Why I use a portfolio line of credit for household cash flow

My wife and I use a joint Wealthsimple chequing account for household payments. I schedule daycare e-Transfers and bills from it, keep the chequing balance lean, and invest the surplus.

The part that makes this setup less stressful for me is my portfolio line of credit. My TFSA investments secure it, and I've enabled it to cover eligible shortfalls in our joint account.

In my opinion, these pieces make financial sense together. I can keep less money parked in chequing while having a backstop for payment timing.

That backstop is borrowing against investments. Interest costs money, available credit can fall, and the investments securing the loan can be sold if collateral becomes insufficient.

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Wealthsimple's enabled overdraft protection can automatically borrow to cover eligible payments, including recurring e-Transfers and bill payments, when available credit is sufficient. There is no extra overdraft-use fee; borrowed money accrues interest.

In my TD setup, avoiding a $30-plus monthly account fee means keeping $6,000 in chequing. I prefer having more choice about where that money goes.

For comparison, TD's current All-Inclusive Banking Plan charges $30.95 a month, with a rebate when the account holds at least $6,000 at the end of every day that month.

Wealthsimple chequing has no monthly account fee or minimum balance requirement. You can get that benefit without opening a portfolio line of credit.

If the TD fee is already waived, the actual account-fee saving is $0. The benefit is releasing cash from the waiver condition, subject to whatever bank benefits you would give up. Any investment return on that cash is uncertain.

At a constant 4.45% annual rate, $1,000 borrowed for seven days is about $0.85 in simple interest. The same calculation for $6,000 over a full 365-day year is $267.

The $267 example does not establish that borrowing is always cheaper. A fee waiver and a secured loan do different jobs. Keeping the money in chequing can mean paying neither the account fee nor borrowing interest. A no-monthly-fee account with an appropriate cash buffer is another option.

Market declines or changes to collateral requirements can reduce the credit available. A shortfall can bring restrictions and a request to repay or add collateral; Wealthsimple can sell collateral investments if the shortfall is unresolved or markets move quickly. A payment can still fail if there isn't enough available credit.

That makes the cash buffer, repayment plan, and amount of credit used important. This is my experience with household cash flow, rather than a recommendation to borrow to invest or to replace emergency savings with a credit line.

For me, the combination makes life less stressful: scheduled payments, a joint account, and a credit backstop whose costs and risks I still need to manage.