Sometimes you have cash sitting around in your investment account. You may be waiting for a market pullback. You may be waiting for fixed income rates to improve before locking in for a longer term. You may need to make a withdrawal from your RRIF or your TFSA soon and need to keep the money handy in cash. Till recently, that meant getting no interest at BMO InvestorLine, or getting a very low interest rate if you could risk locking the money in for 30 days in a cashable GIC with a minimum $10,000 investment. Or, if you had $25,000 or more, you could have purchased units of a high interest savings account fund such as ATL5000. Now, in April 2013, BMO InvestorLine is offering a new choice in daily high interest savings accounts with a somewhat better minimum.
A Vote of Thanks to a Reader for Highlighting this New Option
I’d just like to publicly thank John who pointed out this new option is available. It is much appreciated both by me and I’m sure by other readers!
Investing in BMO AAT High Interest Savings Account Funds
The new offering is two funds:
- AAT770 the BMO AAT CAD High Interest Savings Account
- AAT780 the BMO AAT USD High Interest Savings Account
Each fund has a value of 1.00 dollars per unit. AAT770 is Canadian dollars. AAT780 is US dollars.
What is the “High” Interest Offered on These Funds?
“High” in these days of record low interest rates is a bit of a stretch. The rates offered as of April 11, 2013 are:
- AAT770, 1.27% on Canadian dollar investments
- AAT780, 0.25% on US dollar investments
UPDATE: As of November 2013, AAT770 is only paying 1.25% and AAT780 is only paying 0.20%. Grrrr!
What is the Minimum Investment Required to Buy Units in AAT770 or AAT780?
For both funds, the minimum initial purchase is $5,000. Subsequent purchases can be $500 or more.
While I haven’t tested it yet, I expect to find that you must keep a minimum balance of $5,000 per fund. With the old $25,000 minimum funds like ATL5000, if you tried to sell a few units and drop below a holding of $25,000 it would refuse the transaction, telling you to either sell all or none.
I will test this minimum in the future, but first I have to buy some!
[UPDATE: As of April 2013 when I tried a partial sell that would take my balance below $5000 the system would not let me enter the order. It said I had to keep a balance of $5000 or sell all.]
I have tested whether the system will let you purchase less than $5000. It won’t.
NOTE: Although a $5,000 minimum is much better than the previous $25,000 minimum required by InvestorLine, it’s still quite high. You can invest in ATL5000 with a $1000 minimum at CIBC.
Is There an Early Redemption Fee for AAT770 or AAT780?
As with ATL5000 there should not be an early redemption fee. I will also be testing this in future.
[Update: As of April, 2013 I redeemed all units in my RRSP account. There was no fee deducted from my account either for the buy or the sell. I redeemed fewer than 7 days after purchasing.]
However, with any daily interest product the interest is calculated daily but paid monthly. So if you redeem all of your units before the interest is paid for that month, you will forfeit that interest. This is similar to withdrawing all of your money and closing a daily interest bank account. (I hope to test the options Cash and Reinvest, however. Perhaps you can still get your interest paid out to your cash account even if you sell all of your units before month end. I will report on that if and when I get a test done.)
[Update: To my amazement, when I did a test redemption in April 2013, they actually paid out the interest accrued during the very short time (less than 1 month) that the money was invested. Apparently I've been wrong about this and I apologize to BMO InvestorLine for my misguided thinking.]
Is There a Commission or Fee to Buy AAT770 or AAT780?
There does not appear to be any fee or commission to purchase these units. The fund is described as “No Load” on the purchase order screen. I will be testing this, too.
[Update: I did a purchase and sale within a few days of each other and was not charged any fees in April 2013.]
I’m off to test the product with a buy and, after it settles, a sell. I also want to make a buy and hold it to see how the interest gets paid.
PLEASE share your experiences with high interest savings accounts at InvestorLine or other online brokerages. One reader already brought this new option to light through a comment. Your thoughts may be equally useful to other investors.