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EQ Bank savings accounts, TFSA, and RRSP rates dropping to 1.25%
April 15, 2021
10:40 am
Norman1
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pooreva said

These days it is a gamble...
You could lock your money on 1.5% for 3 months with EQ but during these 3 months Hubert could lower their GIC rates so you miss 1.3%

The uncertainty is always there. That why one shouldn't go all into one-year GIC's or all into five-year GIC's. Instead, one ladders from one year to five years to get a blend of the best and the worst.

April 15, 2021
11:21 am
dougjp
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Norman1 said

pooreva said

These days it is a gamble...
You could lock your money on 1.5% for 3 months with EQ but during these 3 months Hubert could lower their GIC rates so you miss 1.3%

The uncertainty is always there. That why one shouldn't go all into one-year GIC's or all into five-year GIC's. Instead, one ladders from one year to five years to get a blend of the best and the worst.  

Its also good, with TFSA's, to consider using 3/6/9 month options to 'time shift' funds closer to the end of the year. Timely info right now with EQ's options.

People often put money into TFSA GICs at the beginning of the year. Inevitably it seems, these banks go in and out of being competitive in the marketplace. In that case, a GIC coming due before the latter months of any year leaves one stuck with that bank earning less than elsewhere. The only options during that year are withdrawal and transfer elsewhere, the interest then being taxable until the next year when it can get back into a TFSA, or transfer the plan to another FI, but then there may be fees greater than the interest rate/tax differential.

April 15, 2021
2:19 pm
vayerrox
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hwyc said
Based on the goodwill in the email, 2.3% rate can still go as far as *August 24, 2021*

(1) Leaving the deposit in 2.3% TFSA until May 26th.
(2) On May 26th, lock in for the 3-month GIC at 2.3%  

Hi - not sure but wouldn't you have to lock in the GIC on May 25th?

April 15, 2021
3:12 pm
Vatox
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vayerrox said

Hi - not sure but wouldn't you have to lock in the GIC on May 25th?  

Yep, that was determined earlier in the thread. Open GIC before May 26.

April 15, 2021
3:46 pm
Dean
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Norman1 said

The uncertainty is always there. That why one shouldn't go all into one-year GIC's or all into five-year GIC's. Instead, one ladders from one year to five years to get a blend of the best and the worst.  

That's pretty much what I do.

With interest rates being so Low these days, any new GIC's I invest in are for 2 years, or less now.

E.g. My most recent GIC investment was with Oaken for 18 months @ 1.60%.

    Dean

sf-cool " Live Long And Prosper " sf-cool

April 15, 2021
3:56 pm
Adam1
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I have a TFSA GIC with EQ maturing early in May. Are both the 2.3% TFSA savings account and 2.3% 3-month TFSA GIC effective until May 26?

So I could let the matured GIC sit in TFSA savings and then buy the 3 month TFSA GIC on May 25 to maximize interest.

Adam

April 15, 2021
6:34 pm
HermanH
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Adam1 said
I have a TFSA GIC with EQ maturing early in May. Are both the 2.3% TFSA savings account and 2.3% 3-month TFSA GIC effective until May 26?

So I could let the matured GIC sit in TFSA savings and then buy the 3 month TFSA GIC on May 25 to maximize interest.  

I am in the same situation and going to do the same; let it sit in TFSA savings until May 25 and then buy a 3-month GIC. EQ might change the rates in the mean time, but I think it not very likely to happen.

April 15, 2021
6:38 pm
HermanH
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dougjp said The only options during that year are withdrawal and transfer elsewhere, the interest then being taxable until the next year when it can get back into a TFSA, or transfer the plan to another FI, but then there may be fees greater than the interest rate/tax differential.  

I think that if you are charged a penalty for transfer, that fee can be re-added to your total contribution next year.

I had one TFSA transfer and the receiving CU agreed to re-imburse me for the $100 penalty charged by CIBC. They did it as an adjustment to my interest and I received the $100 right away. This meant that I did not have an additional $100 room to add the next year.

April 16, 2021
2:12 pm
meghan88
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Not sure if anyone can answer this but here goes:

I believe EQ has a 200K per-account limit. So conceivably, if 200K has been gathering interest in an account, then a GIC is purchased with those funds, then the GIC+interest cannot be redeposited into the same account, since the 200K limit will have already been exceeded.

Guessing that only EQ can explain where the excess funds would be held once the GIC matures ...

April 16, 2021
2:21 pm
HermanH
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I spoke with an EQ rep and he told me of a way to put in a total of $700K.

I think it went something like this:
1) drop 200K into the Sav Acct
2) buy GICs with it
3) drop another 300K into a joint Sav acct (I forget, but this might also be used to purchase GICs and not require a Joint Sav acct.)
4) drop a final 200K into a Sav acct

When the GICs matures, they won't throw you out if the interest puts you over the max limits. I think they just prevent you from putting in additional funds.

April 16, 2021
2:33 pm
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HermanH said
I spoke with an EQ rep and he told me of a way to put in a total of $700K.

I think it went something like this:
1) drop 200K into the Sav Acct
2) buy GICs with it
3) drop another 300K into a joint Sav acct (I forget, but this might also be used to purchase GICs and not require a Joint Sav acct.)
4) drop a final 200K into a Sav acct

When the GICs matures, they won't throw you out if the interest puts you over the max limits. I think they just prevent you from putting in additional funds.  

And just how much of your 700,000$ will be covered by CDIC coverage ??

April 16, 2021
2:54 pm
meghan88
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CDIC covers up to 100K per account. So, 100K for savings and 100K for joint. What are the odds that EQ will fail?

April 16, 2021
3:22 pm
Bill
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CDIC coverage is $100K per account holder name(s). So HermanH would have $100K covered, plus another $100K via the joint account holders. So $500K would be uninsured, though another $100K could be covered by the other joint holder if it's kept in her/his own account, assuming she/he also has one at EQ.

April 16, 2021
4:35 pm
HermanH
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Bill said
CDIC coverage is $100K per account holder name(s). So HermanH would have $100K covered, plus another $100K via the joint account holders. So $500K would be uninsured, though another $100K could be covered by the other joint holder if it's kept in her/his own account, assuming she/he also has one at EQ.  

You are right. A max of $300 would be covered, if there were 2 account holders and one joint account. (All savings and GIC holdings are considered the same type of account.) So, 100K for me (and all my SAV+GIC holdings as one type), 100K for my partner, and 100K for the joint held by both. (Joint accounts are considered a different account 'type'.)

Watching how everyone on HISA seems almost 'rabid' about maintaining total CDIC coverage at all times, are most members really concerned about banks going bankrupt and triggering CDIC coverage?

I can understand some of the newer / smaller ones like Canadian Tire, Neo Financial, or Wealth One being a bit riskier, but EQ, Tang, and Simplii seem as solid as their parents (close in-laws). Are folks really worried about bank failures?

April 16, 2021
5:33 pm
topgun
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I was buying GIC's in the 1990's at trust companies that were insured by CDIC. I had money in two different trust companies that failed. I got my money back. I would not put more than the insured limits in some of these newer FI's. Each individual is UNIQUE.

Have a Great Day

April 16, 2021
9:33 pm
Loonie
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HermanH said

You are right. A max of $300 would be covered, if there were 2 account holders and one joint account. (All savings and GIC holdings are considered the same type of account.) So, 100K for me (and all my SAV+GIC holdings as one type), 100K for my partner, and 100K for the joint held by both. (Joint accounts are considered a different account 'type'.)

Watching how everyone on HISA seems almost 'rabid' about maintaining total CDIC coverage at all times, are most members really concerned about banks going bankrupt and triggering CDIC coverage?

I can understand some of the newer / smaller ones like Canadian Tire, Neo Financial, or Wealth One being a bit riskier, but EQ, Tang, and Simplii seem as solid as their parents (close in-laws). Are folks really worried about bank failures?  

Definitely a serious concern.
A few years ago, out of the blue, Oaken (Home Capital Group) ran into major financial difficulty and many people were worried they were going to lose their shirts because they were in over CDIC limits.

These things often happen when nobody expects them. If you're a financial genius and can safely predict what is or is not going to happen, then you don't need our advice and you probably don't invest in GICs anyway.

There are enough financial institutions out there that you can have all your money insured, especially if you use credit unions.

The Canadian Big Banks are probably safER than the smaller FIs, but that's not much use when their rates are pitiful. Don't count on Scotia to bail out Tangerine.

The risk, really, is in assuming things will be OK without really knowing much about the state of the FI, the industry, and of international banking and politics, being ignorant of economic history. Most people aren't really up on these things.
If you are going to put more money than is insured into an FI then you need to study the FI just as carefully as you would if you were buying its stock, which includes full consideration of all the threats and risks that it faces. If you can't speak intelligently about the risks, threats, balance sheets, efficiency, and history for at least ten minutes, then I don't think you are ready to consider exceeding limits.

Of the ones you have mentioned, only Simplii is covered by a Big Bank - CIBC. If you MUST over-invest, I would pick that one. Even so, I would keep an eye on it, lest CIBC decides to spin it off.
EQ is not supported by a large bank. Do you even know what it is invested in? I would never go more than 1000 over CDIC at EQ, and that only because of interest accumulated that I'd not moved out yet.

April 16, 2021
11:28 pm
RetirEd
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On the issue of re-depositing TFSA transfer fees the next year: There have been discussions elsewhere, and I have talked to both CRA and some FIs about it. While some FIs have been sloppy in the past, it appears that now:

1. The transfer fees must be taken out of the TFSA, not other money

and

2. CRA won't let you re-deposit over your existing limit next year.

Anyone else have recent experience in this? Or remember where our other discussions of the matter were?
RetirEd

April 17, 2021
6:43 am
Bill
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GICs are locked in, but you can play it supersafe by withdrawing your HISA money at the first hint of anything in the media (e.g. Home group situation). I'm pretty sure you won't wake up one day to find your small bank has failed, if you keep your eyes on it in the media there will be a whiff in the air first. I never exceed CDIC limits but only because I'm not in a position to need every last dollar of interest income, otherwise I might.

April 17, 2021
6:58 am
topgun
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Dean said

That's pretty much what I do.

With interest rates being so Low these days, any new GIC's I invest in are for 2 years, or less now.

E.g. My most recent GIC investment was with Oaken for 18 months @ 1.60%.

    Dean

  

If you buy 1-5 year GIC's the same time each year the average term is 3 years. As the year progress the average term declines to 2 years. Working well for me.

Have a Great Day

April 17, 2021
8:05 am
Norman1
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RetirEd said
On the issue of re-depositing TFSA transfer fees the next year: There have been discussions elsewhere, …

A previous discussion is TFSA Transfer Charges.

If the transfer fee is paid directly by the TFSA, then there is no TFSA withdrawal to increase one's TFSA contribution room the following next year.

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