by withdrawing $10k or some other amount and using it as lump-sum mortgage payment (assuming you haven't maxed them out). ... You're effectively getting a chequing account that is doing the equivalent of paying you interest roughly equal to your mortgage interest rate, tax-free!


I can see why 0.05% (1st $1K) and 0.10% (next $4K) would be small. However, I transfer the excess to the Interest Plus savings account to be paid 1.35% plus the anniversary bonus. It's available to the chequeing account on a next business day basis. For large ticket items like a CC bill, use the web or phone banking to pre-set a transfer from savings to chequing a day before it's needed in chequing & then the bill payment from chequing.


Hmmm ... so the idea is that one withdraws $10K where say 6% interest is charged and that is used to pre-pay one's mortgage that was charging say 4%. So for the new situation, one is paying $600 a year instead of the old situation, where one paid less than $400 / year (one presumably had some money in the PCF chequing account earning interest which overall reduces the $400). 

This means an extra $200 or more per year is paid for the priviledge of avoiding the overdraft fees. Unless one is overdrafting on a regular basis (which likely can be reduced or eliminated with better planning) - I don't see that this is worth it. Unless the mortgage rate is higher than the LoC or HELoC, it's not worth it IMO.


Cheers


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## MrMatt (Dec 21, 2011)

What account has no minimum balance, no transaction charges, and free checks?

The money is in my LOC instead of my checking account for an average of about 1week in between my biweekly pay.
Lets assume I'm moving $2k every 2 weeks, that works out to an average balance of $1000, assuming you have a high yield checking account (with no fees) at 2%(I don't know of such an account), I'm missing out on $20/yr, plus there is $0-2k that isn't CDIC insured, in exchange I get free overdraft protection, free checks, and unlimited free transactions online, or at in person at the branch.
I think it's worth it.


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## Elbyron (Apr 3, 2009)

Eclectic12 said:


> For large ticket items like a CC bill, use the web or phone banking to pre-set a transfer from savings to chequing a day before it's needed in chequing & then the bill payment from chequing.


To do that would require logging in each time I get a CC bill and setting up the transfer. Not only am I too lazy, I'm also not willing to take the chance that I might miss one and then not have enough money in chequing when the funds are automatically withdrawn. Since I have no overdraft protection, the withdrawal would be declined for NSF and I would pay fees to both my bank and to the credit card company totalling almost $100. Far easier to just maintain a chequing balance larger than my highest non-vacation credit card bill (and make sure there's extra cash on hand when a vacation charge is coming). 



> Hmmm ... so the idea is that one withdraws $10K where say 6% interest is charged and that is used to pre-pay one's mortgage that was charging say 4%.


If you're going to use a LoC for this setup, it will work a lot better if it's a secured loan, so 6% is not a good estimate. The most you should be paying on a HELoC is Prime+1% (currently 4%). Also, while there may be some people locked in to a mortgage rate of 4% or more, most are probably in the 3 - 3.5% range depending on how long ago they renewed and whether they use a variable or fixed rate. So the HELoC rate is still higher, but not 2% higher.




> This means an extra $200 or more per year is paid for the priviledge of avoiding the overdraft fees.


Not just avoiding overdraft fees... the idea is to come out ahead by making your money work toward your mortgage debt rather than earning a pathetic 0.1% taxable interest. Even if you did stay on top of things and keep all excess cash in savings earning 1.35% plus bonus, you would still be better off using it to reduce the mortgage interest you will pay. Here's an example:

Let's say Joe currently has $5000 in PCF savings, and he is accumulating $1000 surplus cash each month. His marginal tax rate is 32%. His 3.5% fixed-rate mortgage currently has a balance of $243,469 with 15.5 years remaining and he makes bi-weekly payments of $781.61. 
Scenario 1: Joe continues moving his surplus cash into PCF savings, accumulates interest (1.35% APR compounded daily), and pays tax on that interest annually (also getting the anniversary bonus annually). After 5 years, his $5000 savings has grown to $66,079, and his mortgage balance is now $178,168. So his net total is -$112,089.
Scenario 2: Joe takes out a 4% HELoC and withdraws $12000, and takes this plus his $5000 savings to make an initial lump-sum payment on his mortgage of $17000. His paycheques are deposited in the HELoC so all the surplus is just reducing the debt by $1000 each month. At the end of each year he withdraws another $12000 and makes a lump-sum payment on the mortgage. After 5 years, since he wasn't paying the interest accumulating in the HELoC, there is a debt of $1443 remaining, and he has no savings. However, his mortgage balance has been reduced to $105,531. His net total is therefore -$106,974. 

Joe is much better off in scenario 2, by over $5000. Now most people probably aren't earning a surplus of $1000/month and therefore would make smaller HELoC withdrawals, but the amount of difference between the scenarios is roughly proportional to the amount of surplus. You might argue: "but Joe wouldn't just keep all his money in the savings account, he would invest it for a higher return". Using Excel's "Goal Seek" function I was able to determine that Joe would have to be earning 7.17% interest (assuming its fully taxable) in scenario 1 to break even with scenario 2. There is no way you could get a guaranteed rate anywhere near that high. In scenario 2, the savings are _almost_ guaranteed, with the exception being fluctuations in Prime rate that could change the interest owed on the HELoC by a few hundred dollars.

There are some downsides and difficulties with this strategy:
- Temptation to spend more
- You don't get that "feel good" feeling of seeing your savings accumulate
- Depending on the bank, the HELoC may not be as flexible as a chequing account. Some don't let you access via ATMs, automated bill payment may not be available, and even direct deposit for your paycheques might not be an option. Also I'm not sure if you can get bank drafts.
- not CDIC insured (who cares)
- must have enough equity in your home to qualify for HELoC (soon all banks will only give you up to 65%)
- setting up a HELoC has some legal & assessment fees, but you might be able to convince the bank to pay them for you (easier if they also hold your mortgage)


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## Eclectic12 (Oct 20, 2010)

MrMatt said:


> What account has no minimum balance, no transaction charges, and free checks?
> 
> The money is in my LOC instead of my checking account for an average ... I'm missing out on $20/yr, plus there is $0-2k that isn't CDIC insured, in exchange I get free overdraft protection, free checks, and unlimited free transactions online, or at in person at the branch.
> 
> I think it's worth it.


To be clear, I'm basing my comments on my typical transactions - not "no transaction charges", though I can go six months or more without a transaction charge.

That said, using a PCF chequing account has meant total fees of $35 in _ten years_. That's a lot of transactions plus free cheques! Most of the fees are for using something other than the 3,000+ CIBC atms or the Loblaws atms. I can recall at least four sets of cheques being ordered/delivered for free (it's probably more).

As for transactions, I'm anywhere from five to seventeen cheques a month (Dec is a big month with Christmas gift cheques) & twelve ATM visits per month. That's ignoring all the bill payments made online or by phone & transfers to/from savings to take advantage of the 1.35% paid by the savings account.

Using your number of $1K average, I'd be paying $13 per year (using the chequing plus savings account method) for the LoC method. The problem is that my CC bill varies quite a bit. I believe sept was around $6K and if I've been on training for work, it can be as high as $9K or better. It's nice to be earning that 1.35% on other people's money until the CC bill comes in. 

In my case, I keep the CDIC protection, give up the overdraft protection as well as the in-branch visits. 


The last overdraft charge was about $6.06 due to the new minumum charge of $4.97, where before the minimum charge - previous to this change, I was at times paying $0.60 in overdraft fees. But since I'm usually around four years or more between overdrafts, I'm not that worried. It is far more commen for me to forget a bill until the day it is due, borrow from my LoC for a day to pay the bill same day and pay about $0.14 on the LoC instead of the billing company's late payment fee.


At the end of the day, if what you get out of the LoC method works for you - great. I'm just saying I still don't to see anything that makes me think it will fit what I want.


Cheers


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## Elbyron (Apr 3, 2009)

Eclectic12 said:


> Using your number of $1K average, I'd be paying $13 per year (using the chequing plus savings account method) for the LoC method. The problem is that my CC bill varies quite a bit. I believe sept was around $6K and if I've been on training for work, it can be as high as $9K or better.


I don't understand. Why would you be paying $13 per year for the LoC? What does a varying CC bill have to do with it? If anything, the LoC method works better for a varying CC bill because you don't have to worry about transferring money between savings & chequing accounts.



> It's nice to be earning that 1.35% on other people's money until the CC bill comes in.


It's even nicer to use that money to earn 3.5% interest in the form of reduced interest on your mortgage until the CC bill comes in!


EDIT: Oh I think I see where you're getting confused. You're thinking the $13 per year is the interest you'd pay on the LoC... but it's actually closer to $275 per year if you're borrowing $12K and paying back 1K per month. The thing is, you're also saving about $1000 per year on your mortgage, so that's why it's worth it! Joe could reduce the $275 to $175 per year by doing 2 withdrawals/lump-sum payments of $6000 per year instead of 1 payment of $12000. But that also means his mortgage will only be reduced to $106,105 and it only improves his total savings by $92 over 5 years, or $18.40 per year, so I'm not sure it's really worth the hassle.


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## Spudd (Oct 11, 2011)

I don't understand this comparison at all. Why are the 2 options either saving the $1000/mo in the bank, or borrowing 12k and putting it on the mortgage? Why can't Joe just lump the $1000/mo into the mortgage instead of saving it? I would expect that to be the best outcome of all.


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## Eclectic12 (Oct 20, 2010)

For the "What account has no minimum balance, no transaction charges, and free checks?", I pulled up a year's worth of PC chequing account statements.

There's 366 transactions with total fees of $3 (2 x $1.50 for visiting another financial institution's ATM).

Making up this total is 140 bill payments, 87 transfers, 68 ATM visits, 66 cheques and 5 debit card transactions. At the same time, I borrowed four times to pay bills I'd forgotten about on the day they were due, costing $0.84 in total.

I also overstated the overdraft fee from over a year ago (when I first discovered that the minmum fee was added) as it was only $5.39.


With ING introducing the Thrive chequing account, I expect they are similar - except that after the first set of cheques, additional cheques have a fee.


Cheers


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## Eclectic12 (Oct 20, 2010)

Elbyron said:


> To do that would require logging in each time I get a CC bill and setting up the transfer. Not only am I too lazy, I'm also not willing to take the chance that I might miss one and then not have enough money in chequing when the funds are automatically withdrawn.


I'm on the computer all day for work so opening another browser and paying bills isn't a big issue. I usually collect four or five at a time so that's one login for multiple bills. When I'm in a rush, I've used the phone to program the transfer plus the payment in six minutes, start to finish.

As for risk of an NSF charge - this does not apply to me. I program the transfer from savings to chequeing and the bill payment. So if I miss it - I miss both. The only impact for me is the CC company starts charging interest at 20% or whatever on the balance.




Elbyron said:


> If you're going to use a LoC for this setup, it will work a lot better if it's a secured loan, so 6% is not a good estimate. The most you should be paying on a HELoC is Prime+1% (currently 4%),


I think you've misunderstood - others are saying a LoC or HELoc is a way to free chequing plus overdraft protection while I'm saying I already have that through PCF. If it is a LoC, 6% might be accurate where YMMV. As for the HELoC - mine is at 3% and has been for years.




Elbyron said:


> Not just avoiding overdraft fees... the idea is to come out ahead by making your money work toward your mortgage debt rather than earning a pathetic 0.1% taxable interest...


*shrug* - I used my HELoc to buy bank stocks & a split share in 2009. The 100% to 200% capital gains (plus the 40% of cost the capital share dividends paid in two years) paid off my mortgage. 


Your scenarios compare using extra cash in a bank account to pay off the mortgage - which makes sense (i.e. give up 1.35% to pay down a 3.5% mortgage).

My discussion is around taking the $1K on the LoC to provide "free" chequing plus overdraft protection and making it $10K so that $9K can be paid off from the mortgage (someone else's idea). I don't see any way that paying off $9K of a 3.5% mortgage while starting to pay 4.0% or more on the same money makes any sense. If you do, please explain.


Cheers


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## Eclectic12 (Oct 20, 2010)

Elbyron said:


> I don't understand. Why would you be paying $13 per year for the LoC?


MrMatt is saying he needs $1K in his LoC to cover any cheques written to pay bills and not generate an interest charge, which gives him free chequing (i.e. no interest on the LoC, no fees to get cheques, no overdraft per month fee) plus free overdraft protection, similar to the OP, TheRootOfAllEvil suggested.

I'm saying that using PCF chequing and savings, I'd earn $13 interest and I have free cheques, no worries about what's on my LoC to avoid interest, no overdraft fee per month. The trade-off is that I could write a cheque to go into overdraft. The last one I did was a total charge of $5.39 where $4.97 or so was the minimum fee and $0.42 was the interest charged for the couple of days before I dealt with it - so I'm not seeing a lot of gain here.

If I had the same needs as MrMatt, then I lose the $13 interest to "gain" services I already have and to avoid a $5 fee that I've typically racked up every five years or so. [Actually, until lately when the $4.97 minimum was added, this fee was more like $1.20 for the amount of time before I noticed/fixed this.]




Elbyron said:


> What does a varying CC bill have to do with it? If anything, the LoC method works better for a varying CC bill because you don't have to worry about transferring money between savings & chequing accounts.


It seems like the same work to make sure there is money on the LoC *before* the cheque is written to pay the CC bill. Then too - I have to go to an ATM or mail that cheque to the CC company where today, I use the web or the phone to pay the CC company using an EFT that has no cost to me.

As the varying part - I'd rather have $7K sitting in my savings account being paid 1.35% for about a month and pay using an EFT, three days before the due date. If I put the $7K onto the LoC - I get nothing for it and have the extra work of writing a cheque/delivering it. 

So either there's some aspect I'm missing - or more likely, there's not enough benefit to make it worth my while.




Elbyron said:


> It's even nicer to use that money to earn 3.5% interest in the form of reduced interest on your mortgage until the CC bill comes in!


No mortgage so that's not an option. The only option I can see that is going to put me ahead is savings interest.




Elbyron said:


> EDIT: Oh I think I see where you're getting confused. You're thinking the $13 per year is the interest you'd pay on the LoC...


Nope ... it's interest on MrMatt's $1K that I make with a PCF savings account that he keeps on his LoC (making no money) to be able to write free cheques/have overdraft protection.


Cheers


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## Eclectic12 (Oct 20, 2010)

Spudd said:


> I don't understand this comparison at all.
> 
> Why are the 2 options either saving the $1000/mo in the bank, or borrowing 12k and putting it on the mortgage? ...


Beats me ... I thought that the options that were being discussed are:

a) Option 1 - maintain a $1K positive on the LoC to generate free chequing and avoid interest charges when writing cheques to pay bills.

b) Option 2 - bump the $1K to $10K on the LoC and use the extra $9K to pay off the mortgage earlier, even if the LoC is at a higher interest rate.

c) Option 3 - get an PCF chequing account that provides everything but the overdraft protection. If there is enough spare cash to pay down the mortgage, do that directly - without transferring the mortgage debt to be LoC debt.


Cheers


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## MrMatt (Dec 21, 2011)

Eclectic12 said:


> MrMatt is saying he needs $1K in his LoC to cover any cheques written to pay bills and not generate an interest charge, which gives him free chequing (i.e. no interest on the LoC, no fees to get cheques, no overdraft per month fee) plus free overdraft protection, similar to the OP, TheRootOfAllEvil suggested.
> 
> Nope ... it's interest on MrMatt's $1K that I make with a PCF savings account that he keeps on his LoC (making no money) to be able to write free cheques/have overdraft protection.
> 
> ...


Actually what I'm saying is that to minimize transactions, the average balance in my LOC is about $1k. The cost of having this money in a LOC instead of a savings/checking account is minimal (most likely <$20/yr,)

Quite honestly I hate CIBC, and for that reason I won't touch a PC Financial account either.


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## Eclectic12 (Oct 20, 2010)

MrMatt said:


> Actually what I'm saying is that to minimize transactions, the average balance in my LOC is about $1k. The cost of having this money in a LOC instead of a savings/checking account is minimal (most likely <$20/yr,)
> 
> Quite honestly I hate CIBC, and for that reason I won't touch a PC Financial account either.


Fair enough ... especially if you've had problems in the past with CIBC.

On the other hand, as a PCF customer - I think I'm at about eight errors over at least twelve years. Four were corrected before I had a chance to phone to ask for a correction. Of the remaining four, it was a quick conversation then the error was fixed. This is unlike CRA's error that took twenty-five minutes of arguing to get the phone rep to check the numbers, five minutes to "oh, you are right" and then the "you have to file five adjustments to previous tax returns to get rid of the bogus thousands in penalties/interest - CRA can't assume you'd want this as you could choose to pay the penalties".

The only delay I can recall was the phone rep who was suprised that I was bothering to request a refund of the $1.42 in interest on my LoC as I'd paid the bill from that to avoid the billing company's late fees. Once over her surprise - the interest was refunded no questions asked, without arguements or kicking the request up to a surpervisor.


If PCF is out because CIBC is running daily operations, then likely the ING Direct Thrive chequing account is also out as it charges $12.50 for a book of 50 cheques, after the first free book.


Cheers


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## Elbyron (Apr 3, 2009)

Eclectic12 said:


> a) Option 1 - maintain a $1K positive on the LoC to generate free chequing and avoid interest charges when writing cheques to pay bills.
> 
> b) Option 2 - bump the $1K to $10K on the LoC and use the extra $9K to pay off the mortgage earlier, even if the LoC is at a higher interest rate.
> 
> c) Option 3 - get an PCF chequing account that provides everything but the overdraft protection. If there is enough spare cash to pay down the mortgage, do that directly - without transferring the mortgage debt to be LoC debt.


The two things I was comparing with the "Joe" scenarios are option 2 and option 3 above. Except the key to my entire point is that people like to have a positive balance sitting around in the chequing account, and by borrowing money to pay down a mortgage (even at a slightly higher rate) you are creating a way that this chequing account money can be put to work for you. The difference between the LoC rate and mortgage rate is generally smaller than the difference between the interest you would earn on the chequing account (0.1%) vs interest saved on the mortgage. Therefore you come out ahead by putting 100% of your balance working toward the mortgage interest, even though to do so required borrowing at a slightly higher rate. You may have heard of an "All in One" account, which is offered by National Bank and used to be available at Canadian Tire Financial, also Manulife One is the same idea but with a ridiculous fee. They basically combine all your mortgage & other debts into one loan, and give you an account that has all the features of a chequing account but where the balance of that account is applied daily to reduce the interest on that loan. So my concept, Option 2, is to essentially create your own "All in One" account.



> Why can't Joe just lump the $1000/mo into the mortgage instead of saving it? I would expect that to be the best outcome of all.


You're right, if Joe isn't going to need the money in the short term, he probably should keep funnelling the excess to the mortgage. However, he would still have to keep some liquid funds in chequing (like most of us probably do) in order to cover upcoming bills. So let's compare the options of keeping an average of $5000 reserved in chequing vs taking $5000 out of a LoC to pay down mortgage and then moving that $5000 reserve into the LoC (putting it back to zero) and using the LoC to pay bills and deposit income. The tricky part is estimating the interest on the LoC since it will depend on the timing and amounts of paycheques and bills. I used my own balance history to see what would have happened if I used a LoC instead of chequing, withdrawing chunks of $5000 or more to the mortgage when needed to keep the balance between -4000 and +1000. Since Jan 1st of this year, I would have accumulated $58.39 in interest. I had a lot of fluctuation so that's probably a high-end estimate. But holding an average daily balance of $5000 in a chequing account earning 0.1% only generates $5 per year. Reducing the mortgage balance by $5000 and thus not paying 3.5% interest on that amount, saves you about $190 per year. So even after paying the LoC interest, you're still $132 richer. It's not a lot, because $5000 is not a lot (if you were floating a $10000 balance it would more like $324/year). Is it worth the hassle of setting up? Decide for yourself.


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## Eclectic12 (Oct 20, 2010)

Elbyron said:


> The two things I was comparing with the "Joe" scenarios are option 2 and option 3 above....


First off, sorry for confusing the two threads ... in yours you clearly said "for those with mortgages" and in my haste - I didn't factor that in.

Secondly, as a point of clarification - my options are incorrect. If a cheque for $10K was written on the LoC that had a $1K positive balance, there would be $10K for the mortgage pre-payment & only $9K negative balance on the LoC.




Elbyron said:


> ...Except the key to my entire point is that people like to have a positive balance sitting around in the chequing account, and by borrowing money to pay down a mortgage (even at a slightly higher rate) you are creating a way that this chequing account money can be put to work for you. ... You may have heard of an "All in One" account, which is offered by National Bank and used to be available at Canadian Tire Financial, also Manulife One is the same idea but with a ridiculous fee.


So what I was missing is that the cash flow into the LoC is assumed to be enough to ensure the LoC negative balance is going down over time. For this to work out, IMO - that would require the LoC negative balance to go down fast enough to make up for the interest rate differential (i.e. pay off debt at 3.5%, add debt at 4%). If one's cash flow does not reduce the LoC balance fast enough, the differential will reduce, if not obliterate the savings from having every dollar at work.

I'd add to your risk list - "Big Bills such as new roof or furnace". With this strategy, there no cash that is not at at work, which means any unexpected or unplanned for expenses could upset the apple cart. Now it might not be that much different than having a cash reserves (ex. who plans to replace their car, roof and furnace in twelve months and has cash on-hand?).





Elbyron said:


> You're right, if Joe isn't going to need the money in the short term, he probably should keep funnelling the excess to the mortgage.
> 
> However, he would still have to keep some liquid funds in chequing (like most of us probably do) in order to cover upcoming bills. So let's compare the options of keeping an average of $5000 reserved in chequing vs taking $5000 out of a LoC...


That's where factoring in what I have with PCF, my chequing balance is more like $500 and if I were keeping the other $4500 in savings, I'm making $60.75, before the anniversary bonus interest is added (or if I assume the monthly bills drop the average savings balance to $3K, that's $40.50 interest before anniversary bonus).

But I hear what you are saying, especially as before my mortgage was paid off - it would have been a shift of a 4% mortgage to a 3% HELoC.


So depending on banking services desired/used, what one's cash flow is, what features the LoC (or HELoC) allows, this can work nicely.


Cheers


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## somecanuck (Dec 23, 2011)

I'm a bit late to the party, but a while back I made a spreadsheet comparing cash back credit cards, and I've updated it for the impending change to the MBNA SmartCash. I've switched to the World version to give me 6 months at 5%, after which I'll move to the Scotia Momentum VISA Infinite. Despite the annual fee, it provides significantly more return than the MBNA or Capital One for my spending.

Waiting a full year for the 0.5% on Capital One bothers me. The only bit about the Scotia card I'm not sure of is how/when you receive the cash back (automatic or manual, monthly or annual).

EDIT: Aw crud, I asked a friend who has one, and it's an annual payout.


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