Saving

RBC and BMO Offer Cheaper Business Banking Options

April 23, 2013

8 comments

Many small businesses may make only a couple of banking transactions each month — a couple of deposits and maybe a withdrawal or two — but still end up paying a chunk of it in banking fees. As far as I know, there are no free business chequing accounts available anymore (HSBC Canada briefly offered a free business chequing account but doesn’t any longer). All the big banks offer a basic pay-as-you-go business chequing account for monthly fees ranging between $6 per month at RBC and CIBC and around $10 at BMO, TD Canada Trust and Scotia Bank.

If you average just one or two transactions every month and are unable to maintain a large cash balance, you should take a look at the RBC Business Essentials Savings Account. There are no monthly fees and no minimum balance requirements but you will pay $1 for every electronic or cheque deposit. The first two withdrawals are free but every subsequent withdrawal will cost $3.50. If you are averaging less than 2 deposits and 2 withdrawls every month, you’ll save approximately $50 per year in business banking fees. CIBC also offers a no monthly fee business savings account but since each debit transaction costs $5, any savings are likely to be quickly wiped out.

If you are able to maintain a large cash balance and perform a larger number of transactions, you may want to look into BMO’s Small Business Banking Plan. The account has a monthly fee of $9.50 which is waived if you keep a minimum monthly balance of $4,000. The plan includes a fair number of free transactions but keep in mind that a $4,000 balance translates into an opportunity cost of $40 (assuming a 1 percent interest rate). TD Canada Trust and Scotia Bank also waive monthly fees for maintaining a minimum balance but the limits are higher ($8,000 at TD Canada Trust and $5,000 at ScotiaBank).

Teksavvy’s fly in the ointment

March 19, 2013

27 comments

A couple of years back, frustrated with Bell’s pricey Internet service, we switched to Teksavvy (See post Goodbye Bell, Hello Teksavvy). Teksavvy still offers significant savings over Bell but my initial enthusiasm has cooled considerably. I’ll explain why in this post.

Teksavvy’s 6Mbps, 75 GB per month DSL Internet service costs $29.99 per month. We find that sufficient for our moderate usage, which includes bandwidth intensive activities such as watching movies over Netflix. A similar package, albeit one at a slightly slower speed and much lower bandwidth, at Bell (5Mbps, 20 GB per month) costs $43.95 month. There are other minor differences between the two. Teksavvy requires customers to purchase their own modem while Bell rents it to subscribers. Also, it should be pointed out that Bell offers a discount for bundling with other services and might knock down the rate even more for some customers for a limited time.

At first glance, Teksavvy appears to offer a better Internet package at a significantly lower price but there is a catch. Teksavvy is essentially a reseller for Bell Canada, which owns and operates the telephone wires running to your home and charges a fee for doing so at a price set by the Canadian Radio-Television and Telecommunications Commission (CRTC). Therefore, when a Teksavvy customer orders a new service or a change to an existing service or reports a problem, the service order is often routed through to Bell Canada. Bell Canada, which offers its own suite of competing products, now has every incentive to be less responsive to the needs of a competitor’s customer compared to its own.

A case in point: last year, we moved to a new residence and called Rogers, Bell and Teksavvy to move our cable, phone and Internet services respectively. Rogers and Bell sent technicians to perform the move within 1 business day and followed up to check whether the service was up and running. Teksavvy said that it would move the Internet service one week later. And when the next week rolled around, Teksavvy could not complete the move saying that Bell claimed the phone service was still at the old address even though I had put in a move request to Teksavvy *after* moving the phone service and the move will be delayed one further week. We did get Internet service at the new residence the next week after a two week downtime and we have had no problems since. It turns out that my experience isn’t an isolated one. You can check out negative reports on Teksavvy on this forum but in fairness, it should be pointed out that positive reports far outweigh negative ones.

The bottom line: Teksavvy offers DSL Internet at a much cheaper price than Bell but you should be aware that if you run into problems, you may fall between the cracks because Teksavvy depends on Bell to fulfill its customers’ service orders.

Money Tip: Buy a home you can afford

November 15, 2012

6 comments

November has been designated as Financial Literacy Month (FLM) by the Financial Consumer Agency of Canada, a Federal Government body tasked with educating consumers about financial products and services. As part of FLM, Glenn Cooke of Life Insurance Canada organized a campaign by a dozen bloggers to publish their best financial tip. This post is my contribution towards this initiative.

We recently sold our home we lived in for close to a decade and moved to another one. Just for fun, I decided to crunch the numbers to see how profitable an “investment” housing was in the past decade. It turned out that owning a home was very profitable indeed due to falling interest rates and rising home prices — Ottawa home prices are up an average of 5.5 percent over the past decade according to Teranet-National Bank House Price Index. Add in the value derived from a home in the form of imputed rent and subtract expenses like property taxes, maintenance, mortgage interest, insurance etc. and housing turned in double digit returns. And in cities like Vancouver, home owners saw gains of 8.4 percent in price level increases alone.

But if you adjust your forward assumptions a little — stagnant or worse falling home prices and moderately increasing interest rates — it becomes clear that housing has the potential to quickly turn into a millstone around one’s financial neck. Assuming one has a mortgage balance of $300,000, even a 1 percent jump in interest rates say five years into the future will translate into an extra $2,500 in interest payments alone. And that may even be a conservative assumption. After all, interest rates were 5 percent or more, not so long ago. If interest rates go up by 2 percent instead of 1, you are looking at an extra $5,000 in interest payments.

I’m not arguing that one should not buy a home. Rather, one should buy a home only if all the costs of home ownership can be comfortably accommodated in the family budget. That may mean buying a home based on conservative assumptions, not the maximum mortgage a bank is qualifies one for. After all, a bank only cares about whether you’ll pay your debt back, not whether you have enough left in the budget for such things as retirement savings, kids’ education or even an occasional beach vacation.