Reader Question on Manulife One Account
The following question is from Tony, the blogger behind Pharma Daddy:
I’ve been looking into the Manulife ONE concept over the last little while and it really intrigues me as we are very responsible spenders and savers and think that we could certainly accelerate paying off our loans with this sort of account. What do you know and/or think of this type of account?
A Manulife One account combines all your checking and borrowing accounts into one big pot (you may want to check out Million Dollar Journey’s post on this topic) and the theory is that by applying your income immediately against your outstanding debt, you could save more in interest costs than you’ll make in interest earnings. You may also want to check out the Canadian Tire One-and-Only account, which offers features similar to the Manulife One account without charging a monthly fee.
The major drawback of these all-in-one accounts is that the mortgage is typically at prime whereas even with the current credit crunch, you can get a 0.5% discount to prime with a conventional variable-rate mortgage. Given that a mortgage is the biggest debt carried by most people, it is hard to see a combined account overcoming the lower interest on a conventional mortgage.
Still, a combined account offers one advantage that I discussed in an earlier post: the mortgage is open and you can pay it off in full or part at anytime. However, conventional mortgages also come with pre-payment privileges, so I’m not sure how big an advantage that is.
Please note that this is my opinion only and it’s possible that a combined account fits your financial situation perfectly. As always, do your own due diligence.