Instead of offering a good interest rate year round, many banks now offer short-term higher interest rates to try to win new customers. Tangerine and PC Financial often do this. For example, on September 1, 2014, Tangerine started offering an annual rate of 3% on new savings deposits made between September 1 and September 15. [UPDATE: On September 16 they extended the deadline to September 30.] The catch is the higher rate only lasts until November 30. And it only applies to new deposits, not to money you already had in your accounts which continues to earn only 1.3%. These kinds of offers have led some people to start transferring their cash savings between Tangerine or PC Financial depending on which bank currently has the highest promotional interest rate: are you one of them?

3% for a Daily Interest Savings Account Sounds Great! Is it?

If you could get 3% for a full year on a no-fee, no minimum balance, daily interest savings account it would be pretty sweet. Many savings accounts are offering 1% or less a year. So at first glance, the Tangerine promotion seems great.

The reality, though, is the rate is not being offered for a year, only for 92 days. And if you didn’t deposit your money September 1, it’s fewer than 92 days.

Say you deposited $1000 on September 1. It would earn about $7.50 if you kept it there until November 1. That’s good, but it’s not epic.

And remember, you already were earning some interest on that money. For example, say you had the $1000 originally in a BMO High Interest Smart Saver Account. According to the posted rate today, September 2, of 1.05% per year, you would have earned about $2.63 if you kept it there until November 1.

So the Tangerine promo is only offering you about an additional $4.88 in interest for hosting your savings for three months. That’s good, of course, but again not amazing.

Why Do People Transfer Cash Savings Back and Forth from Tangerine to PC Financial?

In general, these promotional high interest rates are only offered on “new” savings. When they are announced, they state that they are calculated based on how much you have in all of your savings accounts at the bank as of some DATE already PASSED. You don’t know what that date will be until they make the announcement.

They only pay the higher rate on any money in your savings which is above the amount you already had on that date.

For example, in the new promo, Tangerine picked a past date of August 31 2014. (The full rules for this promotion were at https://www.tangerine.ca/en/landing-page/backtoschool/termsandconditions.html.)

So if you had $2500 in your Tangerine savings account on August 31, you will only earn the 3% rate if you have $2501 or more in your account, and even then you will only earn it on the amount exceeding $2500. (For example, if you have $2501, you will earn 3% only on $1! The other $2500 continues to earn the regular 1.3% interest.)

The trick is that often PC Financial will come out with a competing offer a few days after Tangerine. (and vice versa)

If you have a savings account at each bank, you can literally move the money to take advantage of the newest promotional rate.

For example, say on August 31 you had $2500 in your Tangerine savings account and $10 in your PC Financial savings account. Now, if things follow the usual pattern, in a few days, PC Financial will offer a special savings account rate. You can then transfer your $2500 from Tangerine to PC Financial to start earning the new rate.

Yesterday, September 1, if you had a way to spy on PC Financial transfers, I’m sure you would have seen many requests go in electronically to move savings money to Tangerine.

Because transfers are free at both Tangerine and PC Financial and because neither bank requires a minimum balance in their savings accounts, this technique works.

When Might It be Worth All This Savings Account Transferring?

The actual interest earnings are not huge even with these higher promotional interest rates. If you only have a few hundred dollars in savings, they are not very interesting.

But if you have a large amount in cash savings, perhaps because you plan to buy a house in the next few months, or you have a major trip or renovation or tuition bill coming up soon, these rates can be more attractive.

For example, say you have $50 000 in cash which you need in 6 months but not now. Most short-term GICs are offering under 2% and you can’t get your money as simply as you can withdraw it from a cash bank account.

If you could put $50 000 in at 3% annually for a 3 month period, you could earn $375.

That would buy 2 new bicycles and helmets for your children. (Can you tell what we had to do recently?)

More Info on this New Tangerine 3% Promotion

Tangerine is also offering some incentives on new deposits to its TFSA, RRIF and RRSP cash savings accounts. You’d want to read the details of the promotion carefully to see if you would actually be eligible for this temporary higher rate.

What If I Don’t Have an Account with Tangerine? Can I Get This Rate?

Yes.

Just open a new account with Tangerine and write a cheque to deposit your savings.

If it’s like most promotions at Tangerine, they will start paying you interest from the day they receive your cheque.

Remember, though, that the bonus rate only applies to funds deposited between September 1 and September 15, 2014 [UPDATE: now September 30], and it only lasts until November 30. So you’d have to move pretty fast to make any money.

What Am I Doing?

As you may know, we have savings accounts at both Tangerine and PC Financial. Right now, ironically, most of our money is at Tangerine. So we’ll be hoping for a matching promotion from PC Financial. But since we don’t have $50 000 just sitting around, we won’t be devastated if PCF ignores this latest round in the rate wars.

UPDATE: The matching promo has launched!

Our TFSAs and RRSPs are already maxed out, so there’s no way to take advantage of the higher rates there, either.

Related Reading

• PC Financial Offers 3.1% Short-Term Rate to Lure Customers from Tangerine
• How to Link a Tangerine Account to a PC Financial Bank Account
• How to Confirm the Link and Transfer Money Between Your Tangerine Account and Another Bank
  

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What about you? Do you have some cash savings that you intend to shift around to take advantage of this short-term promotional rate? Please share your ideas with a comment.