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Zag Bank 2.5% Promo + Contest
September 21, 2015
1:04 pm
ertyu
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2.5% on all savings until March 20, 2016 so long as you have a $1000 balance by Nov 15, 2015.

https://www.zagbank.ca/fineprint/fall2015?ref=campaign

That same $1000 balance will also enter you into their contest to win $1000.

https://www.zagbank.ca/FinePrint/Contest

September 22, 2015
7:25 am
ertyu
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Note to clarify, they say that the $1,000 balance triggers the 2.5% promo rate to apply as soon as the balance is achieved. The promo rate continues to apply to the end of the promo subsequent to that, even if the balance drops below $1,000.

September 22, 2015
10:05 am
Yatti420
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Existing customers will qualify aswell!..

September 23, 2015
2:51 pm
Bryan Stro
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I'm getting weary of these type of Promos...

Sure, you're thinking I'll just stuff my money in there for a short term, take advantage of the good rate, and then yank it out on March 20th...at the end of the Promo period. No, it's not going the happen that way... They are going to take a full two weeks, 10 bankdays, to "process' the return of your money! All the advantages of the high rate will be lost during this "no income" period. sf-yell Meanwhile, Peoples Trust is still offering 2.45% on GICs for 2 years or greater...

September 23, 2015
6:06 pm
Loonie
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I agree, Peoples' may be the best place for a 2yr GIC.

But a savings account is for money you can't tie up for two years - and for some people this is because they think rates will rise in the interim. For others, they expect to need access to the money. I think the reason these short term deals are so common right now is because fewer and fewer people find it worthwhile to lock in. Banks are having to compete for very short term money.

What we are getting these days is the savings account equivalent of 3 to 6 month GICs, for those who won't likely take the money out and don't want to lock in.

Thus, I think that for most people the point of comparison is other savings account rates, not 2yr+ GICs. The best non-promo savings rate right now is about 1.8%. Compared to that, these promo deals make sense, even with the 2 wk hold. And, usually, interest is paid on one end or the other even during a hold period.

It's mostly about whether you want to be bothered, i.e. how you value your time, and whether the economies of scale are in your favour.

100,000 x 1.8% x 6 months = 900
100,000 x 2.5% x 6 months = 1250
100,000 x 1.8% x 14 days = 69.04
100,000 x 2.5% x 14 days = 95.89

Net benefit of 2.5% over 1.8% rate on $100,000 over 6 months, assuming 0% interest on the former for a period of 14 days and a stable rate of 1.8% on the latter = 1250 - 900 - (95.89 - 69.04)
= $323.15

Even if you assume you will not receive any interest on either end during the 14 days, you are still ahead at 2.5%:
1250 - 900 - 95.89
= $254.11

However, if you only have the minimum $1,000 to deposit, it probably isn't worth the bother, as you will only net 1% of the above, i.e. $2.54 .

This is probably why banks like Tangerine (backed by Scotia) and PC (backed by CIBC) put a limit on how much you can deposit for the promo rates. For new smaller banks like Zag, this is probably less of an issue, as who is going to risk going over CDIC limits for a bank that has no track record?

September 24, 2015
11:16 am
xxxx
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Loonie -
it is not only "whether you want to be bothered" (as you say) - the results you present likely become less attractive once you factor in Income Tax. A complete analysis should always consider the income tax factor - i.e. net return after tax. Of course large amounts of money (economies of scale, as you state) may be more of an incentive to move money.

September 24, 2015
2:23 pm
Loonie
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Net after taxes depends on the individual, of course, and needs to be considered accordingly, and thus I cannot calculate it. This consideration would apply no matter what the interest rate. It still boils down to the price of a coffee at the low end and a fancy restaurant dinner at the other, depending on which establishments you patronize..

Tax rates, brackets, allowable deductions, tax credits and rules affecting registered plans could change for 2016 (regardless of who is in power), so it's impossible to do these calculations with guaranteed accuracy at this time.

However, yes, it's always a good idea to consider what your after-tax results might be.

September 24, 2015
3:23 pm
2of3aintbad
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There are no easy answers. If you need the money in the short term, you might as well earn 2.5% with Zag or 3.% with Tangerine. If you have a longer horizon, you should think about equities. I don't think that there is 'blood in the streets' yet, but if you are serious about investing, you need to have some cash available to -+buy.

October 23, 2015
7:08 pm
tc
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hi all members
how safe is zag bank?
would u go over cdic limit .
pls comment
tks

October 24, 2015
7:57 pm
Yatti420
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tc said

hi all members
how safe is zag bank?
would u go over cdic limit .
pls comment
tks

Zag is okish.. It's new.. Aslong as it is cdic your fine up to the set amount per account.. Just open multiple accounts if your worried..

October 24, 2015
10:13 pm
Loonie
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I think what Yatti probably means is that one could open different TYPES of accounts. I'm not sure what-all Zag offers, but remember that non-registered GICS, savings accounts, chequing accounts held by one individual all count as one unit for CDIC purposes - in other words you can have TOTAL of 100K in all of them. And you can double this if you have joint accounts with someone else.
TFSA is separate, as is RSP, each counting for up to another 100K per person. There are no joint accounts for TFSA or RSP, by definition.

At one time I thought GICs were covered separately from bank accounts, allowing for an extra 100K in non-registered GICs, but I looked it up and found that was not true.

The big banks all have more than one corporation, so, with careful planning, it is possible to spread your money around through these various corporations so that you get additional coverage, as each corporation usually has separate coverage (you must check to be sure) - although I can't think of a good reason why anyone would want to bother as they pay so poorly. But Zag is new and small and it is highly unlikely that it has more than one CDIC-insured corporation.

Also, never rely on the institution in question to tell you what is covered by CDIC. Always check into this for yourself.

October 25, 2015
8:56 am
Norman1
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Loonie said
...
At one time I thought GICs were covered separately from bank accounts, allowing for an extra 100K in non-registered GICs, but I looked it up and found that was not true.
...

GIC's can have separate coverage by CDIC when they are issued by a separate, but related, CDIC member.

With TD, I remember way back that one could select CDIC member TD Mortgage Corporation as the issuer for some of their GIC's. Their chequing accounts were issued by CDIC member The Toronto-Dominion Bank. In such a case, the GIC's would be covered by the $100,000 limit of TD Mortgage Corporation and the chequing account would be covered separately by the $100,000 limit of The Toronto-Dominion Bank.

October 25, 2015
9:06 am
Norman1
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Loonie said

...
But Zag is new and small and it is highly unlikely that it has more than one CDIC-insured corporation.
....

Desjardins Trust Inc. is the trustee of Zag's TFSA and RRSP products. It is a also a CDIC member.

In theory, Zag could too increase CDIC coverage by allowing clients to select either Zag Bank or Desjardins Trust Inc. as the issuer of the accounts.

October 25, 2015
2:22 pm
tc
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Thanks for all the tips and comments.
I guess the easiest way is to open separate accounts for myself,the wife and a joint acct, thus getting 300k protection.
tc

October 25, 2015
5:07 pm
Loonie
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Norman1 said

Loonie said
...
At one time I thought GICs were covered separately from bank accounts, allowing for an extra 100K in non-registered GICs, but I looked it up and found that was not true.
...

GIC's can have separate coverage by CDIC when they are issued by a separate, but related, CDIC member.

With TD, I remember way back that one could select CDIC member TD Mortgage Corporation as the issuer for some of their GIC's. Their chequing accounts were issued by CDIC member The Toronto-Dominion Bank. In such a case, the GIC's would be covered by the $100,000 limit of TD Mortgage Corporation and the chequing account would be covered separately by the $100,000 limit of The Toronto-Dominion Bank.

Yes, that was what I was trying to refer to in my subsequent paragraph. TD also has Canada Trust, which is a 3rd corporation which can be useful. And they have a 4th one which I can't remember which I have never found a use for.

October 25, 2015
5:16 pm
Loonie
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tc said

Thanks for all the tips and comments.
I guess the easiest way is to open separate accounts for myself,the wife and a joint acct, thus getting 300k protection.
tc

Yes, that would work. For perfect coverage, you might want to deduct the anticipated interest from your deposit, as the interest will only be covered by CDIC if it brings the total to no more than 100K.

I think, but am not positive, that you will need to attribute the income to its proper owners on income tax return. Someone else will know the answer to that for sure. In other words, if the capital is not half yours and half your wife's, then you may need to attribute it accordingly.

And, in response to one of your earlier questions, if Zag is part of Desjardins, it should be as safe as any other institution. However, personally, I would not want to exceed the CDIC limits. Some people have chosen to exceed the limits with the Tangerine offer of 3% for about 6 months because it is wholly owned by Scotia, which they feel is secure. It's hard to turn down 3% these days!

November 3, 2015
8:10 am
standringm
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Loonie said

I agree, Peoples' may be the best place for a 2yr GIC.

But a savings account is for money you can't tie up for two years - and for some people this is because they think rates will rise in the interim. For others, they expect to need access to the money. I think the reason these short term deals are so common right now is because fewer and fewer people find it worthwhile to lock in. Banks are having to compete for very short term money.

What we are getting these days is the savings account equivalent of 3 to 6 month GICs, for those who won't likely take the money out and don't want to lock in.

Thus, I think that for most people the point of comparison is other savings account rates, not 2yr+ GICs. The best non-promo savings rate right now is about 1.8%. Compared to that, these promo deals make sense, even with the 2 wk hold. And, usually, interest is paid on one end or the other even during a hold period.

It's mostly about whether you want to be bothered, i.e. how you value your time, and whether the economies of scale are in your favour.

100,000 x 1.8% x 6 months = 900
100,000 x 2.5% x 6 months = 1250
100,000 x 1.8% x 14 days = 69.04
100,000 x 2.5% x 14 days = 95.89

Net benefit of 2.5% over 1.8% rate on $100,000 over 6 months, assuming 0% interest on the former for a period of 14 days and a stable rate of 1.8% on the latter = 1250 - 900 - (95.89 - 69.04)
= $323.15

Even if you assume you will not receive any interest on either end during the 14 days, you are still ahead at 2.5%:
1250 - 900 - 95.89
= $254.11

However, if you only have the minimum $1,000 to deposit, it probably isn't worth the bother, as you will only net 1% of the above, i.e. $2.54 .

This is probably why banks like Tangerine (backed by Scotia) and PC (backed by CIBC) put a limit on how much you can deposit for the promo rates. For new smaller banks like Zag, this is probably less of an issue, as who is going to risk going over CDIC limits for a bank that has no track record?

Hi Loonie
I have been viewing the Zag promo for a couple of months. Your review with the numbers crunch moves me to believe that placing some of my available investment dollars is a waste of time. $2.54 on a thousand or $25.40 on 10 thousand is not gonna make or break me. Zag needs a base rate that is higher than traditional banks to really attract investors.
M

November 25, 2015
6:18 am
Norman1
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standringm said

Hi Loonie
I have been viewing the Zag promo for a couple of months. Your review with the numbers crunch moves me to believe that placing some of my available investment dollars is a waste of time. $2.54 on a thousand or $25.40 on 10 thousand is not gonna make or break me. Zag needs a base rate that is higher than traditional banks to really attract investors.
M

It looks like they are listening. According to their rates page, the base rate on the Zag Savings account is now 2½%.

As well, the fine print of the Fall 2015 promotion has been amended to allow the minimum balance of $1,000 to be reached by December 31, instead of November 15:

We're firm believers that the money you earn should be earning you money. Which is why we're offering 2.5% interest on all Zag Savings accounts until March 20, 2016 if you reach a minimum balance of $1,000 into your Zag Savings account by December 31, 2015.

November 25, 2015
3:57 pm
Peter
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I asked this to Zag Bank on Twitter, in reaction to them removing the mention of 0.8% as the non-promo rate on their website:
"Your messaging around interest rates is confusing. Is 2.5% available to everybody regardless of balance? What is the normal rate?"

Their response:
"The 2.5% rate is available to everyone (new & current clients), no matter what their balance. Rates are always subject to change."

November 25, 2015
6:33 pm
Bill
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Regarding attributing of interest income back to the person whose funds generated the interest, that's true according to the Income Tax Act but in real life all the CRA computer does is match the SIN number on the T5 with the amount reported on that person's tax return. If it's the same, it's happy. In joint accounts usually there's a primary and a secondary holder and the T5 often just shows the primary person's SIN - and it's actually more likely to attract CRA's attention if you deviate from reporting the interest income by the person whose SIN is on the T5.

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