Personal Finance

The advantages of a LOC over a Chequing account

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  • Jan 24th, 2014 2:36 pm
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Jun 3, 2005
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PunkeyDoodles Corner…
casperr wrote: ....I did it with rbc,..
LMAO...go figure...the ONLY one that doesn't allow positive balances (PBs).
rfdn00b wrote: ...Im with cibc and i have ... a loc, can i convert my existing loc into what youare describing here?
lol...there's nothing TO convert it to. It's an LOC. That's it. Enjoy!
I know with the checquing i need to keep it above $1500 i think to avoid paying fees, so you're saying in the loc, there is no minimum... right?
Bingo!
from the looks of it, there is no need to have a checquing acount... i have it to make checques about 5 times a yr and i have an pre authorized payments on it... so everything can be done on the loc.
Bingo x2!
Can we still order personalized checques on this LOC, i like having a carbon copy to avoid looking up the cheques and have a log in case i need it later...
Here's the beauty....Unlike Chequing Accts which Banks don't make money on you if you use them (hence their only source of revenue is to charge service fees, or cloak those fees in 'waived service charges' if you forfeit interest on maintaining a min balance (as you described)...LOCs are a money-making venture all around, so Banks PROACTIVELY SEND you Cheques to use FOR FREE LOLz.
Rudee wrote: Just to put it into prospective. That $30k of borrowed money from my LOC that I put into the stock market appreciated by $12k in a little over 8 weeks. Interest owed for that 8 week period was about $240.
:rolleyes: ...if you can guarantee that return everybody would be doing this. as mentioned by jerryhung, you lucked out. Had the circumstances been different, you wouldn't be bothering disclosing of your $0 profit (at best, more likely significant LOSSES at norm) AND the need to pay interest $240 regardless ;)
gq_fuzion wrote: where i definately agree with this tactic, the banks also have the right to revoke your LOC if they can prove you are using it as a chequing account to evade service charges

your LOC's are reviewed generally on an annual basis
depending on who's reviewing it, you may get lucky

banks do not want their LOC's in credit balances
Good point. Take-home? Use it fairly?
brunes wrote: ...BMO LOC:>>>It is also not possible, as I am aware, to have your paycheque direct deposited into your BMO LOC....
Would be good to find out.

RFD really needs to look into installing the latest version of vBulletin along with a few more plug-ins. This is definately one of those threads I'd give mad reputation props for. Did my barage of pms get your thread-writing juices flowing tng11? :lol: ?
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Oct 23, 2005
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Good thread TNG - I'm considering in getting a HELOC cause rate will be cheaper than LOC.

The reason for the LOC decision is that my wife will be going to school full time - so I'd like to have a LOC in case I run out of savings.

But then I learn from my bank - it's cheaper to go with a Student LOC than a HELOC.

I'm surprised by that - so I think that's what we'll do sometime soon down the road - go for the Student LOC.

Sorry if I'm high jacking the thread.
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Nov 18, 2008
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crackerjack wrote: Good thread TNG - I'm considering in getting a HELOC cause rate will be cheaper than LOC.

The reason for the LOC decision is that my wife will be going to school full time - so I'd like to have a LOC in case I run out of savings.

But then I learn from my bank - it's cheaper to go with a Student LOC than a HELOC.

I'm surprised by that - so I think that's what we'll do sometime soon down the road - go for the Student LOC.

Sorry if I'm high jacking the thread.
A HELOC guarantees a low rate- P+1 is the norm these days from most banks.

But the problem is a HELOC may cost $500 to setup because of legal fees, but you may be able to find a bank to waive the fee for you if you negotiate with them.

Don't forget a Student LOC closes after graduation (at least mine does) and the balance you have on it is converted to a fixed term loan.

Personally, I wouldn't use a HELOC as a Chequing account because of the risk involved with a few hundred thousand of available credit (what if someone steals a cheque?). You could split the HELOC into a few accounts and keep them separate with one for daily use and the other for investment purposes.

What my parents did when they setup a HELOC with CIBC was open a normal unsecured LOC to use as the Chequing account as they don't plan on going in a negative balance and kept it separate from the HELOC.

The great thing about the CIBC LOC is that I know people who have been using it for years without borrowing a cent from it and they haven't been scolded yet- it's coded as a Chequing account with a large overdraft in their system. Personally, I borrow $100 for a few days near the end of the month so it looks like I'm using it on my credit file. It only costs a few cents, so why not.
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tng11 wrote: Yes, but can you constantly return 40% over an 8 week period? You seem to be making that assumption that you can do so. If you could, you would be the richest man on earth in no time.
I have made no assumptions. I've only stated facts. Facts are that I put new money into the market shortly before the early March rally. This is not about consistent returns. This is more about market timing. I certainly would not of done such a thing had I not believed we were close to or at market bottom (at least in terms of the equities in which I was purchasing). Obviously the market can't continue to grow without earnings to back it up. The gains we have seen in the market over the last 8 weeks obviously can't be sustained at that same level, and I'm not expecting them to. Things will slow down, but overall, there will be improvements, albeit slowly. The equities I have invested in are quite leveraged to the market. Banks, energy. Obviously, those two sectors alone contributed significantly to the overall gains in the TSX since Feb lows. Other than my LOC, I have a little over $70k of my own money invested, so obviously I'm going long.
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jerryhung wrote: Tsk tsk, I hate it when I see statement like this

If you put your 30K of LOC money into the stock markets last April, you would NOT be making any comment here as you could be DOWN $12K in 8 weeks, and you STILL have to pay the interest
I agree. However there is a huge difference between April 08 and April 09. As mentioned, I would not of done this if I didn't feel things were at or near market bottom. That would of been gambling. What I've done now, is still gambling, the only difference is the odds are greatly in my favor now. It's highly unlikely the market will re-test it's February lows. There has been a lot of new money going into the market the past couple months as investors are starting to take on a little more risk in return for opportunity to get in at what may indeed be close to or actual market bottom. Only time will tell. Did I expect a 30% plus return so quickly when I put my money in? Heck no. But I did expect a positive return yielding far greater than I could of got putting money in a savings vehicle such as a bank account, GIC, etc - even after the monthly interest payment.
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Nov 18, 2008
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Does anyone have experience with the BMO LOC? I know there is a Mastercard attached to the account, but I was wondering if you could overpay the account and write cheques on it like CIBC, TD and Scotiabank.

Also, another note is that the TD and CIBC LOC cheques are a unique colour from regular cheques (you don't get to pick the style), so some people might know you're using your LOC when giving them a cheque. Not that it really matters. For companies which disallow LOCs for pre-authorized payments (City of Mississauga comes to mind), they still accepted a CIBC LOC cheque without problem as the account coding at the bottom is the exact same as any regular CIBC cheque and there was no printing on the cheque that said "Line of Credit", unlike some TD LOC cheques I've seen before.
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scotia appears to charge for LOC cheques at least according to their website. can anyone confirm?

What is the going rate for an unsecured LOC right now? prime+1? that is cheap!!!
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flito ray wrote: What is the going rate for an unsecured LOC right now? prime+1? that is cheap!!!
You wish! Secured is now Prime+1 at most banks, and some are even asking for Prime+2!

Unsecured is normally like Prime+4 these days, but I do know someone who recently got P+2.75 from PCF.
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UrbanPoet wrote: for all you tin-foil hat guys...
I'm pretty sure a LOC isnt included in CDIC. So if the bank folds your money is gone forever!
thats why you link it to a high interest rate savings account and transfer extra cash there....also i dont think any of the big cdn banks are going to fold..have been using this system for over 5 years and think its great...
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markj wrote: thats why you link it to a high interest rate savings account and transfer extra cash there....also i dont think any of the big cdn banks are going to fold..have been using this system for over 5 years and think its great...
Exactly. It's not like I keep a few thousand in positive balance in my LOC, at most a few hundred even if that.
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tng11 wrote: 2. Free Cheques: If you're with PCF this is not an issue. But if you're with a B&M bank, you will easily pay $35 for 100 cheques. Again, cheques are totally free with the LOC at CIBC, TD and Scotiabank. They look exactly like regular cheques, there is nothing there to indicate it was from a LOC account. CIBC sends you 20 duplicates at a time which I think is good as I don't need to use cheques too often.
I got a LOC with CIBC (no other account with them), how do I get Free cheques from them?
Is this cheque on demand, where I just walk into any branch and they'll print and hand me over 20 printed cheques?
Or do I just start using the two initial cheque they printed for me (when I first open the account) and more will come?
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jmc0 wrote: I got a LOC with CIBC (no other account with them), how do I get Free cheques from them?
Is this cheque on demand, where I just walk into any branch and they'll print and hand me over 20 printed cheques?
Or do I just start using the two initial cheque they printed for me (when I first open the account) and more will come?
Just log into online banking, under "Customer Services" you should see an "order cheques" link. Just click there, go through a few pages and it will automatically order 20 personalized duplicates for you and send them to you. You can't get them from a branch right away, so I make a note to order them when I'm halfway through the booklet.
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tng11 wrote: Does anyone have experience with the BMO LOC? I know there is a Mastercard attached to the account, but I was wondering if you could overpay the account and write cheques on it like CIBC, TD and Scotiabank.

Also, another note is that the TD and CIBC LOC cheques are a unique colour from regular cheques (you don't get to pick the style), so some people might know you're using your LOC when giving them a cheque. Not that it really matters. For companies which disallow LOCs for pre-authorized payments (City of Mississauga comes to mind), they still accepted a CIBC LOC cheque without problem as the account coding at the bottom is the exact same as any regular CIBC cheque and there was no printing on the cheque that said "Line of Credit", unlike some TD LOC cheques I've seen before.
I have a BMO loc (no other account with them), they didn't give me a client card just a mastercard; I don't use this account much.

After opening the loc, they mail me a book of personalized cheques [with my name and my local home branch info, etc. on them (like the usual cheque)]. BUT the MIRC encoded branch transit number [the numbers printed after the cheque number on the bottom eg 005 :XXXXX"'YYY|:] does not match with my local home branch.
XXXXX usually starts with zero, like 01234, on these cheque its like 98765. The YYY is 001 which stands for Bank of Montreal. The last set of MIRC numbers [numbers after the YYY|:], aka account number, also does not match my account number with them.

So I don't think it's a chequing account to the same degree as CIBC's loc (which btw their cheque matches), it's more like the MBNA prestige line account.

btw, you can print your own cheque using special software, etc. if the info, format and encoding is done correctly.
http://www.cdnpay.ca/faqs/cheques.asp#9
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^they may ask you to close your LOC when applying for a mortgage (if its a different bank than your LOC bank), royal bank did that to me
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The Ivory Actuary wrote:
I'm thinking of buying real estate in the next 2-3 years, and I have no outstanding debt, and total credit card limits of around 15k. Is there a glaring reason why I shouldn't instruct my banker to take the limit as high as he can? When I need a mortgage in 2-3 years, will it look better to have a $20k LOC or a $50k LOC on my files?
Worse case scenario is they ask you to lower your limit. No problem really.

Is there any chance the institution you're talking about is TD? I know CIBC is doing slightly better on 50K LOCs right now, but it really doesn't matter if you're using it as a Chequing account.
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The Ivory Actuary wrote: On another note, I can spot one disadvantage of a Big 5 LOC over a PCF chequing: electronic transfers to accounts at other banks are free through PCF, but you'd need to do an EMT or write a cheque from a Big 5 (well, from CIBC at least) LOC in order to transfer funds to another bank.
Yep, that's the only difference I forgot to mention.

Getting a PCF LOC would also solve this problem too. I've left my PCF and CIBC Chequing accounts empty and switched to using the PCF and CIBC LOC as my daily accounts (I keep PCF because of the bank to bank transfers). Granted, both the limits are not very high and the rates are quite high.

But again, it's what you value. PCF LOC only gives you low cost overdraft over the regular Chequing account. CIBC/TD/Scotia LOC would give you teller service as well (if you really need it).
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Sep 21, 2008
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I finally pulled the trigger and got the Line of Credit,
I'm almost 23, so not that much credit history. My first credit card was with them about 10 months ago. I managed to get a $5k LOC at P+2%.

My advisor said something about the LOC not having the same debit access like my regular chequing account. Does that mean Interac debit at stores won't work with a LOC or what?
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Edward_K wrote: I finally pulled the trigger and got the Line of Credit,
I'm almost 23, so not that much credit history. My first credit card was with them about 10 months ago. I managed to get a $5k LOC at P+2%.

My advisor said something about the LOC not having the same debit access like my regular chequing account. Does that mean Interac debit at stores won't work with a LOC or what?
If you can get Interac on that LOC, it should work like any bank account for purchases and withdrawals. Perhaps it is the case that the bank you talked to simply does not allow that.
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I have a question to the ones holding a TD LOC:

Was anyone successful in getting a pre-auth debit transaction done on their LOC? I tried it with citibank for my cc bills and citi tried twice and it failed. I see no record of it in my LOC history. Is it crippled for the LOC?

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