CIBC - 5 yr @ 3.25% | Page 2 | GIC discussions | Discussion forum

Please consider registering
guest

sp_LogInOut Log In sp_Registration Register

Register | Lost password?
Advanced Search

— Forum Scope —




— Match —





— Forum Options —





Minimum search word length is 3 characters - maximum search word length is 84 characters

No permission to create posts
sp_Feed Topic RSS sp_TopicIcon
CIBC - 5 yr @ 3.25%
January 6, 2022
3:00 am
2of3aintbad
Member
Members
Forum Posts: 314
Member Since:
February 24, 2015
sp_UserOfflineSmall Offline

GR said
According to the "terms and conditions", it seems that monthly interest on these GICs is payable at the same rate as annual interest for clients aged 60 & older.
So, 3.25% payable monthly for 5 years for 60+.  

3.25% monthly is certainly more attractive. Without calculating exactly, I note that BMOIL's best monthly rate is 2.35%. The associated rate for the 2 institutions there that offer 2.35% is 2.44% annually, so someone would need to offer maybe 3.35% annually to match.

January 6, 2022
7:28 am
phrank
Member
Members
Forum Posts: 89
Member Since:
January 3, 2009
sp_UserOfflineSmall Offline

Loonie said
However, if CIBC can do this, others can probably do better in weeks to come.

It's only Jan 5. I will wait and see what else turns up. The other Big Banks haven't even spoken yet.

  

Exactly my thoughts. The last time I saw a competitive rate advertised openly from any bank was decades ago. I can't see this being the best rate for long.

January 6, 2022
7:31 am
Loonie
Member
Members
Forum Posts: 7659
Member Since:
October 21, 2013
sp_UserOfflineSmall Offline

I have recently decided to switch to annual payout in new GICs as long as there is no interest penalty for doing so.

My main reasons are bookkeeping and insurance coverage.
I just find it a lot easier to keep track when I'm basically only dealing with the principal. If I put in 50K for five years, it will still be 50K in 3 or 4 years. It remains a nice round number.
Similarly, if insurance is limited to 100K, I will probably put in that round number in total and not worry too much about the accumulating interest for one year - even better if it is only accumulating for one month!

Probably the major reason people choose annual payout is simply because they want and may need the annual income. This is true for many retirees.

Trying to predict future rates is unreliable. Few of us would have anticipated, a year ago, that we'd be looking at 3.25 by now.

It's true you have to pay tax whether you've received the interest yet or not in non-registered, but if all your GICs are on the same payout system and they are laddered, that doesn't matter much as you will be receiving approx one fifth of your total interest annually anyway..

Of course, if one runs into an exceptionally attractive rate, an exception can always be made to take maximum advantage by compounding. I still have the 4% GIC that was offered by one of the Ontario credit unions a few years ago, and am glad it is still compounding. I only wish I'd bought more!

January 6, 2022
8:07 am
canadian.100
Member
Members
Forum Posts: 481
Member Since:
September 7, 2018
sp_UserOfflineSmall Offline

Loonie said
Of course, if one runs into an exceptionally attractive rate, an exception can always be made to take maximum advantage by compounding. I still have the 4% GIC that was offered by one of the Ontario credit unions a few years ago, and am glad it is still compounding. I only wish I'd bought more!  

Yes - I will certainly buy GICs when they hit 4% or more. I have had Preferred Shares (both Perpetual and Rate Reset) which I bought over 10 years ago paying 4.75% to 5.75% quarterly. While I am happy now after keeping them to this point - and not selling when they dropped, I am very glad I did not buy more the way the Resets in particular bounced up and down when interest rates collapsed a few years ago. Patience is a virtue when investing. Looking for 4% GICs to indulge in.

January 6, 2022
9:49 am
Alexandra
British Columbia
Member
Members
Forum Posts: 253
Member Since:
September 24, 2019
sp_UserOfflineSmall Offline

I will be turning 75 later this year. Like Loonie, I am pretty well going for annual payments instead of compounding interest for the easier bookkeeping. (I did start a little earlier than him though). I am in very good health but anything can happen from now on and when it does, my daughter and heir, who does not live in the same city, will have a much easier time sorting all the financial stuff out. I don't want to do the monthly payments as I have A LOT of GIC's and don't desire to have to keep track several times each month to ensure that all those small payments were made. Some banks such as Oaken will transfer the interest right to my main CIBC account. But others will only put the funds into the savings account with them. So it means you have to check the funds went through correctly to that account then do a transfer to your main bank so that all those relatively small amounts end up being a large enough one to re-invest in say another GIC.

January 7, 2022
5:36 am
Jim Sherat
Member
Members
Forum Posts: 87
Member Since:
January 1, 2018
sp_UserOfflineSmall Offline

I need some help to better understand the concern raised by Herman and others regards using this promo to park some of one's TFSA money ???

I get the timing issue (early Jan), and CIBC's low, or near zero reg. interest rates one would face in 2027; but taking $50K TFSA money for example ... even with simple interest, 3.25% yields $8,125 (and even more with compounding which I would always do within a TFSA)

Doesn't the $100 transfer fee become little more than a 'rounding error' compared to the overall interest earned ? thanks

January 7, 2022
5:40 am
Jim Sherat
Member
Members
Forum Posts: 87
Member Since:
January 1, 2018
sp_UserOfflineSmall Offline

btw, I'm asking this because I'm seriously considering opening account and TFSAs for my wife and I today at CIBC.
I'm halfway through the Year-end Move, having pulled significant funds out of our Meridian TFSAs in December, but haven't decided where to go with the re Investment yet, or our $6K 2022 contributions. This CIBC offer is looking pretty tasty.

January 7, 2022
6:23 am
savemoresaveoften
Member
Members
Forum Posts: 868
Member Since:
March 30, 2017
sp_UserOfflineSmall Offline

Jim Sherat said
btw, I'm asking this because I'm seriously considering opening account and TFSAs for my wife and I today at CIBC.
I'm halfway through the Year-end Move, having pulled significant funds out of our Meridian TFSAs in December, but haven't decided where to go with the re Investment yet, or our $6K 2022 contributions. This CIBC offer is looking pretty tasty.  

For me, I dont do the Dec maneuver so the cost of "closing/transferring" is irrelevant. Also if someone is investing at least $50k plus into a fixed income like this one, the deciding factor is the term and rate and not the "cost of doing biz" in my mind. I just put my 2022 contribution plus a bit of cash into this, 5y compounding. To me thats the "fixed income" portion of my TFSA and thats fine with me (the bulk of it is in equities). Could I wait a little longer and higher rate may pop up ? Sure but for like $10k only, not really going to waste my time on it. There are bigger fish to fry 🙂

January 7, 2022
8:20 am
toto
Member
Members
Forum Posts: 269
Member Since:
August 17, 2010
sp_UserOfflineSmall Offline

I called BMO to ask if they would matchthe 3.25 rate on 100,000 , but best they would give me is 5 year rateriser with an average 2.75 rate.

January 7, 2022
8:39 am
Bill
Member
Members
Forum Posts: 2733
Member Since:
September 11, 2013
sp_UserOfflineSmall Offline

I agree, a small fee, doing the maneuver on Nov 30 thereby losing a month's worth of TFSA sheltering, etc, shouldn't be the driving factor in most cases. Also, if your TFSA gic money matures early in the year you're not stuck with a horrible rate for the rest of that year, can always withdraw it (no fees, or leave a buck in it) and stick it in a regular HISA, etc until recontributing the next year. Or you can transfer it and pay the fee. TFSA's are very accessible and flexible, aside from during gic term no need to be stuck with a rate you don't like, you just have to keep an accurate record of your ins/outs.

January 7, 2022
10:31 am
Loonie
Member
Members
Forum Posts: 7659
Member Since:
October 21, 2013
sp_UserOfflineSmall Offline

Hi Jim,
We haven't heard from you for a while!

I think that for a 50K deposit, the transfer fee is not a huge issue. The answer really is proportionate to the size of the deposit. I definitely wouldn't do it for 6K.

In Jan 2027, you should be able to do a direct transfer to another good deal and not worry about the rest of that year. Leaving it at CIBC in savings for that long would seriously undercut the benefit of this GIC. If you can't find a GIC you like in Jan 2027, I would probably transfer it to an FI that doesn't charge a transfer-out fee, but you can cross that bridge when you come to it.

January 7, 2022
10:59 am
gicjunkie
Ontario
Member
Members
Forum Posts: 528
Member Since:
November 7, 2014
sp_UserOfflineSmall Offline

phrank said

Exactly my thoughts. The last time I saw a competitive rate advertised openly from any bank was decades ago. I can't see this being the best rate for long.  

FYI : I spoke to reps at TDCT and Scotiabank. They say that right now, they will not match the CIBC rate for 5 years @ 3.25%. TD offered me 2.00% for 5 years. Scotia was 1.95%. Having said that, anything can change.

January 7, 2022
11:32 am
Norman1
Member
Members
Forum Posts: 4497
Member Since:
April 6, 2013
sp_UserOfflineSmall Offline

CIBC has made their market leading 3¼% 5 year GIC available through Scotia iTRADE. $5,000 minimum and $5 million maximum:
CIBC3.25a.png

January 7, 2022
11:37 am
HermanH
Member
Members
Forum Posts: 296
Member Since:
April 14, 2021
sp_UserOfflineSmall Offline

Jim Sherat said
I need some help to better understand the concern raised by Herman and others regards using this promo to park some of one's TFSA money ???

I get the timing issue (early Jan), and CIBC's low, or near zero reg. interest rates one would face in 2027; but taking $50K TFSA money for example ... even with simple interest, 3.25% yields $8,125 (and even more with compounding which I would always do within a TFSA)

Doesn't the $100 transfer fee become little more than a 'rounding error' compared to the overall interest earned ? thanks  

Let's use your figures for the example and assume that you put in 50K for 5 years, maturing in early Jan 2027.

CIBC was offering garbage TFSA rates like 0.25%. When your 50K matures, it will earn approximately $125 for the rest of 2027, assuming that CIBC returns to garbage rates and you just leave it in the TFSA Savings account with no other promotion available. On or before Dec 31, 2027, you can move it out for no transfer fee.

If you decide to transfer the 50K+8,125 earned interest to another account that earns 1.5% (using today's available rates), it would earn about $872 for 2027. The $100-150 transfer fee would leave you about $722.

The size of your overall TFSA transfer makes the $100 penalty seem smaller and I agree with Loonie that it makes not much sense for a 6K TFSA. $100/872 is still 11% of the interest you might earn in that year.

January 7, 2022
12:40 pm
Loonie
Member
Members
Forum Posts: 7659
Member Since:
October 21, 2013
sp_UserOfflineSmall Offline

I would not withdraw the money at the end of five years. I would transfer it to another FI TFSA.

Using today's rates, the highest non-promo rate available in savings is 1.25%. If you take that outside of the TFSA and pay tax on it at marginal 30%, the rate becomes 0.875%. As you would basically be leaving it there for a year, this decreases your average rate over the six years significantly.

Assuming simple interest for the sake of argument (because my poor brain would find it too complicated otherwise):

Simple interest at 3.25 on 50K for five years = $8125.
Cash out and deposit $58.125 in non-registered savings account paying 0.875% gives you after-tax interest of $509.
Add $509 + $8,125 = $8,634 after-tax income over six years.
This averages out to $1.439 annual interest.
$1,439 is 2.87% of 50K, and that would be the effective annual rate over six years.
2.87% is lower than the current five year rate offered by Huber and Tandia credit unions at 3%. Hubert has no transfer-out fee, and I think Tandia's is only $50.
Conclusion: You need to be prepared to transfer your maturing CIBC GIC fairly quickly to another GIC; or you should just get it at Hubert for 3% instead;; or you should wait a few weeks now in the hopes of a better deal.

It may look a little different with compounding, but I think the trend is clear at least. I just find it too difficult to figure out the average rate with compounding.

January 7, 2022
4:04 pm
Norman1
Member
Members
Forum Posts: 4497
Member Since:
April 6, 2013
sp_UserOfflineSmall Offline

The average rate with compounding is the geometric, instead of arithmetic, mean of five years at 3¼% and one year at 0.7 x 0.875% = 0.6125%:

6(1 + 0.0325)5 * (1+0.006125) - 1 = 0.02806 = 2.806% per annum

January 7, 2022
6:31 pm
Loonie
Member
Members
Forum Posts: 7659
Member Since:
October 21, 2013
sp_UserOfflineSmall Offline

thanks, Norman.
So, it's actually worse, with compounding, if you withdraw after five years and put in savings account non-reg'd.
2.80 would be nothing to write home about.

January 7, 2022
8:54 pm
Norman1
Member
Members
Forum Posts: 4497
Member Since:
April 6, 2013
sp_UserOfflineSmall Offline

It will depend on what is available when the CIBC GIC matures in five years.

It looks better if those Hubert one-year quarterly term deposits were still 2% then. That would mean five years at 3¼% and one year at 0.7 x 2% = 1.4%:

6(1 + 0.0325)5 * (1+0.014) - 1 = 0.0294 = 2.94% per annum

January 7, 2022
9:14 pm
Loonie
Member
Members
Forum Posts: 7659
Member Since:
October 21, 2013
sp_UserOfflineSmall Offline

Yes; I see.
Still, something less than 3% doesn't create the same buzz as 3.25%.

The best outcome would probably be to roll it into another five year GIC somewhere.

I think this offer illustrates the issue with locking into a TFSA GIC at the beginning of any year. These silly rules that don't allow you to take it out and redeposit in the same calendar year are a nuisance and a hazard.

January 7, 2022
10:08 pm
HermanH
Member
Members
Forum Posts: 296
Member Since:
April 14, 2021
sp_UserOfflineSmall Offline

Loonie said
I think this offer illustrates the issue with locking into a TFSA GIC at the beginning of any year. These silly rules that don't allow you to take it out and redeposit in the same calendar year are a nuisance and a hazard.  

Institutions like CIBC, which charge a penalty TFSA transfer fee, are just hurting themselves with their penny-pinching small-mindedness. Anyone who thinks it through, the way it has been done on this thread, are more likely to just forego the loss of an entire year than put up with their silliness; all because they want to play games over a few days. sf-yell

No permission to create posts

Please write your comments in the forum.