I also see that they pay interest on a tiered system - if your balance is below $10,000, the HISA interest rate is ZERO! And they charged me $5 for each of three transfers from Scotiabank to my Tangerine account, initiated from Tangerine (their subsidiary!). Not impressed!

JohnnyCash said

If you want an interesting mental exercise, how about taking what you wrote and turning it into the effective interest rate that's actually being paid. It's probably not too far off from the implied rate they claim is being paid even with the delayed interest payment.  

The actual interest rate that Scotia paid me works out to 4.9947% on an annual basis, instead of the (promo) rate of 5.0%. You are right that that seems an infinitesimal difference, but apply 0.0053% to the billions held by their clients, and that becomes a tidy sum they get to keep for the bank.

They need to pay interest on interest from the first of the month! The posting date should be irrelevant.

pentel said
Is it possible that nothing is missed here? From ScotiaBank point of view, clients are still getting a full month of interest as interest is paid from July 9 to Aug 9, Aug 9 to Sep 9 and so forth.  

No, because the interest is earned in a calendar month but is not paid out until the 9th of the following month or thereabouts. Because the interest isn't credited on the 1st, compounding of that interest cannot occur for those first 9 days because it hasn't been credited yet.

rhvic said
Well, I now know how Scotiabank pays interest over a calendar month, calculated to the penny.

They do NOT pay compound interest on the account interest which they post on the 7th business day, until it is posted. Thus one misses out on the first 9 or more calendar days of compound interest. (11 days for this month, August, since interest was just posted today, Aug 12)

I can tell from the balance I started with on July 1, interest posted on July 9, and then total interest paid. They paid 31 days worth of interest on the starting balance, and only 23 days interest on the posted interest.

Now, you may say that this is not a huge difference - heck, for me it is just below $3. But now consider how many savings accounts they have for how many clients (they claim 24 million global customers), and consider that they are not paying compound interest on the interest for the first 9 or so days, on every one of those accounts. This is not fair - they are keeping perhaps millions for themselves, when the account holders should be credited with the interest from the start of the month.

Most credit unions post interest on the first day of the month, and many banks are able to post interest in the first three or four days of the month - why can't Scotia? By posting interest only on the 7th business day, are they deliberately paying less interest, and adding this to their bottom line?  

If you want an interesting mental exercise, how about taking what you wrote and turning it into the effective interest rate that's actually being paid. It's probably not too far off from the implied rate they claim is being paid even with the delayed interest payment.

They do NOT pay compound interest on the account interest which they post on the 7th business day, until it is posted. Thus one misses out on the first 9 or more calendar days of compound interest. (11 days for this month, August, since interest was just posted today, Aug 12)

I can tell from the balance I started with on July 1, interest posted on July 9, and then total interest paid. They paid 31 days worth of interest on the starting balance, and only 23 days interest on the posted interest.

Now, you may say that this is not a huge difference - heck, for me it is just below $3. But now consider how many savings accounts they have for how many clients (they claim 24 million global customers), and consider that they are not paying compound interest on the interest for the first 9 or so days, on every one of those accounts. This is not fair - they are keeping perhaps millions for themselves, when the account holders should be credited with the interest from the start of the month.

Most credit unions post interest on the first day of the month, and many banks are able to post interest in the first three or four days of the month - why can't Scotia? By posting interest only on the 7th business day, are they deliberately paying less interest, and adding this to their bottom line?

Norman1 said
When interest is earned and when the interest is paid are different things.

Page 12 of the Day-to-Day Banking Companion Booklet says interest is earned daily and interest for a month is paid on the 7th business day after the end of that month:

Interest Calculation and Payment
Interest on your HISA balance is calculated daily using closing day balances of the HISA and the Regular Interest Rate determined by the Balance Level into which your Total Relationship Balance falls. Interest accrued on your HISA is paid on the 7th business day after the end of that month. …

It doesn't look like the interest for a month is paid the day after that month and just posted late.  

Based on the calculation and payment quote which Norman1 shows, the bank uses the closing balance of the HISA on a daily basis. And therein lies the problem - the closing balance for the first 8 days does not include the earned June interest, thus it is not itself earning compound interest during that time. The bank thus does not pay compound interest for 8 days. If this is happening over many thousands of HISA and other accounts, then the bank is saving a tidy sum (millions?) for itself every month.

Newton said
From post #8, "The Promotional Rate is an annualized rate and interest is calculated daily during the Promotional Rate Period only and paid monthly."

Interest earned on June 1st won't be paid until July 9th which was 39 days away. Can the bank still claim that interest is paid monthly?  

Yes, it's paid once a month.

Added: This is not an unusual practice for ISAs in brokerage accounts. Date of posted re-invested interest, or dollar amounts if not re-invested, can vary from the period covered by the payment. IOW, posted date is not relevant for the interest calculation itself.

Interest earned on June 1st won't be paid until July 9th which was 39 days away. Can the bank still claim that interest is paid monthly?

Page 12 of the Day-to-Day Banking Companion Booklet says interest is earned daily and interest for a month is paid on the 7th business day after the end of that month:

Interest Calculation and Payment
Interest on your HISA balance is calculated daily using closing day balances of the HISA and the Regular Interest Rate determined by the Balance Level into which your Total Relationship Balance falls. Interest accrued on your HISA is paid on the 7th business day after the end of that month. …

It doesn't look like the interest for a month is paid the day after that month and just posted late.

Is the interest on the June interest going to be calculated from the posting date of July 9, or the start of the month, July 1? Technically the interest is earned as of July 1, so it should be compounded from that date. But, it is not posted until July 9, so it might only be compounded from that date.

Which is it? I think I will only find out on the 7th business day of August.

The Promotional Rate is an annualized rate and interest is calculated daily during the Promotional Rate Period only and paid monthly. During the Promotional Rate Period, the total annual interest rate applicable on your eligible HISA will be the sum of the Promotional Rate and the Regular Interest Rate (as determined by your Balance Tier) calculated daily and paid monthly in two separate interest payments: (i) interest calculated at the Promotional Rate and (ii) interest calculated at the Regular Interest Rate. You will be able to see your interest payments posted to your HISA on your Online Banking or your Mobile App on the day after 7th business day after the end of each month.

There, I did the homework for you....... thank you... you are welcome.

amidat said
Booked/Value date is important.
If the interest was booked/posted on July 9 but valued for July 1, then I would expect that for July they would calculate interest on the earned June interest starting July 1.
However, it appears that interest was booked/posted and valued for July 9.
So, I would expect that for July they would calculate interest on the earned June interest starting July 9.
FYI. It appears that the daily closing balance from July 1 to 8 does not include the interest paid on July 9.  

You are correct that the posted daily closing balance did not include the earned June interest until July 9. But I will be very disappointed if that interest does not itself earn interest from July 1. I will compare the July interest which I will get in August to what I think it should be, and if it is less, then I will be writing to the CEO of ScotiaBank, the banking ombudsperson, and the Minister of Finance.

What happens say if a bank simply decides not to post interest until the end of the next month? Should they then be able to not pay interest on interest for an entire month? I sure hope not. It is not a lot of money, but there is the principal involved!