New Tax Free Savings Accounts (TFSA) | Tax Free Savings Accounts | Discussion forum

Please consider registering

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

sp_Feed Topic RSS sp_TopicIcon
New Tax Free Savings Accounts (TFSA)
November 26, 2008
6:03 pm
Palos Green

Have any of you decided who you will be setting your TFSA accounts with?
I was about to set mine up with HSBC, but realized the rates won't even be posted until the accounts are active on Jan 2nd.. so why lock myself in now?
Virtually every bank will be offering TFSA's, and from the bankers perspective, won't these accounts, by their nature, be viewed as the most stable & long-term accounts? and thus generate a competitive rate market, with promo's, bonuses, etc..?

Bare in mind, you can only have one TFSA, you can transfer the account between banks, but not without incurring a large FEE, ie) HSBC would charge me $25 to move the account.

Each bank I deal with seems to be trying to sign me up to their TFSA's, but why would I lock myself into something when I don't even know what I'll be getting...

November 27, 2008
8:05 am

The online banks will not charge a fee to transfer money in and out of a TFSA. It will be just like transferring money between your online bank account and your linked "bricks and mortar" bank account. You are also not limited to just one TFSA. You can open up as many accounts as you like, provided the total of all the account balances does not exceed the yearly contribution limit (which is currently $5000). The government will hit you with a penalty tax if you exceed the max contribution.

You are not "locked in" with a TFSA. You can withdraw funds whenever you like for whatever reason you like, just with a regular savings account. The only difference is that when you withdraw funds, you can't put them back in again until the following year.

I've signed up with PC Financial's TFSA. They offer 3.75% interest beginning January 1, 2009 (you can't transfer money to the account until then). ING has a promotion where you open up an account that pays double the durrent interest rate until January 1, at which point ING converts the account to a TFSA for you. The idea is that doubling the interest rate will pay the taxes otherwise owing on the interest before the account is converted to a TFSA.

I know that ICICI and People's Trust are not offering TFSAs.

November 27, 2008
5:48 pm
Palos Green

I did not know that..
All the banks I looked at listed at least a $25 account transfer fee (the account itself, not money transfers) so I assumed you could only have one TFSA as I don't see the point of a bank charging a fee to transfer a TFSA if I am able open multiple TFSA's.
By "locked in" I meant locked in to holding the TFSA with a specific institution, not the money with in it.

December 4, 2008
10:42 pm

Is the money in TFSA part of the CDIC insurance 100K max.??

or it is separate account for 100K ..20years from now...

December 6, 2008
10:01 am

Yes the TFSA will be deposit insured if it is in a savings or term deposit with a bank just like an RSP. I have talked to my online bank Achieva Financial and they are now just starting to take applications over the phone and will have the online application starting on January 1st. They have some of the best interest rates, with a full deposit guarantee.

December 9, 2008
10:47 pm

A few comments on the previous posts:
- The transfer fees relate to direct transfers between different financial institutions, just as are in place for RRSPs or other accounts today.
- The CDIC $100k insurance limit applies to cash and GICs held at a single institution, and in fact an individuals can qualify multiple times based on different types of accounts held at that institution(1)Basic=chequing,savings,etc; 2)=Joint, 3)=RRSP,..) The new TFSA will fall into the basic category.
- Although this forum is for high interest savings, remember that a TFSA is an account type which can hold many different types of instruments depending on the institution. These can include cash, GICs, stocks, bonds, mutual funds,etc.
When considering how to use the limited amount of contribution room available ($5000/year initially), you should consider more than just cash. Remember that no matter what the gain on the investment (interest, dividends, capital gains), it will not be taxable. As such you should consider using your room for the investment which will gain the most, which is not necessarily a simple high interest cash account. e.g. corporate bonds today yield 6% or more.
- Remember also that the quoted interest rates are all "subject to change". Given the major drop in the Bank of Canada rate, I think we can expect those rates to drop noticeably in the near future.
- All of this needs to be considered, because once you contribute to a TFSA at an institution, any withdrawals cannot be put back in until the following year. This flexibility is great, but it requires consideration.

January 5, 2009
2:29 pm
Salty Bob

Does anyone know if one particular bank has better interest rates than others in terms of Tax free savings accts? Or, what the highest/current rate is for one of these accts?

January 7, 2009
6:15 pm

I've notice alot of the banks are offering a 3.75% interest on the TFSA's, but this is only for a few months. Then how do we know what the interest rate will be after that?

January 8, 2009
9:04 pm

I've chosen Achieva Financial for my TFSA as they already have an automated online application for these type of accounts and consistently have among the best rates available for many years without the gimick of introductory rates offered by many banks. Given you want to tax shelter as much of your interest income within this type of account, I will ladder my TFSA savings into a five year term deposit every January. Achieva is currently offering 4.5% and my bank could only offer 3.75%

Please write your comments in the forum.