TFSA drops to 1.60% from 1.90% | Canadian Tire | Discussion forum

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TFSA drops to 1.60% from 1.90%
April 7, 2014
7:36 am
Forum Posts: 1353
Member Since:
May 15, 2007
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I just noticed that Canadian Tire Financial dropped its regular TFSA rate to 1.60% from 1.90%. According to the chart, that's the 4th straight year of drops on about April 1.

April 7, 2014
1:26 pm
British Columbia, Canada
Forum Posts: 4077
Member Since:
December 12, 2009
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Thanks, Peter.

Friends, I'd steer clear of Canadian Tire Bank and Canadian Tire Financial Services for deposit services (i.e., GIC and savings account) & MasterCard services, respectively, this year. It's for the above-noted reason but also I have a strong hunch, at a minimum, Canadian Tire Bank will cease to operate as a going concern by the end of this year. Their deposit base is relatively small and was originally launched as a funding source for when they offered mortgages and HELOCs (which have since all been sold to National Bank of Canada a few years ago) and isn't able to grow at the rate they're issuing new credit cards hence why they primarily fund their credit card receivables through the securitization vehicle, Glacier Credit Card Trust, and pay semi-annual distributions to unitholders. Sure, the distributions they pay are higher than the interest earned on savings accounts, but it's a reliable and fast source of funding and, given credit cards can charge 19.99%-21.99% interest on an annualized basis, still allows them a healthy spread.

Canadian Tire has made no secret, even announcing the exploration of options last summer, that they're seeking a "partner" to acquire their MasterCard portfolio and deposit base through Canadian Tire Bank. I suspect we could see either TD, RBC or Scotiabank acquire Canadian Tire's financial services portfolio whereby Canadian Tire may retain some data analytics rights and perhaps customer servicing (i.e., the ability to accept in-store payments) and the "partner" acquiring the receivables, issuing & embossing cards, providing servicing via contact centres and the funding source. Given the relatively small deposit portfolio, the key asset here is the credit cards and, to a lesser extent, the creditor/identity theft insurance coverages. The deposit base is sort of a nice "cherry on top" and what you'll likely see, with any of the potential suitors, migrate the deposit customers to the "parent" bank, issuing new account numbers and/or online banking access in much the same way RBC did with ResMor Trust Company and Ally Credit Canada (collectively, "Ally Canada"). :)

In short, the bank-owned "virtual bank" deposit divisions will get a lot thinner. Stick with the "tried & tested" PC Financial, Tangerine Bank, Canadian Direct Financial or, when online banking launches, Oaken Financial. If you prefer the Manitoba-based credit unions, I'd stick with either Hubert Financial or, wait until "me to me transfers" launch, and go with Implicity Financial - or your local credit union (which still pays fairly decent rates, likely).


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