Thursday, July 24, 2008

Knowing your limits

I recently received a piece of unaddressed mail from a new BMO branch that just opened in our neighbourhood. The gist of the piece was a welcome bonus of $100 for new chequing customers who open an account at this branch, upon completion of their first payroll deposit or pre-authorized debit.

I looked into the accounts offered by BMO, and was strongly considering taking them up on the offer. My plan was to open the account, and set up our bi-monthly hydro bill as a pre-authorized debit. Then, after the next hydro bill gets processed in September, I would switch the debit back to my primary bank account. The deal requires the account to stay open for six months, so at the end of January I would close down the account. At the lowest level banking plan of $4/month, I would be out $24, for a net income of $76. Not bad for an hour's effort.

I started thinking hard about this, however, and realized that the whole idea of starting a new banking relationship (with a monthly fee) just for the purpose of gaming the company out of $76 feels like a bit of a stretch. This feels to me like the idea of running credit card arbitrage on a low-rate offer rather than a 0% offer: true, you come out ahead, but the margin is pretty slim, and with the possibility of something going wrong, not exactly a no-risk proposition.

I'm going to pass on this offer. I don't want or need a new chequing account, and that's really a showstopper for me. If I were in the market for a new account, this would probably sway me to BMO, but I'm not going to let this offer create the need for a new banking product.

This might very well be worthwhile for someone else, but it falls outside my own comfort zone, and doesn't seem worth the effort or the risk.

Where do you draw the line when it comes to bonus offers and arbitrage strategies?

1 comment:

heather said...

when RBC refused to give me the free EEE PC they were offering to people who switched to or opened a new chequing account (one they had switched me to themselves), the only way for me to get the free computer was to open a new chequing account and jump through a bunch of qualification hoops (direct deposit, pre-authorized payments, etc.

after doing the math, valuing my time and, really, not wanting to have TWO chequing accounts for however many months, i decided that $300 free wasn't worth the effort.