GIC monthly interest payout | Page 3 | 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
GIC monthly interest payout
November 13, 2023
6:28 am
hwyc
GTA
Member
Members
Forum Posts: 1240
Member Since:
September 30, 2017
sp_UserOfflineSmall Offline

1-year term 5.75% seen on TDDI today.

... $5k min for interest paid monthly
... $1k min for interest paid semi-annually

November 13, 2023
7:36 am
Norman1
Member
Members
Forum Posts: 7043
Member Since:
April 6, 2013
sp_UserOfflineSmall Offline

One will need to wait until tomorrow to order GIC's. Today is a holiday for the bond and GIC markets. This is the notice from Scotia iTRADE:

The Bond Markets will be closed on Monday, November 13, 2023

Please be advised the Bond Markets will be closed on Monday, November 13, 2023, in observance of Remembrance Day.

Trades will not be settled on this day. GIC order entry will also be closed. Banking Services will not be available including cheque requests and EFT withdrawals.

The Canadian & US equity markets are open regular business hours.

Should you have any questions, the Scotia iTRADE Customer Service team will be available during regular business hours. ScotiaMcLeod clients should contact their Advisor.

November 17, 2023
3:48 pm
hwyc
GTA
Member
Members
Forum Posts: 1240
Member Since:
September 30, 2017
sp_UserOfflineSmall Offline

Didn't last. Fallback to 5.65% … when I buy today sf-frown

November 23, 2023
5:38 am
hwyc
GTA
Member
Members
Forum Posts: 1240
Member Since:
September 30, 2017
sp_UserOfflineSmall Offline

TD 1-yr term offer on TDDI dropped to 5.55% today. I believe a peak is now in the rearview.

November 28, 2023
5:01 am
ertye23
Member
Banned
Forum Posts: 3
Member Since:
November 28, 2023
sp_UserOfflineSmall Offline

Sandy999 said
I can only find Oaken Financial and Motive Financial that have a GIC which will payout a monthly interest to a savings account. Does anyone know of any others that will do this? Oaken drops the rate if you want interest paid monthly. Motive you must be over 57 to get this but they keep the same rate.  

I'm interested in that question too

November 28, 2023
7:48 am
althisa
Member
Members
Forum Posts: 107
Member Since:
September 5, 2023
sp_UserOfflineSmall Offline

Most major FIs offer GIcs with monthly payouts.
The rates and options for ScotiaBank can be found here:
https://www.scotiabank.com/ca/en/personal/rates-prices/gic-rates.html

Screen-Shot-2023-11-28-at-10.42.41-AM.png

Note that the GICs with monthly payouts rates are always LOWER than GICs with annual and even semi annual payouts. If the flexiblity of monthly payouts is desired/required then there is a reduction in earned interest.
I am sure there is a background calculation by the FI ensuring the monthly payouts (reinvested at the same rate) dont cumulatively earn significantly more than the annual payout GICs.

These are my learnings from researching monthly payout GICs. There is never any free lunch, you want the flexibility of the monthly payout, you give up some potential interest earned.

November 28, 2023
8:44 am
Norman1
Member
Members
Forum Posts: 7043
Member Since:
April 6, 2013
sp_UserOfflineSmall Offline

That's expected.

The person who is withdrawing the accrued interest each month has less invested during most of the term of the GIC than another person who is withdrawing the accrued interest annually.

If the bank didn't adjust the monthly pay GIC rate downward, then the person taking the interest monthly would end up with a higher return on funds invested (principal + accrued interest) than the one taking interest annually.

November 28, 2023
9:56 am
AltaRed
BC Interior
Member
Members
Forum Posts: 3082
Member Since:
October 27, 2013
sp_UserOfflineSmall Offline

hwyc said
TD 1-yr term offer on TDDI dropped to 5.55% today. I believe a peak is now in the rearview.  

Between reduced demand for loans and the likely rollover of the bond yield curve, that is probably a view worth betting on.

We won't know for sure pending another month or so of CPI data and/or the central bank continuing (or not) to hold on short term rates, but my guess is also that interest rates have peaked.

November 28, 2023
10:26 am
Case1030
Member
Members
Forum Posts: 61
Member Since:
October 13, 2023
sp_UserOfflineSmall Offline

althisa said

Note that the GICs with monthly payouts rates are always LOWER than GICs with annual and even semi annual payouts.  

Not always lower, TDDI shows three, 5 year GICs that all have the same interest rate (5.05%) for monthly, semi-annual, annual and compounding.

Screenshot-1.png

November 28, 2023
12:31 pm
althisa
Member
Members
Forum Posts: 107
Member Since:
September 5, 2023
sp_UserOfflineSmall Offline

Case1030 said

althisa said

Note that the GICs with monthly payouts rates are always LOWER than GICs with annual and even semi annual payouts.  

Not always lower, TDDI shows three, 5 year GICs that all have the same interest rate (5.05%) for monthly, semi-annual, annual and compounding.
 

I stand corrected, GICs with monthly payouts rates are ALMOST always LOWER than GICs with annual and even semi annual payouts

Things you learn by being on this forum sf-laugh

I do need to sign up for a TDDI account if equal interest rates regardless of payout frequency is a regular practice, and not some quirk of a once in a blue moon inverted yield curve.

November 29, 2023
5:00 am
RetirEd
Member
Members
Forum Posts: 1122
Member Since:
November 18, 2017
sp_UserOfflineSmall Offline

Norman1: I've also had deposits paying monthly at the same rate as annual payout or annual compounding. They let one keep very close to insurance limits without going over them.

The flaw is in your calculation assumption:

The person who is withdrawing the accrued interest each month has less invested during most of the term of the GIC than another person who is withdrawing the accrued interest annually.

If the bank didn't adjust the monthly pay GIC rate downward, then the person taking the interest monthly would end up with a higher return on funds invested (principal + accrued interest) than the one taking interest annually.

Since the monthly interest is calculated anew each month, the periodic principal is correct! It's simply the compounding that is lost if the interest doesn't stay in the deposit, so no lower rate is needed.

RetirEd

November 29, 2023
8:06 pm
Norman1
Member
Members
Forum Posts: 7043
Member Since:
April 6, 2013
sp_UserOfflineSmall Offline

That's not correct because (1) the rate used to calculate the payouts is not necessarily the internal rate of return on the money invested and (2) the money invested at any point in time is not just the original principal.

This cashflow requires a 6% per annum, compounded quarterly, internal return on to achieve:

5-Jan -$10,000
5-Apr +$150
5-Jul +$150
5-Oct +$150
5-Jan +$10,150

However, this cashflow requires a 5.8695% per annum, compounded quarterly, internal return to achieve:

5-Jan -$10,000
5-Apr +$0
5-Jul +$0
5-Oct +$0
5-Jan +$10,600

So, one has receive a higher rate of return if one draws out the gains earlier and still ends up with the same total gains as someone else who left the gains in until the end.

No permission to create posts

Please write your comments in the forum.