What is Manulife One?
A Manulife One account combines all your checking, savings and borrowing accounts into one big pot. Since financial institutions typically charge more in interest on loans than they pay on deposits, combining everything into one account should, at least in theory, help you save on interest costs.
What are the benefits of Manulife One?
If you have chequing, savings and loan accounts all over the place, chances are you will benefit from the mere act of consolidating all your accounts in one place. Any deposit to the account automatically reduces the balance owing on a loan, so you’ll benefit from lower interest payments. Since the Manulife One account is secured by your residence, you will also be able to borrow at a much lower rate than credit cards and personal lines of credit. A Manulife One account can be an excellent cash management tool for anyone with irregular income streams.
What are the drawbacks of Manulife One?
The chief disadvantage of a Manulife One account are extra costs that are imposed in two ways. First, the Manulife One account charges interest at what the bank calls a “Base Rate”. Unlike, traditional secured lines of credit, which charge interest based on the Prime Rate (Prime plus 0.5 percent, for example), the Base Rate is not always in sync with the Prime Rate. For example, when the Bank of Canada cuts interest rates, traditional banks, with rare exceptions, immediately cut their Prime Rate. Manulife, on the other hand, has in the past, been slow to reduce the “Base Rate” promptly. These delays impose extra interest costs to account holders.
The second cost Manulife One imposes is the monthly fee, which is currently set at $14 per month. That’s roughly the cost of the highest tier chequing accounts at traditional banks. But the premium bank chequing accounts often come with extra benefits like free money orders, annual fee waivers on premium credit cards, discounts on safe deposit box rentals etc. that Manulife One doesn’t currently offer. If you consolidate all your accounts at a traditional bank, you can get all the advantages of an all-in-one account plus the convenience of moving funds to and from your investment account.
Also, it is worth noting that you may not always get the best fixed rate at Manulife. As of this writing, the 1-year closed fixed rate at Manulife is 3.0 percent compared to 2.8 percent offered by many mortgage brokers but the 5-year closed fixed rate that Manulife offers is competitive with the best rates available. The moral is that you should shop around for your fixed rate mortgage.
What are my alternatives
National Bank Financial offers an identical product called All-in-One Banking that does not have a monthly fee on the main account and links the interest rate to Prime. The interest rate is currently Prime plus 1 percent but one understands that the rate is negotiable.
An even better alternative may simply be a consolidation at a traditional bank combined with a line of credit secured against the home. It offers all the advantages of a Manulife One account without the drawbacks albeit with some effort involved in moving around funds every once in a while.