In order to woo new customers, financial institutions are becoming creative in the way they package their bank accounts. All of them promise their unlimited bank accounts will simplify your banking as well as save you money.
For all their hype, some can be quite confusing and you have to manage the account exactly as prescribed to be rewarded with the benefits. Most will waive the monthly fee if a minimum monthly balance is maintained, but beware of additional fees.
Related: 10 Fees To Avoid Paying
Here are a few of the most common unlimited bank accounts in Canada.
Scotia Moneyback Account
Scotia advertises this account as one that pays you just for using the account. The reality is that you receive 1% money back on all your debit purchases to a maximum of $300 per year.
With a monthly fee of $14.95 you would have to use your debit card a lot to break even – $18,000 in purchases annually. Additional fees are applied for other services such as e-transfers and info alerts and if you use overdraft protection.
Bank of Montreal Premium Account
BMO has a similar plan, but instead of cash back you earn 1 Air Miles reward mile for every $40 you spend on your debit card. Also, if you maintain a daily balance of $5,000 or more in your bank account you earn 25% more reward miles on your purchases using a BMO Gold Air Miles MasterCard.
The monthly fee is $25 but is waived with a minimum monthly balance of $5,000. If you collect Air Miles you would have to calculate whether this account would be of benefit to you. At the very least I would maintain the minimum monthly balance.
CIBC Everyday Plus Account
You can earn Aeroplan miles (100 monthly) if you have at least one direct deposit to your account or at least three pre-authorized monthly debits. Also available is an “Anniversary Reward.”
You receive $100 each year for using an eligible chequing account, plus savings account, plus charging a minimum of $1,000 on the CIBC credit card. At $8.95 a month it is the least expensive of the accounts here.
RBC Signature Account
The monthly charge on this account is $13.95. It can be reduced to $9.95 if you also have a qualifying investment with them as well as an RBC credit card and a mortgage or home equity secured line of credit.
The No Limit Account is similar and the $10.95 fee is fully waived with the additional products. It is strictly for electronic banking and other services such as personal cheques, other bank ATM transactions and e-transfers will cost you more.
Manulife All In One Account
You’ve seen the Manulife One account advertised on TV. The principle is to combine all your “inefficient” accounts (chequing, savings, GICs, loans and home mortgage) into one equity secured line of credit which charges a monthly fee ($14) as well as a prime rate based interest.
The concept is that when you apply your income immediately against your debt you will save in interest costs. Why leave money in a so-called high interest savings account or no interest chequing account when it can be reducing your debt interest?
While the concept sounds good, you have to be extremely organized to know where you stand regarding savings vs. debt vs. monthly expenses. People generally underestimate how much they spend and overestimate what they save. If you are not disciplined you can easily overspend and inadvertently increase your interest costs instead.
Unlimited Bank Accounts: Conclusion
Just like when people use credit cards to collect rewards and then pay the balance off each month, unlimited bank accounts can benefit those who stay within their parameters.
But make no mistake about it; banks are in the business of increasing their own profits not ours. They are well aware of the psychology of their customers and how they use their accounts, and chances are they will end up paying out more than they save.
I suggest you read the features carefully and compare them to your banking style. Then monitor the account for several months to make sure you are receiving the full benefits you expect.
How much money do you make for the amount of time you work? You know that your salary is “x” amount and a typical workweek is 35 to 40 hours. Discover for yourself the real trade-off in time, energy and monetary expenses that are directly associated with your job.
Commuting:
Whether you drive, walk or take public transportation, getting to and from work incurs an expenditure of time or money, or both. What is your commuting time? Calculate how much money you spend on a bus pass, walking shoes, gas, parking, tolls, traffic tickets, and car (and bike) maintenance.
Wardrobe:
Are the clothes you wear at work the same as you wear on your days off – or do you need a special wardrobe to be appropriately attired? This includes not only the obvious outfits like nurses’ uniforms, construction workers’ steel-toed boots and chefs’ aprons, but also the tailored suits, ties, shoes and accessories that are the norm in offices.
Consider the time and money spent on shopping and personal grooming activities. Don’t forget dry cleaning, tailoring and other clothing maintenance.
Meals:
Extra costs for meals take many forms – money for morning coffee and doughnuts (not to mention the time spent in line at the Tim’s takeout window), daily lunches, drinks after work with your co-workers, and expensive convenience foods that you buy because you are too tired to cook dinner.
Decompression:
When you come home from work are you ready to jump into your personal projects or share family time? Or are you tired and drained and need to veg out in front of the TV for a few hours with a drink in hand.
Job-Related Illness:
What percentage of illness is job-related – induced by stress, physical working conditions or conflict with employers or fellow employees? There is a lot less illness-caused absenteeism in volunteers than in paid employees. Think of the time spent waiting in the doctor’s office and the money spent on drugs and remedies not covered by insurance.
Other Expenses:
Childcare expenses (day-care, babysitter or nanny) take a big chunk out of your salary. Do you have a housekeeper or hire a cleaning service? What about the hours spent reading work related material, upgrading, going to seminars and conferences, and spending evenings networking for business.
Don’t overlook expenses such as educational programs, books and tools.
The Bottom Line
Calculate the hours you spend on work related activities – what you wouldn’t do if you were not working – and add them to your normal workweek. Then subtract all your job related expenses from your salary to come up with your real hourly wage.
What if you discover that you’re actually making six bucks an hour? Are you willing to accept that? Knowing the financial bottom line for your job will help you clarify your earnings.
You can reduce or eliminate your expenses by bringing your own lunch, using transit instead of driving and rethinking your clothing needs. You can decide whether it’s worthwhile for a parent to stay at home with the children. You can use the results as criteria for accepting or rejecting a job offers when you can see clearly what they are worth and perhaps accept a job that you wouldn’t have previously considered.
It’s an interesting exercise to do. How much are you really earning?
After reading an article in a recent MoneySense magazine called 11 Steps To Financial Freedom, I thought it would be interesting to go through each of these steps one-by-one and share my results on this blog. Each week I’ll go through one of the 11 steps to financial freedom, with the intention of creating a complete financial plan by the end of the series.
Over the past several weeks I have prioritized my goals, determined my net worth, recorded my cash flow, compared my spending to my goals, set my top three goals, developed a strategy to reach our goals, reviewed my insurance coverage, attempted to slash my taxes, and created an investing policy.
This week we take a look at step 10: create or update your will.
Write Up Your Will
Creating a will has been on my financial to-do list for quite some time. Back when we started this blog I confessed that one of my financial sins was not having a will in place. Not that I’ve been looking forward to setting up a will or anything, but it was this step that gave me the idea to write and complete the series.
According to the MoneySense article, every adult who owns assets and has a spouse or children should have a will. An accurate and up-to-date will is the only way to ensure your assets will be distributed the way you want them to be.
Action Step #10: Creating or Update Your Will
Your will should be updated and filed with your financial plan, but if you don’t have one in place you should hire a lawyer to draw one up for you.
I’m meeting with a lawyer tomorrow who specializes in wills and estates. I was sent a 19-page document to fill out prior to our meeting, which asks for all kinds of information about you, your spouse, your children, and your finances (assets and liabilities).
Next you need to list your instructions for your will, including naming an executor, declaring a guardian for minor children, naming beneficiaries, and choosing a power of attorney.
Why do I need a Will?
Without a will, your estate will be divided according to the laws of your province. For example, if you are married with several children, the Intestate Succession Act of Alberta states that your spouse receives the first $40,000.00 and one-third of your estate. The remainder of your estate will be given to your children. If you have minor children, the Public Trustee of Alberta will look after the children’s interest.
How Much Does a Will Cost To Prepare?
The cost of a will is quite reasonable, considering its importance. A few hours of a lawyer’s time could mean substantial savings in taxes and probate fees. In our case, we were quoted based on a flat rate of $250 for a single person, and $400 for a couple.
How Do I Pick An Executor?
The purpose of the executor is to carry out the wishes of the person who made the will. The executor is responsible for paying all the debts of the estate (including taxes) and to distribute the estate to the beneficiaries according to the terms of the will.
How Do I Appoint Guardians?
One of the main reasons for young couples to have a will in place is to appoint guardians for their children who are under 18 years of age. The guardian will be the person legally responsible for raising the children.
Final Thoughts
Creating a will has been a priority of mine for the past three years, but it’s just one of those things that gets easily pushed aside to deal with “some other time”.
Even though we don’t like to think about our own mortality, it’s important to have a proper plan just in case something does happen. I’m glad that we finally took the initiative to create our will, and I look forward to finishing up the process this week.
This series will wrap up next week when we reach step 11: create your final plan.