YOU MUST MAINTAIN A MINIMUM BALANCE
Many banks require that you keep a minimum balance in your account in order to receive some kind of benefit from them.
Is the benefit worth the minimum balance? Let’s have a closer look.
The TD all-inclusive chequing account looks like a great deal:
- TRANSACTIONS: All transactions are free – up to a $804.50 value per year. Includes a free safety deposit box and personalized cheques. Whoa.
- CREDIT CARD: They waive the annual fee on one of 5 top TD credit cards. Up to $120 per year saved. Nice.
- MONTHLY FEE: And…you can get all of this for free, with no monthly fee, if you keep a minimum balance of $5,000 in your account at all times. Otherwise the monthly fee is $29.95 for all of the awesome stuff.
- TOTAL SAVINGS: So, if I add that all up, I’m saving $804.50+$120+($29.95 x 12 months) = $1,283.90 per year!
Seems like a no-brainer. You keep $5,000 in your account and you save $1,283.90 annually.
That’s like investing in something and getting a 26% return. If you have $5,000 to invest, you are totally better off to just leave it in your bank account and you’ll make 26%.
This is how they get you.
YOU CAN’T SAVE SOMETHING THAT DOESN’T EXIST
It all looks so magical and wonderful. But there are actually no savings at all because you have equivalent alternatives that cost NOTHING.
Let’s try this again:
- TRANSACTIONS: Free transactions are great, but they only have value if there is a situation where you might have to pay them. I bank with Tangerine and my transactions are always free. So free TD transactions are worth $0 per year to me. I don’t want a safety deposit box as that would imply I want to visit a branch. And I’m hoping that people stop using cheques any day now, because email money transfers are so much better.
- CREDIT CARD: I have two credit cards – my Tangerine Mastercard with no fee and 1-2% cash back, and my Scotiabank Visa with no fee and car rental insurance benefits. I don’t pay fees so I don’t need to save any.
- MONTHLY FEE: I pay no monthly fee at Tangerine and I even make a tiny bit of interest on my chequing account. No minimum balance required.
- TOTAL SAVINGS: So, if I add that all up, I’m saving $0+0+($0 x 12 months) = $0 per year!
For $0 per year in savings, I can choose to leave $5,000 of my money in my TD account forever.
Or I could put $5,000 in a GIC and make $150 per year.
There are a lot of things to do with your $5,000 that don’t involve fake savings.
Always remember when banks quote savings, they are only comparing to themselves. It’s up to you to compare their offer to the other products out there.
BUT I WANT THE FREE TV!!!
TD also has a free TV offer along with this account.
As I’ve already discussed in my RBC iPad post, if you were already going to switch to TD and buy a 40” TV, then please proceed.
But otherwise, the life energy you are spending to get a free TV doesn’t seem worth it.
Many of the terms are similar to RBC’s offer, but the TV is worth a bit more ($500), you have to be approved for a TD credit card within 14 days and then spend $500 on that card before October.
Then the TV comes 3 months after all of the conditions have been met.
All that, plus holding your $5,000 hostage for 6 months or more.
The whole thing gives me a headache.
Ultimately, you make the decision that is right for you. My goal is to provide you with as much information as possible to make that decision. Decide wisely.