GICs | Financial Crooks

The Bank of Canada has begun the long, slow process of raising interest rates. While banks are fairly quick to also increase the interest rates they charge customers on lines of credit and some types of mortgages, they are slower in raising the interest rates they pay you for depositing your cash with them. Still, I’ve seen the amount I get paid each month increasing on some accounts even though I haven’t increased the amount on deposit, so I decided to quickly check what interest rate I’m earning for my cash and GICs at BMO InvestorLine, CIBC Investor’s Edge, RBC Direct Investing, Tangerine, Simplii Financial and EQ Bank to see if I’m getting the best, highest interest rate I can.

Where Can I Get the Best Interest Rate for My Short-term Cash Savings At EQ Bank, Oaken Financial, Simplii Financial or Tangerine?

OK, the first thing I’m going to do is look at the base interest rates without any special promotional short-term interest bonus rates.

For a Savings account,

EQ Bank is paying 2.3 %
Oaken Financial is paying 1.5 %
Tangerine is paying 1.1 %
Simplii Financial is paying 1 %

These rates are as of January 24, 2018.

There are some wild cards to consider though:

some Tangerine customers have been offered 2.5 % (like me) till the end of May 31 2018
some new Tangerine customers can get a promotional rate for their first 6 months of 2.4 % or 1.9 %
all Simplii Financial customers can get a rate of 3 % until February 28 2018.

That’s why we have accounts at all 4 banks and move our money around to earn the highest interest.

For a Chequing account,
both Tangerine and Simplii Financial are still using a tiered system where different amounts of money earn different rates of interest. The highest rate, though, is still much less than their Savings account rate so try not to keep your extra cash in your chequing account.

For reference, on January 24, 2018

Tangerine’s rates for a chequing account are:

0-50 000 0.15 %
50-100 000 0.55 %
100 000+ 0.65 %

and Simplii Financial’s rates are:

0 – 1 000    0.05 %
1-5 000    0.10 %
5-25 000    0.15 %
25 000 +    0.50 %

EQ Bank and Oaken Financial don’t offer a chequing account.

Where Can I Get the Best Interest Rate for My GIC Savings At EQ Bank, Oaken Financial, Simplii Financial or Tangerine?

Be sure to stay below the CDIC limits on total $$ and on length of term (usually 5 years max) to protect your investment at any institution!

Right now on January 24, 2018, the clear rate winner is Oaken Financial.

1 year GIC ~~2.25 %~~ 2.5% as of Friday January 26
2 year GIC ~~2.6 %~~ 2.85% as of Friday January 26
5 year GIC 3.15 % 3.25% as of Friday January 26

Tangerine offers the next best rates.

1 year GIC 2 %
2 year GIC 2.15 %
5 year GIC 2.6 %

Simplii Financial has the lowest rates on offer.

1 year GIC 1.687 %
2 year GIC 1.293 %
5 year GIC 2.228 %

EQ Bank does not issue GICs.

What Interest Rate Can I Get for My Parked Cash In My Online Discount Brokerage Account at BMO InvestorLine, CIBC Investor’s Edge and RBC Direct Investing?

Our portfolios include a large chunk of cash and other fixed income investments because we are very conservative. I like to keep some of this cash in our RRSPs and TFSAs partly in case I see something worth buying in a hurry because our contributions are maxed out each year by the end of January.

I also earn dividends in the accounts which I’m not always keen to re-invest immediately.

So I keep the money in high interest savings account mutual funds or in GICs.

This week, on January 24 2018, the following interest rates were available

At all three brokerages, the Canadian dollar high interest savings account mutual funds (AAT770; ATL5000; and RBF2010 respectively) were paying 0.95 %.

At all three brokerages, the US dollar high interest savings account mutual funds (AAT780; ATL5001; and RBF2014 respectively) were paying 0.70 %

The GIC rates were close but not identical. These are the rates on January 24, 2018.

For a 1-year GIC

BMO InvestorLine had the best offer at 2.1 %.
CIBC Investor’s Edge and RBC Direct Investing were tied at 2.05 % (from HSBC Bank.)

For a 2-year GIC

RBC Direct Investing had the best offer at 2.36 % from Home Trust Company.
BMO InvestorLine and CIBC Investor’s Edge were tied at 2.35 % from Equitable Bank.

For a 5-year GIC

RBC Direct Investing had the best offer at 2.86 % from Home Trust Company.
BMO InvestorLine and CIBC Investor’s Edge were tied at 2.85 % from Equitable Bank.

So it looks like I should re-start my monthly GIC ladder inside our RRSP as the difference between the HISA rate and the GIC rate is starting to be important in total dollars earned.

Overall, our money is in the best places to earn the most interest–for now. In future, I’ll have to keep an eye on the rates to make sure we don’t need to move our funds.

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Why Does It Seem Investing in GICs Might Be Risky and Make Me Lose Money?

First, I’ll clarify that I’m not actually worried about losing any money—but other people seem to be.

I have part of our emergency fund money invested in 1-year-term GICs with Oaken Financial. Each month, 1/ 12 of that money is invested in a new 1-year GIC just after the previous year’s GIC matures. That means if interest rates ever start to go up, I should gradually be re-investing at a higher rate. We chose this procedure because we knew that if we needed our emergency funds to pay our bills, we would only need a steady stream of money each month, not one big lump sum of money.

Oaken Financial has been very good to work with. Their telephone support is courteous and prompt. They send me a letter confirming each GIC purchase and a free monthly statement for our high interest savings account. It’s quick and simple to buy my GICs online and to transfer money in and out of our savings account.

Are My GICs at Oaken Financial at Risk?

The problem isn’t directly with Oaken Financial. The problem is that the company that owns them is having some legal and financial difficulties. They may have loaned money in the form of mortgages to people who were not honest about the value of the properties, if I understand it correctly.

That means the company that owns them is at risk. Right now, many investors are selling their shares in the company. Some small investors with cash deposits with Oaken and Home Trust are also withdrawing their savings.

It’s kind of like that scene in the movie It’s a Wonderful Life where everyone tries to take their money out of the Savings and Loan business at the same time. The business could fail because of a lack of faith.

However, my GICs are Oaken Financial are not at risk. They are insured by the CDIC. I checked before I bought them. So if something happens to the company, my money will be re-paid by insurance. I’m sure that would not happen instantly and there would be paperwork but I’m also sure it would happen eventually.

Will I Keep Buying GICs from Oaken Financial?

Recently, to encourage people to keep their cash at Oaken, they have increased the rate they offer on GICs.

Since I was planning to re-invest our next maturing GIC in May in for a new one year term, I will be doing just that. It’s still CDIC insured. And I am hopeful they may weather this storm. If not, they will likely be purchased by another financial institution and life will go on. Either way, I have no concerns I will lose our money.

Should I Try to Get My Money Out of my GICs at Oaken Financial?

Only you can tell what is best for your finances. Discuss your options with a financial advisor. Talk to CDIC and Oaken about your concerns if you want. I can’t tell you what you could or should do.

Personally, I’m going for a nature walk.

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Tag Archives: GICs

With the Bank of Canada Increasing Rates Where Can I Keep My Cash to Get a High Interest Rate?