Take a Good Idea and Make It Yours

Tasha and I were talking yesterday about the Manulife One product. She’d seen the ads on TV and was wondering if it was too good to be true. It’s not. The Manulife One is an excellent example of how a financial institution can come up with a great idea… or at least steal it from Down Under.

I’ve blogged on the Manulife One before. The idea behind it is simple. If instead of using a chequing account and a mortgage, you deposit all your money into the Manulife One account, which also holds your mortgage and line of credit, then every day the money is in the account is a day you’re not paying interest on that part of your debt. In other words, it’s like making a prepayment against your mortgage. Then, when you need the money, you pull it out again. But for the time the money is applied against your debt, you save on interest. And since chequing accounts pay nothing, it’s a great way to put your money to work for as long as it’s in your hot little hands.

I told Tasha she could probably set up exactly the same system on her line of credit. Here’s how:

  • When she and her husband get paid, they’d transfer all the money to their line of credit to pay it down,
  • They would ask their bank to link their LOC to their chequing account so that when a cheque or debit had to clear, it would come off the line. If the bank couldn’t do that (gawd, some of them are so archaic with their dumb “systems,”) then she’d simply use the line to pay everything, transferring money into her chequing account to cover stuff as necessary.
  • Another way to do it would be to put everything they usually put through their bank account on a single credit card. I do this with my telephone bill, internet, satellite, and a host of other fixed expenses. Then they would use the line to pay off the credit card every month. It would save all that transferring action since everything could be paid from the line in one swoop. And since the card would be paid in full each month, there’d be no interest.

There ya go: A TashaOne Account… an account that let’s her use the money in hand to reduce her interest costs for as long as she has that money, while banking right where she is happiest.

Of course, you have to be incredibly disciplined to make this work. You can’t increase your line… you have to pay it down consistently. And you have to live on a strict budget so your spending doesn’t get out of hand and drive your line of credit balance through the stratosphere.

If you’re committed to putting every extra cent you have towards getting your line of credit paid off, and you’re living on a budget so your spending is totally within limits, then you too can create a (yournamehere)One Account and put your hard-earned money to work every single day it’s in your account!

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20 Responses to “Take a Good Idea and Make It Yours”

  1. This sounds like an excellent idea! However, I don’t think I could be disiplinined enough at this point! I am working really hard to pay off my LOC now and I just took access of the account off my bank card so I have to go into the bank to get money if I want any and that is really inconvenient! LOL! My plan is working the way it is for now…but perhaps I will be in a different place when my consumer debt is gone and all I have left is the mortgage! I can’t wait!!!!!!!!! 🙂

  2. Hmmm, I think I didn’t understand well… I thought that on Manulife One, your money would be applied to your MORTGAGE, then decreasing the interest you are paying on it. The TashaOne idea (hehehe), sounds like I would be applying my money to a LOC, not my mortgage.

    So, if I don’t have a LOC (or have zero balance), how could I do the same as Manufile One and apply my salary to my mortgage?

  3. avatar Gail Says... Says:
    November 20, 2008 at 10:31 am

    This strategy is specifically for use with a line of credit. If you want to do your mortgage, you have to go with the Manulife One.

  4. I’m with Agatha…My mortgage isn’t a LOC so the “One” strategy just doesn’t apply.

  5. i am definitely not disciplined to do that. most of our debt was incurred with good intentions (ie. put it on the card until pay day or put it on the card until we get home and transfer money).

    we have just started with a PC Mastercard and are using that to purchase items and pay them off the minute we get home (& i’ve actually put my husband in charge of that because i just can’t be trusted!) for the PC points.

  6. I like this idea and I think it would work well for those in Tasha’s shoes – of course it would require disipline but also good organizational skills to keep careful track of where the money is going on a daily basis so you know how much you really have to spend. It’s easy to think you’ve nearly paid off your LOC if you forget that you still need it to pay bills, etc. Right now we’re kind of doing this with our saving accounts and I’m not sure if it’s the right approach – we get interest while the money is in there, but of course, some of the money is designated for for certain needs, so we don’t have as much as it looks like when it first gets deposited.

  7. From my research (and I am not an expert so feel free to disagree) I found that for those of us with just a mortgage and no other debt the Manulife One account wasn’t a good idea. The interest rate is usually higher than a traditional mortgage. Having a traditional mortgage with a low interest rate and generous repayment terms was better.

  8. Dinah, great strategy about paying it off as soon as you get home. I like that approach.

  9. I totally agree it’s a great idea if you can make it work. I found that whenever I have debt I crunch down and pay it faster. If I have money in my account I become lax in my spending . In our household we usually transfer any credit card debt when we have it to my account, which makes it disappear faster. But since the mortgage is out of sight, it’s also out of mind.. If I had it on one account only, seeing the debt in there would definitely make me focus more.. hehe and I would have no fun ever.

    Hm. Maybe it’s not such a good idea.

  10. We do this with our “points” credit card. We charge everything to it, even groceries, BUT, this is the important part, it is paid in full every month without fail. This way we avoid bank charges as it is one transaction per month to pay the card and we earn points as well.
    We also track all charges on the card on a weekly basis to track the credit card balance. This system must be tracked in the same way that Gail tracks expenses in the jars, we track ours on an excel spreadsheet, it is not a free pass to use the card to spend with abandon!
    We also take it one step further and time major purchases to out statement date. Our statement date falls at the end of the month so whenever possible major purchases are made just after the statement date – allowing us to use the credit card company’s money for approximately 45 days before the payment is due.

  11. I had thought of using Manulife one but when I used their online calculator it basically told me that I wouldn’t be saving anything by combining everything and using their product… I think it’s true that you have to have a lot of debt to make this work?? I didn’t like it anyways… I’m sticking with paying off my mortgage faster… I recently changed the amortization from 25 to 15 paying it bi-weekly so I’ll be rid of it sooner!! YAY can’t wait!

  12. Thanks for this information, Gail. Before I paid off my mortgage using a HELOC I considered the Manulife One account and got in contact with one of their reps and whatnot. In the end I decided to stay with the FI I’ve been with for over 15 years and get the HELOC.

    I had not considered what you describe above for TashaOne but being that I use my MC to pay pretty much everything (cable bill, etc.), I am going to give this concept some thought.

  13. The manulife one has a service charge of $14 a month, I am not going to pay a bank to hold my mortgage. The RBC homeline is the best alternative as you can have a portion of your mortgage in a HELOC and the rates are better.

  14. I looked at the online calculator and it said I wouldn’t save anything. Plus I would be worried about the loss of convenience. How do you get your money if you need a bit of cash?

    And ditto on paying off credit cards. As I see it the problem isn’t using credit cards, it’s carrying a balance.

  15. How timely. We have an appt. Sat. a.m. with our financial advisor re: our RSP’s (last I heard we had lost over $6,000 so I’m hoping for better news). We have no mortgage, but, do have a line of credit. I will ask about this.
    Am grinning here. Saved $44.00 on buying a battery operated toothbrush as recommended by my dental hyg. last week. Thank you SAVERQUEEN! I got coupons from save.ca and the one I was told to buy was $29.99 on sale for $19.99. They took 2 coupons for $13.00 so it cost $6.99 plus tax. Where they were located there was one coupon left for 3 more brush heads for free – the usual cost being $21.00. I have turned all of this in to a game trying to best myself as I go along – it’s a win/win situation :o)

  16. Manulife One, as mentioned previously, has a higher interest rate and charges a monthly fee. Canadian Tire One-and-Only account has no fees – it’s a better deal if you’re going for this kind of mortgage. (Probably because they’re not spending advertising money like Manulife!)

    https://www.myctfs.com/Products/OneAccount/

    I typically carry a fairly high account balance… this type of account would be good for me (but I’m locked in where I am and should not have another term on my mortgage).

  17. Lots of banks have similar products, and have done for many years…CIBC, Scotia etc. All you’re doing is having one HUGE line of credit, using your house as the security. Because it’s secured, the interest rate isn’t as high as on a ‘regular’ line of credit. Most banks will happily talk to you about their version of the Manulife One. Also, often there are promotions where if you use some magic number of dollars for the first few months, all the set up/legal fees are waived! You just have to ask 🙂

  18. WOW! That is very clever and scary sounding.

  19. No real comment on this strategy as it applies to a non-secured personal line of credit, but a few words of experience with the secured kind.

    I have something similar to the Manulife One, only from a bank. No monthly charge, and the interest rate = floating @ bank prime. Right now, it’s a very sweet deal. If rates spike anytime soon, not so much.

    While I love having the flexibility to pay whatever I want as long as it’s more than the month’s interest, after a couple of months I stopped using it as intended.

    I find it much easier to make a single lump sum payment on the big loan every month.

    I manage the rest of my money elsewhere, parking whatever I don’t need right away in a high-interest savings account. I do earn less interest on my parked money than I’d save by parking it on the mortgage loan, but it takes superior discipline to avoid winding up with a mortgage loan that’s forever maxed out (which is ultimately what the bank wants).

    My discipline is good, but not that good. Parking non-mortgage funds elsewhere means I always know exactly where I stand. The extra cost? About $10-20/month due to the interest rate spread and taxability of savings interest.

    There’s a significant benefit to my strategy: having everything tied up in the home loan could turn into a real problem if something were to happen and I needed reserves to make that monthly interest payment on my home.

    So, the caveat for those who would use Manulife One, Canadian Tire, National Bank All-in-One, etc., as designed is not to put absolutely all of your cash flow in there. Keep a buffer outside just in case you need the means to cover your minimum between jobs etc.

    Of course, I might say different if I had high-interest consumer debt to worry about. In that case, I certainly would fold it into the mortgage loan — at 4%, it’s a no-brainer.

  20. Back from the financial adviser. My mind is reeling. Had to reinvest so checked out all the options. Can only hope I did the right thing. On paper, I’ve even lost more $$…..yikes!
    Will be calling Monday to hook our LOC and chequing acct. – sounds like we could save around $15.-$20. per month doing this. Better to be in our pocket. Don’t think this is for everyone though. Have to be very disciplined in not spending MORE. No problem for me.
    Also, we are each going to open the new acct. available Jan. 2nd that has just been announced (up to $5,000 each). And, although it is not the best way to save, I will continue for the short term automatic from my pay deposit into Cdn. savings bonds for $$ for a crib, etc. for here for our new expected first grandbaby.

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