Tuesday, October 09, 2007

More bank notes

Since my experience with PC Financial's high-interest savings account has been largely positive, I've been mulling over switching to their no-fee daily bank account for my everyday chequing account.

I currently have a chequing account with RBC, a Visa card there too, and I keep my investments in an RBC Directinvesting account. That didn't really happen by design, but over the years I've grown to appreciate the convenience of having all my accounts in one place and being able to transfer money easily. I'm certainly not with RBC because they're the cheapest. I pay $4 per month to maintain my chequing account there, and $0 for the Visa because I pay my bill on time in full every month. In the past few years I've moved from about 20-30 debit transactions per month to less than 5 as I've been very diligent about putting absolutely everything I can on Visa for the points.

I usually say savings trump other factors , but part of me appreciates that I benefit from their size and heft when it comes to things like customer service when something goes wrong or having to find a bank machine somewhere nearby. If I were to count the advantages of keeping my everyday cash with RBC, I'd have to say they are the proximity to bank machines, ability to make same-day transactions (for paying off Visa or moving money into my investment account when an opportunity presents itself. Taking money out of my PC Financial savings, for example, would currently take at least two business days while I transfer it online to RBC and then find a bank machine to get it out.)

To me, $4 a month ($48 a year) seems a reasonable price for that. But let's do a little more detailed cost-benefit analysis here.

The obvious advantage of the no-fee chequing account at PC Financial? As the name implies, it's the 'no fee' part. That's a $48 annual savings right off the bat. But there's more. PC Financial offers 250 PC points every month for keeping $1000 in the account. Assuming I moved $1000 float from savings into the account to get that reward, I'd accrue 3000 PC points per year -- assuming I didn't use the account at all for things like buying groceries, which would boost my points. How much is 3000 PC points worth? As far as I can tell, about $3 worth of groceries. So my total savings in this scenario are now $48 worth of annual fees saved, plus $3 in benefits. I'm going to assume that things like customer service and prevalence of CIBC bank machines (who run PC's finance division) are a wash, so they don't enter into it.

Is $51 enough to make the switch? Honestly, I don't think so, but there are a few more factors to consider. Like the interest I lose from moving that $1000 out of my 4.25% savings and into effectively, an account that pays me 0% interest. That's $42.50 a year on the other side of the ledger. The benefits are getting smaller.

From where I sit, the only way this makes sense financially is if I play for keeps -- don't use the PC account merely as a "points-generating" mechanism, but actually use if for everyday use. I'd really start racking up some grocery points then. But I really like my RBC Visa card and would want to keep it. My plan to get free rewards from it is working perfectly. If that were the case, and I was going to use a PC account for things like my paycheque and debit transactions, but keep my RBC Visa and investment accounts open, I'd be well-served to keep the RBC chequing account open in some manner as an intermediary to them. Maybe converting it into a pay-as-you-go account would be best, where I'd pay $0 in principle, but a nominal fee (I think it's 50 cents) every time I made a transaction like paying my Visa bill or moving money into savings.

Forgive the jumbled structure of my thoughts on this one, but it's an insight into how my brain works. I'd love any insights from people who've done what I'm thinking of doing.

Essentially, my concerns boil down to this: Can you actually function without in some way being a customer of the big banks, and only use the fringe discount products? Or is that getting too cute by half?

I'd hate to go to the hassle of switching all those accounts over only to figure out the savings I accrued were nowhere near the cost in hassle I paid to get them.

3 comments:

nancy (aka money coach) said...

I moved from RBC to Citizens Bank of Canada (fee-free if you keep $1K in; unlimited everything plus high interest 3.8% savings. Not sure how those compare to PC). It was a small hassle, but not that big a deal. I kept my RBC Visa, but haven't looked back for anything else.

Canadian Dream said...

GIV,

Don't you qualify for one of RBC's fee rebate plans? You have an investment account and a Visa card. I do and so I'm not paying that $4/month in bank fees.

Look into it.

Tim

Krupo said...

If RBC is smart they'll waive your fees - they don't give you a waiver if you keep X dollars in there? I'm surprised, but not shocked.

Remember too that of the $42.50 in interest, you're paying 12-18%+ in tax on that, so your interest gained is actually lower than you think it is, post-tax.