April 6, 2013
Yes,I know that. But, as I said, all is known at the beginning of the deal. They have places they can put that one-year marginal amount and do well with it, and so on. … If they don't get my money at all, they won't make a cent, which is a bigger loss for them than paying equally for both unless, of course, they simply don't want my money. …
That's not always the case that the financial institution can use those small one-, two-, three-, and four-year amounts profitably. It really depends on their GIC pool and what they do with that money.
If the RRIF GIC's are just 10% of their GIC's, then the financial institution may not need to care that much about the rate and duration of what amounts to 16% of 10% or 1.6% of their pool.
If the RRIF GIC's are 60%, then it becomes 9.6% of their pool. If they are doing just mortgages, that is a significant amount of mismatch.
For financial institutions, our money is just inventory. If they cannot obtain it at a price and duration they can make a profit on, then they rather not have the money than lose money on it.
In the past, I've shopped and have seen smaller financial institutions refuse to match GIC rates, even when the competitor is just ¼% more. I didn't understand why back then. Wouldn't it be better to pay ¼% more and have the extra $10,000 in deposits than not?
Now, I realize it is better to let the $10,000 go to a competitor rather than lose money on the $10,000.
October 21, 2013
If you've ever had a line of credit (especially unsecured) or a car loan, you know that FIs can make a lot of money off of relatively short term investments, not to mention credit card interest, which is month to month. Not everything goes into mortgages, and, as you say,, we are talking about a very small percentage of their invest-able money. The bigger and more complex the FI, the more things they have their noses into. Ironically, it is more often the CUs, which have a narrow ranges of lending pathways, which offer same rates on RSPs and RIFs.
I note that there are no bargains in interest rates with the new Meridian credit cards, at 19.5% (not that I care, personally, but it is interesting).
When I ask them why they can't pay me any more interest, they say that it's because of all the costs involved with all the new regulations governing mortgages!
Banking is complicated, and I can't claim to understand the whole industry by any means, but I am confident they make money on all of mine.
They may need to worry more about their proportion of RIF business in future, since we baby boomers are now getting into RIF territory. Perhaps we should expect a more steady differential in rates of return between RIF and RSP? This will be another reason never to get the RSPs in the first place.
I am cashing them in as fast as I prudently can. I want to know how much money I really have. I am amazed at the number of people who think they are debt-free and have their assets all added up, but they forget to deduct the 100K or more that they are going to owe on those RSPs sooner or later (not to mention reductions in the age credit and possible OAS clawbacks, increased provincial health plan premiums, etc etc.!) It's a really insidious kind of debt because there isn't anything much you can do to get rid of it or even to know for sure how much it will be. The only thing you can do is control how fast you draw down those registered plans.
December 20, 2016
May 24, 2016
Nehpets, I was interested to read about the 2.20% 18 month GIC as I'm looking at investing for that time period. As I'm already a Meridian customer, I phoned and asked for that rate and was told that it was for the RRSP season and had ended on March 1st. I pleasantly persisted and eventually was told that my account would be looked at and I would be contacted tomorrow as to whether or not they would extend the offer to me. If you could share which branch you deal with it might make my case stronger. It'll be interesting to see what eventuates.
May 24, 2016
December 20, 2016
I spoke with my Meridian branch today and will be given the 2.20 rate on my TFSA (and spouse's) which will be transferred from Achieva. We will also be given that rate for a regular GIC.
My dealing is with a Meridian Branch in Ottawa, where the representative handling my transactions is a very enthusiastic and knowledgeable young woman who follows through on every commitment and arrangement she has made for me and my wife.
It sounds like they probably have retention strategies and protocols when faced with the potential withdrawl of significant sums.
It reminds me of when I speak with Sirius XM to renew my subscription...the renewal price is full retail until I say the word "cancel" is mentioned, at which point the script changes into retention mode and the renewal price is 1/3 retail.
In order for the retention strategy to be implemented, they need to hear the "keyword"
Some financial institutions respond the same way when you say words like "close the account", "withdraw it all", or "cash it in" ....so I can transfer it out...