# RBC pulled my prime + 0% LoC



## Mall Guy (Sep 14, 2011)

I logged on to my online banking site, only to discover RBC had pulled my prime +0% LoC, no notice before or since. When I inquired, I got what I consider a pretty weak answer "that product was for RRSP purposes, and they no longer offer that product". I've had this LoC for about 14 years, and still have three other (more expensive prime +1 and 2%) LoC's.

Anyone else experienced this? I just see it as RBC wanting to make more money off of me. Might be enough to make me switch banks!


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## Abha (Jun 26, 2011)

Were you using it or was the LOC an inactive product (dormant) ?


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## Mall Guy (Sep 14, 2011)

No, it was an active account, although it had a zero balance when it disappeared.


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## Jungle (Feb 17, 2010)

Prime - 0 is almost unheard of right now. 

The banks want to make more money on their LOC and variable mortgages.

They've already started to take away the discounts on variable mortgages, because interest rates will remain low for a while yet.


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## doctrine (Sep 30, 2011)

they are allowed to take it away at any time, although surprised they didn't just increase the rate.


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

Good lesson for those who think it's a good idea to rely on LOC as their emergency fund.


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## joncnca (Jul 12, 2009)

the-royal-mail said:


> Good lesson for those who think it's a good idea to rely on LOC as their emergency fund.


as i was scrolling down this thread, i was thinking to myself "where's the-royal-mail??? when's TRM going to chime in about how this totally shows how an LOC should not be relied upon for emergencies!"

haha


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## financialnoob (Feb 26, 2011)

+1 for TRM.


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## andrewf (Mar 1, 2010)

I'm slightly less convinced, given that OP has two other LOCs.

Anyway, I suspect it is because the banks are tightening their variable rate offerings. Mortgages have really tightened. Last I checked, banks are all offering Prime even or Prime -0.1%. Anyone know why they have done this?


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## m3s (Apr 3, 2010)

the-royal-mail said:


> Good lesson for those who think it's a good idea to rely on LOC as their emergency fund.


He only lost the amazing rate. It's still easy for most people to get a decent LOC

I think paying prime +1-3% is cheaper than the opportunity cost of having an entire emergency fund sit idle

Nothing wrong with either approach imo, depending on your tolerance


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## KaeJS (Sep 28, 2010)

Mall Guy said:


> Might be enough to make me switch banks!


That's what everyone says.

The banks just recycle customers. They're all the same - no point switching.


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## Islenska (May 4, 2011)

I have a LOC at RBC (unsecured) 4.5% and CIBC (unsecured) 4%, so went to RBC about at least matching this as I do all my banking there and their reply was a firm NO, in fact the fellow said I was getting the "most preferred rate"
so should be happy???


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## marina628 (Dec 14, 2010)

my secure credit line is 3% and unsecured line is 4% at TD Bank


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## Mall Guy (Sep 14, 2011)

I guess my beef is that they did this this without notice, and how they go on and on about "relationship". Yes its obvious they just want a bigger pound of flesh, and I agree that they are all the same. However, given the number of products I have with them (2 mortgages, visa, several LOC, RRSP, RESP, Action Direct Acct), I haven't given in on the issue yet. Doubt I will get the prime rate back, but did ask for a reduction in the rate on a fully secure LOC. We will see!


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## m3s (Apr 3, 2010)

I think the whole "relationship" thing is exploited by the big banks now. You can usually get a better deal on most products by shopping around. Same things for insurance I find. They know people are lazy and prefer to do everything at one stop, so they bait you with a few good deals and overcharge on others. It doesn't bother them if you leave because most Cdns are oblivious to better deals


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## andrewf (Mar 1, 2010)

KaeJS said:


> That's what everyone says.
> 
> The banks just recycle customers. They're all the same - no point switching.


Dunno... you should at least go to a low/no fee banking relationship. ING or PC.


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## OhGreatGuru (May 24, 2009)

Mall Guy said:


> I logged on to my online banking site, only to discover RBC had pulled my prime +0% LoC, no notice before or since. When I inquired, I got what I consider a pretty weak answer "that product was for RRSP purposes, and they no longer offer that product". I've had this LoC for about 14 years, and still have three other (more expensive prime +1 and 2%) LoC's.
> 
> ...


I agree the answer was weak. They should have said "We regret to advise you that we have had to withdraw this product because it is no longer profitable". But that would be too much refreshing honesty.

But otherwise I think you are just whining. You had a Prime + 0% LOC for 14 years! Times and interest rates change! I'd like to buy CSBs at 8%, but guess what, they don't have them anymore. You had a zero balance, so by cancelling it they made sure you didn't take money out while thinking it was still being offered at Prime +0%. 

Maybe they owe you an apology over notification, but if they dig through their archive they'll probably find an e-mail notice sent to your on-line banking site that you ignored.

I won't even speculate about why someone would need 4 LOCs.


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## BBB (Jun 13, 2011)

I had a Student LoC at Prime + 1% and I asked if the rate would increase when it got switched to (to me no longer being a student) and they said "No". But it went up to Prime + 6.5%, right after. I didn't have much left on it so I didn't care and it will be completely paid off on Wednesday so I am looking forward to that.


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## Mall Guy (Sep 14, 2011)

OhGreatGuru said:


> But otherwise I think you are just whining.


Well, of course I'm just whining! But was curious as to whether this happened to anyone else.


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## Eclectic12 (Oct 20, 2010)

BBB said:


> I had a Student LoC at Prime + 1% and I asked if the rate would increase when it got switched to (to me no longer being a student) and they said "No". But it went up to Prime + 6.5%, right after. I didn't have much left on it so I didn't care and it will be completely paid off on Wednesday so I am looking forward to that.


Interesting ... I've seen lots of articles of people identifying that their rate was bumped.

I'm not sure if I lucked out or what but so far (*knock* on wood), in four years, the rate has stayed as signed. So as prime has dropped, so has the LoC. With prime steady, the LoC has stayed steady.


Maybe because it was setup as part of a mortgage though a mortgage broker?


Cheers


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## canadianbanks (Jun 5, 2009)

KaeJS said:


> That's what everyone says.
> 
> The banks just recycle customers. They're all the same - no point switching.


Very well said! There's virtually no competition in the Canadian banking sector, that's why the big banks don't care.


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## james4beach (Nov 15, 2012)

Wells Fargo, a huge bank in the US, just cancelled *all* of their personal lines of credit!

This worries me. I like having my LoC, in case I need it, but I still worry that the (big) bank might not let me keep it. The bank keeps sending me promotions and reminders to use it, but I never do.

Maybe this sounds stupid, but I just borrowed $100 on my LoC so that it shows a balance. If I pay it in a month or two, it's just a few cents of interest. I don't want my account to be flagged as unused.


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## Mukhang pera (Feb 26, 2016)

james4beach said:


> Maybe this sounds stupid, but I just borrowed $100 on my LoC so that it shows a balance. If I pay it in a month or two, it's just a few cents of interest. I don't want my account to be flagged as unused.


I guess I am stupid along with you. I draw down my LoC now and again and pay it back after awhile, just to keep it exercised. Kinda' like owning a gun. Better to have it and not need it than need it and not have it. 

The gun comment should earn me a  or two.


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## james4beach (Nov 15, 2012)

Mukhang pera said:


> I guess I am stupid along with you. I draw down my LoC now and again and pay it back after awhile, just to keep it exercised. Kinda' like owning a gun. Better to have it and not need it than need it and not have it.


Thanks, I'm happy to hear that. Roughly how much do you borrow from it?


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## Mukhang pera (Feb 26, 2016)

james4beach said:


> Thanks, I'm happy to hear that. Roughly how much do you borrow from it?


Usually about $200-$300. Not always same and not always paid back on same schedule. I vary it a bit. I might owe something for 4-8 weeks, then have a 0 balance for maybe 6 months or so after that. I never let a whole year go by without using the account.


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## james4beach (Nov 15, 2012)

Mukhang pera said:


> Usually about $200-$300. Not always same and not always paid back on same schedule. I vary it a bit. I might owe something for 4-8 weeks, then have a 0 balance for maybe 6 months or so after that. I never let a whole year go by without using the account.


Thanks. I should do the same. A few cents or dollars of interest is no big deal, but the value of keeping the LoC is quite significant, especially since I'm self employed and this could be a valuable source of liquidity/short term credit.


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## MrMatt (Dec 21, 2011)

I use my LOC continuously.
My workflow
Get bill, pay 3 days before due date from LOC.

Get paycheck, transfer to LOC (minus pending mortgage payments etc)

My LOC balance is targetted to $0, but floats +- a few $k

I pay no fees on LOC, I don't pay for overdraft, and I only pay $.50-$2.00 a month in interest, even if I have an expensive month where I have to spend several $k on stuff ( like when I bought new appliances)

The idea of a LOC as an emergency fund has come up before, I think it's a bad idea.
Also my LOC and primary CC is at a different institution than my cash Emergency fund, just so they don't decide to transfer it over.

Don't keep all your assets and debts at the same bank.
Spread it out, personally I use 2 banks


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## james4beach (Nov 15, 2012)

MrMatt said:


> I use my LOC continuously.
> My workflow
> Get bill, pay 3 days before due date from LOC.


This is an interesting idea, to continually use the LOC. That would really exercise it and prevent it from getting flagged as 'unused'.

I also like your point about keeping the assets and debts spread out among different banks.


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## Synergy (Mar 18, 2013)

I wish the bank would close my unused HELOC so I don't have to pay the $300 discharge fee!


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## MrMatt (Dec 21, 2011)

james4beach said:


> This is an interesting idea, to continually use the LOC. That would really exercise it and prevent it from getting flagged as 'unused'.
> 
> I also like your point about keeping the assets and debts spread out among different banks.


FYI, it's called "right of offset"









What Is the Right of Offset and What Can You Do About It?


What is right of offset in banking? Learn about it here and find out how it can affect your finances.




www.hoyes.com





Really simply I have a "deposit bank" and a "transaction/credit" bank. 
Yes money flows into both, but they have their primary purposes.

But lets say, bad things happen and I can't pay my debt. The transaction/credit bank has no access to the savings at my deposit bank (without initiating proceedings against me)

If it's all at one bank, it's really easy for them to close the LOC and simply "offset" (seize) funds from my savings account to pay it off. So if you have a bad time, they can really wreck havoc on your plans.
Imagine if you have an emergency, and a loss of income while things get sorted out, having your credit cut is bad, having your credit cut AND your savings "offset" (seized) at the same time is worse.

A properly engineered system shouldn't have a single point of failure, unless it's really necessary. Your banking doesn't need to be a single point of failure.


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## Mortgage u/w (Feb 6, 2014)

You may be better off with a product such as Manulife One. All your banking is held under one giant LOC. No need for a separate savings account, chequing account, LOC, Mortgage......its all under one. Mortgages get paid out much quicker and you always have access to funds.


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## MrMatt (Dec 21, 2011)

Mortgage u/w said:


> You may be better off with a product such as Manulife One. All your banking is held under one giant LOC. No need for a separate savings account, chequing account, LOC, Mortgage......its all under one. Mortgages get paid out much quicker and you always have access to funds.


Apparently those type of accounts are popular in Australia as well.

I'm not sure under what conditions they'd close or restrict credit in them though.
Remember, if your net assets are negative, they've likely given themselves the right to close off new credit at any time for any reason.

However it also looks like they charge at least a 1% premium on mortgage rates, and a $17/month service charge.


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## Mortgage u/w (Feb 6, 2014)

MrMatt said:


> Apparently those type of accounts are popular in Australia as well.
> 
> I'm not sure under what conditions they'd close or restrict credit in them though.
> Remember, if your net assets are negative, they've likely given themselves the right to close off new credit at any time for any reason.
> ...


You are limited to the global credit limit you initially qualified for. As the balance owing drops, you can reborrow to the max, no questions asked. Just like a credit card limit. They also can't restrict anyone from going elsewhere and opening additional unsecured credit. 

Not sure about the premium on rates.....their rates are fairly competitive. Just like the bank posted rates, you can't rely on what they advertise. The monthly fee should be viewed as a bank account fee - no different than what traditional banks would charge.


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## james4beach (Nov 15, 2012)

Today I found out that my bank has an option that can be turned on, which automatically pays the minimum payment each month on the line of credit (by transferring from my chequing account).

It sounds like a good idea to me. Does anyone know of a downside to doing this? Even though they are transferring the min payment, I can always pay the full balance by doing a second payment myself.

Along the lines of what @MrMatt said, I do keep my primary savings account at a different bank. But I also have an account at the same bank as the LoC with a minimal balance, certainly enough to pay the minimum.

If times got very tough for me, the minimum payment always has to be paid anyway, but the LoC bank has no way to reach my bigger savings account -- without legal action. I think the worst thing that could happen is that the bank terminates or freezes the LoC, but my big savings account (at another bank) is insulated from this.


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## MrMatt (Dec 21, 2011)

james4beach said:


> Today I found out that my bank has an option that can be turned on, which automatically pays the minimum payment each month on the line of credit (by transferring from my chequing account).
> 
> It sounds like a good idea to me. Does anyone know of a downside to doing this?


At TD my TD LOC has that as a mandatory (or highly encouraged) "feature". I don't like automatic stuff, and only my mortgage, insurance and car loan are automatic, because they really didn't present any other options.

Personally my LOC average balance is zero, so it's a non issue. I get a paycheck, and immediately transfer it to the LOC


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