Recently, I’ve been “bombarded” with e-mails from Scotiabank offering me a ton of “advantages” if I open either an Ultimate Package or Preferred Package account.
The “advantages” are the following: waiver of annual fees on 1 eligible credit card, unlimited, free monthly transactions on the checking account, an additional 0.10% interest on their Momentum Plus Savings account (Ultimate Package only), no fee ATM withdrawals (Ultimate Package only), the ability to earn Scene points and an extra $ 300.00.
Wow…sounds like a dream offer. Well, not so fast.
The devil is in the fine prints
Before accepting their offer, I did some digging and analysis by reading the tiny fine prints at the bottom of the e-mail.
Here it goes:
- Not all Scotiabank credit cards are eligible for the fee waiver. That being said, the ones with the highest annual fees are. It’s probably the only positive point here.
- In order to have free, unlimited monthly transactions, the checking account needs to have a daily balance of $ 5 000.00 (Ultimate) or a combined balance of $ 30 000.00 between the checking and the savings account. For the Preferred package, you only need a daily balance of $ 4 000.00 to waive the monthly fee. If you don’t have the required balances, you will pay $ 30.95 (Ultimate) or $ 15.95 (Preferred) per month.
- The checking accounts don’t pay interests.
- The interest rate on their Momentum Plus Savings account is 1%, at the time of writing. If you don’t make any withdrawals, you can earn a top-up, up to 1%. So, at most, this account will pay 2%.
A reminder of how the banking system works
When you deposit money in a bank or other chartered financial institutions in Canada, these entities immediately loan your deposit amount.
The Bank of Canada doesn’t impose a minimum cash reserve requirement and Canadian banks keep very little cash on hand. Of course, if you wanted your money back, your bank would give you the full amount back.
If a Canadian financial institution were to default, all deposits are insured by CDIC, a.k.a the Federal Government, a.k.a. tax payers.
Other foreign central banks impose a minimum cash reserve, and in that case, deposits are usually not insured.
So, if you were to deposit $ 5 000.00 to waive the monthly fee on the Ultimate Package account, Scotia would lend that money….and pay you nothing for it, as this account doesn’t pay interest.
Now, Scotiabank doesn’t provide any free lunch. None of the various financial institutions ever do! If you applied for one of the many unsecured loans they offer, they would charge you interests on it, starting at 5%-6%.
Banks make money by charging interests and a myriad of other fees and by paying very little interests on savings.
Never leave a large sum in a checking account to waive the monthly fees
Find an institution that doesn’t charge you monthly fees in the first place! I brought-up that subject here.
Besides by doing so, you would also loose money to inflation.
What about the $ 300?
In order to earn that, you would need to open an account by tomorrow. Then to receive the $, you would need to set-up a direct deposit -paycheque- or pay bills from the account, in excess of $ 50.00 or have 2 recurring debits on the account.
This offer is expiring and being replaced by 10 000 scene points instead, if you do the exact same thing as above. It’s the equivalent of 8 movies at Cineplex, on regular admission. That’s a retail value of about $ 120.00…yikes! This offer is only at signing. It doesn’t carry over every year.
If I were to accept this offer today and sign-up for the Ultimate Package, it would still costs me $. Since I wouldn’t be leaving the required balance in the checking account, it would cost me $ 371.40 per year in fees.
Let’s assume I set-up a direct deposit and earn the $ 300.00. I am still over by $ 71.40. I have a Scotia Value credit card with an annual fee of $ 29.00. With that fee waived, I am still over by $ 42.40. Remember, the $ 300 is one- time thing only.
On the 2nd year, the account would cost me $ 342.40, if I kept it.
If I missed the deadline for the $ 300 and earned Scene points instead, I would be worse off.
And that, folks, is one ridiculous bank offer!