Paying bills from a savings account | EQ Bank | Discussion forum

From recent questionnaire EQ bank sent to some of its clients, including me, it is clear they plan to introduce debit card.
That would be quite nice addition to their "Savings Plus" account.

I also wondered why would other banks keep separate checking and savings accounts.

So, looked at mine and this is what I see: for different reasons I keep almost $1,000 combined in checking accounts I have with different banks.
Some of that money is to be able to pay with debit card at a small store I frequent that doesn't like credit cards ("we will charge $2 fee for every credit card transaction under $10"), some for cases when I would like to withdraw $20-$40 cash on a whim, some for direct debit, and so on.

I could have trimmed that amount to perhaps $100 with added inconvenience of remembering which checking accounts to top-up every time I leave my house, and when direct debit transactions hit my accounts, but I don't want that inconvenience.

So, how much a bank makes by keeping separate checking and savings? A simple math: the difference between interest on both, multiplied by how much money is kept on average in checking account, multiplied by number of bank clients.
My guess would be: enough for a large bank to have a convincing argument for not consolidating checking and savings accounts.

The separate chequing and savings accounts is an old banking trick. I wrote about it a while back.

It is an effective trick for the banks. Equitable Bank CEO Andrew Moor shared, in his January 2016 Bloomberg interview, that about 70% of Canadians don't like to manage the money between their chequing and savings accounts. They end up leaving the money in their chequing account.

I find the responsibility of transferring funds from savings to chequing in order to meet obligations such as bill payments to be a huge nuisance and inconvenience. It's something I prefer to live without. And, as Peter says, when this is the system you use, you run the risk of forgetting something.

Thus, I make a generous estimate near the end of each month as to what my chequing account will require the following month, then I make one monthly deposit to chequing and forget about it. All bill payments are on pre-authorized debit (or, where permitted, credit card), including credit card bill payments. The chequing account is a no-fee account, but there is loss of interest, which is equivalent to a fee. For me, it's worth the loss of interest to have the convenience and to know that I'm covered - given the choices. This is also the account through which we make cash withdrawals and spouse makes the occasional debit payment, so I only have to keep track of one "active" chequing account.

If I wanted to be more frugal, I could do as Peter suggests, moving only the amount required to meet a particular bill into chequing immediately before paying it, and doing this for every bill. But I'm not. This is the way I've always done it and I'm not likely to change now that I'm in my 70s. If I did, I'd probably make a mistake and regret it! At this age, I have a great fondness for systems I can't mess up!

HOWEVER, it would be better if this could all be accommodated through the savings account. They should pay interest on all funds equally. These are deposit accounts, after all, not GICs.

I figure it's my choice to take the convenient route which is a bit more expensive. I'd rather do that, given the choices, because I don't like having to worry about it - or paying NSF fees!

One variation would be for us to ensure that sufficient income sources were deposited to the chequing account monthly by pre-authorized deposit, enough to cover living expenses. We are moving towards this, and will probably do it in due course as it's the best answer for failing memories, unexpected illness, hospitalizations and periods of travel. Then there should be nothing to do except make arrangements to cover extraordinary expenses and perhaps withdraw any accumulated excess once a year or so. It can also help to have a healthy overdraft protection.

I think we have a long way to go before there is a truly Senior-friendly account, but the needed innovations are unlikely to happen.

Loonie said
I find the responsibility of transferring funds from savings to chequing in order to meet obligations such as bill payments to be a huge nuisance and inconvenience. It's something I prefer to live without. And, as Peter says, when this is the system you use, you run the risk of forgetting something.

Thus, I make a generous estimate near the end of each month as to what my chequing account will require the following month, then I make one monthly deposit to chequing and forget about it. All bill payments are on pre-authorized debit, including credit cards. The chequing account is a no-fee account, but there is loss of interest, which is equivalent to a fee. For me, it's worth the loss of interest to have the convenience and to know that I'm covered - given the choices. This is also the account through which we make cash withdrawals and spouse makes the occasional debit payment, so I only have to keep track of one "active" chequing account.

If I wanted to be more frugal, I could do as Peter suggests, moving only the amount required to meet a particular bill into chequing immediately before paying it, and doing this for every bill. But I'm not. This is the way I've always done it and I'm not likely to change now that I'm in my 70s. If I did, I'd probably make a mistake and regret it! At this age, I have a great fondness for systems I can't mess up!

HOWEVER, it would be better if this could all be accommodated through the savings account. They should pay interest on all funds equally. These are deposit accounts, after all, not GICs.

I figure it's my choice to take the convenient route which is a bit more expensive. I'd rather do that, given the choices, because I don't like having to worry about it - or paying NSF fees!

One variation would be for us to ensure that sufficient income sources were deposited to the chequing account monthly by pre-authorized deposit, enough to cover living expenses. We are moving towards this, and will probably do it in due course as it's the best answer for failing memories, unexpected illness, hospitalizations and periods of travel. Then there should be nothing to do except make arrangements to cover extraordinary expenses and perhaps withdraw any accumulated excess once a year or so. It can also help to have a healthy overdraft protection.

I think we have a long way to go before there is a truly Senior-friendly account, but the needed innovations are unlikely to happen.  

Chequing accounts at Alterna can be set up with a "coverdraft" which backs up your chequing account from your savings account. It's free, but you have to phone Alterna to set it up.

Chequing accounts at Motus and Meridian can be set up with minimum and maximum amounts and each night there is a sweep to move money in or out of chequings or savings account to achieve this range in your chequing account.

Note by admin: Alterna Bank has clarified that their "coverdraft" feature is completely automated by the system

@Briguy, I didn't mention Alterna Bank's coverdraft feature because that's not really a technological feature. It's actually just something every other FI offers called "advance posting" whereby the FI will pay an exception item where no overdraft is in place, or the withdrawal exceeds the authorized limit, except that they normally charge a $5.00 per instance fee. It's nice of Alterna Bank to provide this for free (i.e., without charge), but it's still just a manual posting that they have to do to transfer funds from a savings account. As well, I hadn't really thought about it.

I could actually see Alterna Bank eliminating this feature as they grow and instead implementing a more automated "sweep" feature like Motus Bank/Meridian Credit Union and Motive Financial have (I think you said Motive Financial has such a feature?). As they grow, their advance posting reports will become burdensome to making these manual transfers so they'll probably have to institute a fee. That said, they're very cognizant of being customer centric, which is why I see them working on an automatic "sweep"-type feature that those mentioned and Manulife Bank have.

Cheers,
Doug

I wasn't aware of the overdraft alternative with Alterna. Thanks, Briguy. Might use that, especially since Alterna is where I currently "store" extra cash that is to be transferred to the chequing account in question at BigBank. Even so, I don't think I would want to rely on this all the time; I would feel I was abusing the system.
Motusbank is also a reasonable choice for conventional payments because their chequing account offers .50%

I haven't read this entire thread, but I just wanted to share, I've never owned a Chequing account. I've only done my banking with savings account my entire life.

To be honest, I still don't understand the point behind Chequing accounts and their purpose. Most will say, well savings is for saving for a rainy day, and Chequing is for day to day banking (ie. paying bills, mortgage, etc.) except that I've done that always and only through my savings accounts; as I mentioned, I've NEVER owned a Chequing account and don't see the purpose.

I think people just believe that you need a Chequing account for day to day banking because that's the way it is...nope.

moneyhelp said
I haven't read this entire thread, but I just wanted to share, I've never owned a Chequing account. I've only done my banking with savings account my entire life.

To be honest, I still don't understand the point behind Chequing accounts and their purpose. Most will say, well savings is for saving for a rainy day, and Chequing is for day to day banking (ie. paying bills, mortgage, etc.) except that I've done that always and only through my savings accounts; as I mentioned, I've NEVER owned a Chequing account and don't see the purpose.

I think people just believe that you need a Chequing account for day to day banking because that's the way it is...nope.  

It's only recently that savings accounts have become available with unlimited bill pay, preauthorized debit, interac transfers, external transfers etc. Before that you needed a chequing account to get all those features, even if you didn't need to actually send a cheque. I'd still rather give physical cheques to a landlord or any company rather than allow money to be taken out of my account automatically, assuming they won't automatically bill my credit card or allow me to pay online at my bank each month. Once you issue a preauthorized debit it's impossible to have the bank take it away. @Doug can confirm this. The best Scotiabank would do for me when an alarm company continued taking monthly fees out of my account was to offer me a " stop payment " that I would have had to pay for every 6 months indefinitely. Luckily the alarm company ( Grand Alarms ) stopped taking the money out after a few months. The only reason I allowed that preauthorized debit was that it was done through the builder.

I find the Scotia policy as outlined alarming. I've never run into anything like that but have never had an account at Scotia other than an RSP and LIRA once upon a time. I hope you were misinformed. It doesn't make any sense. Once you have stopped it, it should be stopped, and there should be no need to stop it again in six months. If necessary, I would appeal to the bank's ombudsperson.
You d should be able to "un"-authorized automatic payments just as easily as you set them up.

the only time I had a problem with this was when an insurance company continued to take payments from our bank account after the policy had expired. This was remedied as soon as I noticed, and the insurance company refunded the extra premiums. You do have to keep an eye on them though. The insurance company (RBC, I think) would have gone on deducting the premium indefintiely even though they knew better.