Think twice about Scotia's moneyback account

Scotiabank is jumping on the cash-back rewards trend with a bank account that gives you a 1 per cent rebate for every purchase made on your debit card.  But is this a good deal for customers? 

Scotia says it is the only Canadian bank offering this sort of account which works like most unlimited chequing accounts, with a twist.  Instead of carrying a minimum balance to waive the monthly fee, account holders pay the fees but can earn cash back to hopefully offset them

The Moneyback Account is a hybrid between an unlimited chequing account and a cash back rewards credit card.  The challenge for the customer is that it’s not particularly effective at either one.  The math just doesn’t add up. 

The maximum amount you can earn with the Scotia Moneyback Account is capped at $300 a year, meaning you have to spend $30,000 a year ($2,500 a month) on your debit card to get the full rebate.   

But the account comes with a steep $14.95 monthly fee. Account customers need to spend at least $18,000 a year ($1,500 a month) on their debit cards  to break even on the fees.

Pre-authorized debits, like your recurring bill payments, don’t qualify to earn money back.  My spending on groceries and discretionary items barely exceeds the $1,500 a month that’s required to offset the fees. 

The Scotia Moneyback Account has the right idea by trying to capitalize on the popularity of rewards cards and integrating it into an unlimited debit card spending program.  Unfortunately, even the biggest spender will receive a measly 0.4 per cent return from this account after covering the fee.

Compare that to spending $30,000 a year with a basic rewards credit card like the PC Financial MasterCard, where you earn $300 worth of free groceries without paying any fees.  And at that level of spending with a cash-back credit card like the MBNA SmartCash MasterCard you could earn up to $445 a year with no annual fee.

This account is right for you if you spend more than $1,500 a month and insist on using a debit card for the majority of your purchases.  But you’re looking to beat the fees and earn money back on your every day spending then switch to a no-fee cash back rewards credit card. 

Also read:

How to cut your debit card fees

Why restaurants want you to pay by debit card

Robb Engen is half of the Boomer & Echo personal finance blogging team with his mother, a former financial advisor.