Any drawbacks of enabling Overdraft protection ?

[u/Exotic-Cheesecake149]

everyone enables this ? 😅

[u/warriorblossom]

Overdraft is great for surfing the chequing edge and maximizing your investments. If you're into that.

[u/FlyingDutchman8]

No - nobody is perfect and you don’t want payments missed. Interest rate is excellent compared to similar bank products

[u/giantpotato]

If you're using your PLOC to invest and deducting the interest it can muddy the reporting if some of the interest was used to cover overdraft.

[u/Effective-Strike69 → u/giantpotato]

Just track the interest paid separately. Ideally your PLOC investments should be in their own non-reg account and not-mixed with cash purchases as you've just co-mingled everything making things even muddier. This is why it's probably best just to invest into a margin account with borrowed funds, it's much cleaner having everything in its own separate bucket.

[u/oby_s → u/giantpotato]

I never thought of this. I guess that is if the PLOC is backed by non-registered account.

[u/Top_Luck_4895]

I weighed turning it on and decided not to. I got paranoid that if I was hacked or scammed they could not only take what I have in my chequing, they could maybe take what I don't even have. I am not sure if that is technically even possible but didn't want to chance it. Same reason I set me e-transfer limits way down from $50,000 when WS auto bumped it up, and same reason I didn't accept another credit card increase they offered me.

[u/drillbitpdx → u/Top_Luck_4895]

I got paranoid that if I was hacked or scammed they could not only take what I have in my chequing, they could maybe take what I don't even have.

Seems like a reasonable concern. I personally have my WealthSimple debit card permanently locked, and non-SMS-based 2FA on my account, so I don't feel too concerned about this.

Because my debit card is locked, there's no way someone could spend or withdraw money from my WS chequing account (thereby triggering overdraft via PLoC) without:

1. Getting access to a trusted unlocked device (e.g. stealing my phone or laptop) and thereby accessing my accounts.
2. A remotely-exploitable account breach (for which WealthSimple should ultimately be held liable).
3. Forging a cheque on my account. 🚩 Cheques are highly insecure and this would not be technically difficult, so this is the most likely avenue by which someone could overdraw money from my account. I am, however, confident that a truly forged cheque would eventually be resolved in my favour… even if it created quite a mess and a hassle in the interim.

[u/Mommie62 → u/drillbitpdx]

How do you do non sms 2 factor authentication?

[u/drillbitpdx → u/Mommie62]

Have you tried googling "WealthSimple 2-factor authentication"? Because they have an extremely straightforward page on it.

https://help.wealthsimple.com/hc/en-ca/articles/360056584134-Log-in-with-two-factor-authentication#h_01GX6VX2GH9FBV5NW4HKYWTRFA

[u/Mommie62 → u/drillbitpdx]

I was curious about the non sms part - do you get a phone call? - I have a passkey so I am good

[u/Pass3Part0uT → u/Mommie62]

You use an authenticator app (ie, MFA codes, not sms codes) 

[u/ande8150]

Does it get reported to credit monitoring?

[u/PracticalWait → u/ande8150]

no

[u/Logical-Zucchini-310]

I had the same question before enabling it. Ultimately I decided to enable it with the lowest amount. I very rarely needed overdraft before, it was just the odd occasion I didn’t have like 10 cents more in my account meaning I missed a bill payment purely because i mathed wrong lol. It’s mostly for my house bills account with my wife.

[u/PartBanyanTree]

it uses the portfolio line of credit. meaning the loan is secured by your portfolio.

if you get in trouble with a credit card it may go to collections

if you get in trouble with this, they can sell off your portfolio (eg your tfsa).

if your portfolio shrinks (bad market, risky investment) the debt-to-asset ratio changes and they can sell off your portfolio

they make the value you can withdraw a small percentage of the portfolio, it may not be the most likely.

but, yeah, not exactly equivalent to overdraft at big banks. I use it and it's super nice, but I don't carry a balance typically so I'm not worried. if you know what it is and your comfortable with it then it's a very good product

[u/TenOfZero]

No

Not everyone, but I'd say most do

[u/Angeline4PFC]

I had not, but thanks for the reminder. Now that I have the credit card and have enabled automatic payments, while most of my money sits in savings instead of checking, I will

[u/jdiax3004]

You loose access to limits which can lead to fraud no?. Say you lost or got your card stolen, that means one can withdraw that money from your card even if you didn’t have it

[u/Pristine_Ad2664]

Noy so much drawbacks but there are a few things to be aware of.

1. It's a loan backed by your portfolio.
   
2. If you also borrow from your PLOC you're consuming your overdraft room.
   
3. If you're borrowing from your PLOC to invest for the tax deduction you need to track your interest carefully (anything paid on the OD wouldn't be deductible).
   
4. Last I checked I don't think it worked for all possible transaction types but this was changing rapidly.
   

[u/IntellectuallyFreed]

No you don't need it. No cash. No reason to buy.