Personal Finance

using LOC instead of chequing account

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Sr. Member
Nov 9, 2008
815 posts
464 upvotes
Ottawa

using LOC instead of chequing account

I'm wondering if I could close my chequing account, deposit the money i have there, and my pay cheque every month into my LOC to have a positive balance...and use the LOC for my daily needs.. debits etc.

it will usually have a positive balance, and it'd give me more flexibility/safety in terms of `overdraft protection`.

any ideaS? i could call the bank but RFD is a lot better for me right now because i'd like to hear if there are unexpected results of doing this.

thank you!
29 replies
Deal Addict
Dec 28, 2008
1382 posts
169 upvotes
Toronto
This depends which bank you use.

I know you can do this at TD and CIBC.

Yes, a lot of people do this.
Member
Oct 29, 2009
263 posts
6 upvotes
OP: It is not a silly idea at all. It's basically a free way to bank with a b&m bank. I know TD / CIBC allows you to do this.

If it floats your boat, do it. No problem.
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Mar 23, 2004
47726 posts
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Markham
d5486 wrote: I'm wondering if I could close my chequing account, deposit the money i have there, and my pay cheque every month into my LOC to have a positive balance...and use the LOC for my daily needs.. debits etc.

it will usually have a positive balance, and it'd give me more flexibility/safety in terms of `overdraft protectio!

been discussed here before: http://forums.redflagdeals.com/using-lo ... nt-512388/

Certainly not a bad idea since u get free cheques, no fee, no minimum balance required, teller/abm access, etc etc.
edwardalex wrote: OP: It is not a silly idea at all. It's basically a free way to bank with a b&m bank. I know TD / CIBC allows you to do this.

+1
Banned
Feb 17, 2007
3190 posts
203 upvotes
I have TD Line of credit. It is as same as a regular chequing account except you will see negative balance when you overpaid.
No interest will be given for negative balances, but if your account is positive (it means you borrowed money from them), you will be charged interest.

You can order cheques for TD LoC for free. Each order consist of 20 cheques standard style (meaning, you can not choose design or anything, more like what PC Financial is offering). You can repeat ordering cheques for free. I have already burn through 60 cheques now.

Your cheques look and feel like normal cheques for a regular chequing account at TD. No one will know the cheques you are giving them are from a credit product.

Now that you have TD account, what about your saving and credit card accounts?
I use Canadian Tire financial as my saving account. Currently yield 2% just like Ally.
I linked my CTF Saving account with my TD LoC with no problem. I pull money from my TD LoC to CTF Saving on every paycheque. Sometimes I under budgeted my expenses and went into positive at TD LoC, but it was quickly adjusted via my next paycheque. However, if you do need to withdraw from your saving account at CTF, you can push the fund from your CTF to TD LoC without problem even if it gets into negative.

Now then, if you try to link RBC LoC to Ally and CTF alike, that may possess a problem because RBC LoC cheques aren't even free (not that it matters), and it specially indicate that your cheque is a credit product; therefore, external accounts may not be linked.


Overall, TD LoC is the best one in the industry lol.
I Also have RBC LoC which is complete garbage (with higher rate). And I also have CIBC LoC; however, I haven't get a chance to locate a branch that is willing to take me in as their client. I already got approved for this LoC over the phone.
Deal Fanatic
Feb 15, 2006
9183 posts
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Toronto
At Meridian Credit Union, you can open one account. If having positive balance, you get interest. If you take money out, it's a line of credit. You can direct deposit your pay cheque to it. The negative is the cheques are not free.

TD and CIBC LOC as people said, can function like a chequeing account, with free cheques. Better yet if it's a secured LOC, or HE LOC.
Banned
Feb 17, 2007
3190 posts
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Arrgh wrote: TD and CIBC LOC as people said, can function like a chequeing account, with free cheques. Better yet if it's a secured LOC, or HE LOC.

Still wondering why people uses Manulife One where they have to pay $14 monthly fee.
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Mar 23, 2004
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ACC-Major wrote: Still wondering why people uses Manulife One where they have to pay $14 monthly fee.

well i mean there are ppl who think it's silly to use a loc, then there gotta be ppl who thinks it's fine to pay to use a loc ;)
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May 19, 2005
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ACC-Major wrote: Still wondering why people uses Manulife One where they have to pay $14 monthly fee.

Some people pay $25/month to use a Chequing account.

PCF and ING Thrive are great options, but sometimes you just need a real bank (e.g. Need to take out a large amount of your own cash quickly, or setup a bank draft the same day).
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Mar 23, 2004
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Jonavin wrote: PCF and ING Thrive are great options, but sometimes you just need a real bank (e.g. Need to take out a large amount of your own cash quickly, or setup a bank draft the same day).

Nicely said. And i would never use an atm to deposit a large amount of cash.
Member
Mar 27, 2009
264 posts
50 upvotes
coopercold wrote: Actually, it is, in fact, silly. I'm assuming the OP works hard for their money. So why should they give a single penny away to a B&M bank? It's sheer foolishness to make give a bank an interest-free loan. I won't do it, and anyone who does is silly. I demand something in return for giving the bank my money. It's, in part, because they have my money and moneys from people like me that they can lend and stay capitalized and do all the other things banks do.

IMHO. :razz:

BTW, ING Thrive has free "Whoops" overdraft protection, if that's a concern for you.


The idea is that you pair a LOC with a high-interest savings account. The LOC gives you access to the full services of a bank for free, including unlimited transactions and free cheques, but you would maintain your balance at $0, or as close to $0 as possible, with all surplus cash immediately going to your HISA or other investments. You don't need "Whoops" overdraft protection or any of that nonsense, because this is a solution for those who are both fiscally responsible and disciplined enough to effectively budget so that you neither pay the bank interest nor you leave a penny behind unused. The effective balance of the LOC will always be $0, and you never pay a cent in fees or interest to anyone.
Deal Addict
Feb 25, 2009
1009 posts
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angel_wing0 wrote: well i mean there are ppl who think it's silly to use a loc, then there gotta be ppl who thinks it's fine to pay to use a loc ;)


so true
Being broke is childish and I'm quite grown
Member
Sep 24, 2003
300 posts
3 upvotes
Would this concept(loc replacing chq acct) apply to business acct as well?
Deal Addict
Dec 28, 2008
1382 posts
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Toronto
fayenet wrote: Would this concept(loc replacing chq acct) apply to business acct as well?
I know at CIBC, a line of credit for the business and the bank account is the same thing essentially.

A bank account with a huge overdraft that's cheaper interest rate.

But you can't get around account fees, internest, loan admin fees, etc.
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Feb 23, 2004
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How to open LOC account at TD or CIBC?

It doesn't make sense to say "I need to open LOC to replace my checking account"?
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Banned
Feb 17, 2007
3190 posts
203 upvotes
kocoman wrote: How to open LOC account at TD or CIBC?

It doesn't make sense to say "I need to open LOC to replace my checking account"?

Just say you wana open a LoC, no need to provide the real reason. Just say for daily usage.
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May 19, 2005
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kocoman wrote: How to open LOC account at TD or CIBC?

It doesn't make sense to say "I need to open LOC to replace my checking account"?

Tell them you want some money for the casino, or you got an email from a South African prince for a great investment opportunity.
Sr. Member
Oct 21, 2005
615 posts
95 upvotes
London
coopercold wrote: So you're going to overpay your LOC? If so, it's a silly idea. At least if you have a chequing account, your money can accrue interest, however little it may be. Get a no-fee chequing account, a la ING Thrive and the like, and keep your LOC at $0.

Yes, it is silly if your keep thousands of dollars in LOC. I have been using TD LOC for years. I love it. I usually keep my balance as close to $100 as possible. I like the fact that I don't have to worry about money being held, pay to order cheques, worry about overdraft, etc. It is peace of mind.
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May 19, 2005
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Just curious. How does a negative loc balance affect your credit report? It's not reported at all? Or is each of your over-payment reports as a payment?
Sr. Member
Nov 13, 2007
881 posts
135 upvotes
Toronto
The problem is that LOC account does not show on ABM. If you are willing to line up to cash your cheque forever than it can work.

Some bank won't let you withdraw directly from LOC. So you will need to write yourself a cheque. Some banks has restriction on LOC, stating that you cannot have positive balance on LOC for x consecutive months. Otherwise, you will have to pay rip-off penalty (I remember reading this on account agreement but don't remember which bank).
Before you do anything, dig out that agreement and read it carefully. Keep on mind that bank can change agreement any time. Don't try to outsmart them.

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