Thanks but no thanks, BMO.

I received this gem in the mail today from BMO, aren’t I lucky?

Sounds good, BMO! There’s nothing I’d love more!

I think the best part of the letter is that they’re going to give me $10K for planned and unplanned expenses and they’re encouraging me to deal with these in a way that suits [my] lifestyle and makes smart financial sense.

Hold the phone. Taking on a $10,000 line of credit is a useful alternative to an emergency fund of cash savings? Uh, no. See almost everything Gail Vaz-Oxlade has ever written. It’s an easy way out. It’s also an easy way to get into more debt while coping with a family emergency or job loss. After such a traumatic event, do you want to be worrying about paying your minimum LOC payment? No.

Combine that with the fact that consumer debt in Canada hit an all time high this quarter (since TransUnion started tracking the info in 2004), AND that a CIBC poll revealed that an alarming 45% of Canadians have no emergency savings, and you have a recipe for disaster.

There was a time in my life that I was seeking a line of credit to borrow from (& repay the week after, when I got paid), and I was denied by BMO (for a lower LOC limit) because I didn’t have enough assets to borrow against. Now they’re throwing it at me without the slightest knowledge of ANY of my assets. Seriously, they know nothing!

So, if you have an emergency fund set up with just $100 in it for unexpected expenses, you are already miles ahead of 45% of the Canadian population. Doesn’t that feel good?!


Filed under Personal Finance

19 responses to “Thanks but no thanks, BMO.

  1. “So, if you have an emergency fund set up with just $100 in it for unexpected expenses, you are already miles ahead of 45% of the Canadian population. Doesn’t that feel good?!”

    Oh Canada, you make me cringe lol

    I get offers like that a lot too and it’s depressing. I’m glad that I can say no to them. I can imagine most people would think “sweet! free $10K!”

  2. Personally I do have my line of credit as part of my emergency plan. Each year I ask for a lower rate though. It’s at the point that I would make much more from a good investment than what I’d be paying in any interest charges. I just wouldn’t leave any balance on my line of credit for any length of time. If I did have to resort to that I would probably end up moving it to a credit card balance transfer at 0% instead.

    • That’s fair. If the rate is low and you would be paying it off right away, I could see it. I could also see having it as part of a last resort emergency plan as Andrea mentioned in another comment. I just couldn’t see it being my only option, and now that my emergency fund is almost fully funded, it won’t be necessary for me to have.

  3. I also have a line of credit, but now that I’ve paid it off I’m at a bit of a loss with what to do with it. I hope that I’ll never have to use it again, but I’m also not quite ready to close it yet. I’m honestly probably looking at it as a safety net until I’ve built my savings up to a comfortable level. Sad but true.

    It does feel good to have a savings account set up for emergency purposes, but like Bridget I’m cringing a little bit. There was another article a little while ago about how the majority of people couldn’t handle an unexpected $2000 bill without being in trouble. I was proud when I passed that savings point, but the $100 one is a little scary to be honest with you. :s

    • That’s completely fair – you’re taking action to build your savings up, and I think that’s the important part!

      Every little bit helps when building up your EF. I have two more paycheques until mine is done, but I’m not going to cancel the automatic transfers for it. It goes into my TFSA so I’ll just keep contributing my 5K a year since now I can live without that $200/cheque.

  4. I think most ppl like the idea of having one, and it feels awesome to not need it, but I imagine that some people don’t have an idea of when to not use it and will get in trouble again.

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  6. I totally agree with you! That’s why I told my bank I didn’t need a line of credit and probably won’t ever get one. I can’t really see why I would need one.

    • Me neither. I just hate the fact that their marketing angle is you get yourself out of a sticky situation using an LOC (which I guess is better than using a higher interest credit card, but still).

  7. Cait

    While I agree that it’s not good to use an LoC as an E-Fund, and that banks do unfortunately market them as such, it’s also good to have available credit that is just that… available! I’d love if my bank offered me an LoC right now *because* it would hardly get used. Weird? Maybe.

  8. I don’t use my LOC as an e-fund, I do like having it with room available though just for peace of mind… even though I have my emergency fund now AND I know that borrowing your way out of a sticky situation just makes it worse. Not sure why, I would never sign up for one for the reasons you mention though. Its a last resort above and beyond my actual emergency fund.

    And I’m sad to see so many canadians have so little saved, where is it all going?

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  10. Pingback: Thanks but no thanks, BMO – Part Deux. | afistfulodollars

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