Beyond the rate: Applying for overdraft protection at Tangerine Bank

Overdraft protection at Tangerine

If you’ve ever been hit with an NSF (non-sufficient funds) fee, you know that it’s costly and inconvenient. With overdraft or coverdraft protection, you can avoid such fees, often for free. Here’s how to set up overdraft protection at Tangerine Bank.

You get charged an NSF fee if there is a debit against your account (such as someone cashing a cheque you wrote) and you do not have enough money in your account to cover the debit. By default, your account is not allowed to be “overdrawn” — in other words, it cannot have a negative balance. Tangerine’s NSF fee is $40. Not only are you charged the fee, but your cheque bounces and you’ll have to re-do the transaction (such as issuing a new cheque) when you have enough money in your account again. You might also get charged another fee by the recipient to cover their inconvenience.

Overdraft protection allows your account to go into a negative balance (up to a certain limit). At Tangerine, you must apply to have this protection enabled. Overdraft protection at Tangerine is free if you do not use it at all, or when you use it, if you transfer enough money into the account by 9:00pm Pacific time / 12:00am Eastern time on the night that your account is overdrawn. Otherwise, it costs $5 in each month that you use it (no matter how many times you use it in a month), plus 19% annual interest until the overdraft amount is paid back. Tangerine will e-mail you whenever you’ve overdrawn your account.

Setting up overdraft protection at Tangerine Bank

First, in your online interface, click the “Overdraft” link on your chequing account:

Step 1: Click the Overdraft link

Then, click the “Apply” button:

Step 2: Click the Apply button

Then, agree to the terms:

Step 3: Agree to the terms

Finally, fill in the application form, which asks for your employment information as well as other personal information:

Step 4a: Enter your employment information

Step 4b: Enter more personal finance information

In some cases, you’re done and are approved immediately. Note that it does a credit bureau check and you might get denied.

How to avoid overdraft fees

If you have enough money in your Tangerine savings account, you can simply transfer the money instantly to the chequing account the same day that an overdraft occurs. Otherwise, if you have enough money elsewhere, consider sending yourself an Interac e-Transfer from another financial institution, since the money transfers close to instantly, allowing for what is usually less than a 30 minute delay between when you send the Interac e-Transfer and when you receive an e-mail or phone link to deposit the money. Many financial institutions offer free Interac e-Transfers on no-fee accounts, including Alterna Bank, EQ Bank, and Motive Financial. (Credit to forum user Adam1 for the idea!)

Not a client of Tangerine Bank? Other financial institutions offer similar overdraft features, including “coverdraft” from Alterna Bank, which triggers an automatic, internal transfer of money between your Alterna Bank accounts whenever one of them is overdrawn.

Tax Free Savings Account year-end tips

The end of the calendar year is a good time to think about Tax Free Savings Accounts (TFSA) for a couple of main reasons:

  • You get an extra $5,500 contribution room on January 1, 2013 (up from $5,000 in previous years)
  • The end of the year is the best time to withdraw money from a TFSA if you want to minimize the time until the contribution room created from the withdrawal is available again. A more concrete example of this: it is easiest to move money from one TFSA to another TFSA by withdrawing from one TFSA at the end of the year and depositing to another TFSA at the beginning of the next year

Rules

Tax Free Savings Accounts have caused some confusion since they were introduced (as evidenced by some of the posts in this forum). For a comprehensive overview about TFSA rules and benefits, check out the Canada Revenue Agency site.

The biggest confusion around TFSAs is typically regarding withdrawals: you can withdraw money from a Tax Free Savings Account to a non-TFSA account during the year, but that does not create contribution room to deposit money back into a TFSA until the following year. As such, frequent withdrawals and deposits (unless in small amounts) can bring you over your contribution limit.

Technically, your available contribution room (in other words, the amount of money that you can deposit) for the current year remains fixed all year, and is made up of:

  1. New contribution room available on January 1 ($5,500 in 2013)
  2. Unused contribution room from the previous year
  3. Withdrawals made in the previous year (including any interest earned that you withdrew)

A very simple example: Suppose you had never opened a TFSA before, and deposited exactly $20,000 into a TFSA in January 2012, maxing out your contribution room. Then, you withdraw $5,000 in February 2012. You cannot re-deposit that $5,000 into a TFSA without penalty until January 2013.

You can transfer money between Tax Free Savings Accounts at different institutions during the year without adversely affecting your contribution limit, although some institutions will charge a transfer fee.

There are some good example scenarios out there that go beyond the basics, such as here, here and here.

Unfortunately, due to the fact that you can open a TFSA at almost any financial institution, there isn’t an easy way for the government give you a real-time report of your contribution room during the year. (I remember seeing such a report once, and it was inaccurate.) Therefore, you have to keep close track of your contributions and withdrawals yourself.

Beware of teaser interest rates

Because it is not as easy to move money in and out of a TFSA as with other bank accounts, you are slightly more locked in to a financial institution’s TFSA account. Thus, you are more vulnerable to fluctuating interest rates. Some banks have, in my opinion, abused this fact by offering higher rates at the beginning of the year and then dropping the rate a few months later for more reasons than just “market fluctuations”. You and your money are a bit stuck at that point. I am not predicting that this will happen again, but it is definitely something to be suspicious about when you see a higher than usual TFSA rate at the beginning of the year.

Some examples:

  • Canadian Tire Financial TFSA:
    January 8, 2010: 3.15%; May 7, 2010: 2.15%
    December 30, 2010: 3.50%; March 31, 2011: 2.50% (even though they had advertised that it was “not a temporary promotional rate”)
    December 29, 2011: 2.75%; March 31, 2012: 2.00%
  • ING Direct
    Jan 1, 2010: 3.00% (was 1.20% on Dec 15, 2009); April 28, 2010: 2.00%
    Dec 30, 2010: 2.00% (was 1.50% on Oct 2, 2010); August 20, 2011: 1.50%
    January 1, 2012: 2.00%; April 1, 2012: 1.60%; March 20, 2012: 1.40%

See this comparison chart for some historical data on rates.

More than just a savings account

You can open a TFSA trading account for investments (such as in stocks) and you won’t be taxed on the gains made within the TFSA. However, you are also subject to more volatility compared to investing outside of a TFSA: you aren’t able to deduct capital losses within a TFSA from other taxable gains, while you are able to deduct capital losses outside of a TFSA.

You can also open other accounts, such as a GIC, within a TFSA. See this thread for some discussion around this.

Note: re-posted from here; originally published November 25, 2011; updated December 19, 2012

Forum/Topic Started Last post Posts

Tax Free Savings Accounts

How Is TFSA Contribution room determined? Do ALL withdrawals increase the max?

July 3, 2021
11:12 am by
smayer97
View

July 10, 2021
10:36 pm by
Vatox
View

66

Tax Free Savings Accounts

Is it ok to reinvest your TFSA again into a TFSA GIC after it matures?

May 24, 2021
2:55 am by
Hmm
View

May 27, 2021
11:01 pm by
Loonie
View

29

Tax Free Savings Accounts

First Ontario CU TFSA special

May 20, 2021
7:32 am by
Koogie
View

May 20, 2021
7:32 am by
Koogie
View

1

Tax Free Savings Accounts

TFSA – Questrade – how to buy GICs or High Interest investments through it

September 23, 2012
7:58 am by
Ash
View

May 4, 2021
2:38 pm by
picassocat
View

13

Tax Free Savings Accounts

Tangerine Bank has NO maturity options for a maturing TFSA GIC

March 18, 2021
2:46 pm by
TommyT
View

March 26, 2021
9:09 pm by
Norman1
View

20

ING Direct’s smart business practices

Disclaimer: in this article I aim to discuss ING Direct’s business practices — mostly their marketing efforts — only. It is certainly a neverending discussion on which banks back this all up with a good product (rate and features) and good service.

I’ve always thought that ING Direct Canada’s business approach is smart, from its branding to its overall marketing to how it treats its customers. Over the years, it has projected a rather straightforward message about no hidden fees and good rates. This is complemented by an uncluttered website and a smart referral program. (In general, a referral program is usually a good idea, as it encourages people to recommend your product or company without having to pay them as employees. And, of course, you are not only getting new, high-quality customers — not just iffy leads — but you also take no risk until you’ve actually signed up a customer.)

ING Direct wasn’t the pioneer of high interest savings in Canada, but many people might think that it was. And even though the majority of other Canadian banks and credit unions have created high interest savings accounts (some which have higher interest rates), ING Direct remains a strong player. So it has been doing something right all along. Of course, the savings account isn’t the only “product” that ING Direct offers, but that account is a very important entry point for people to do other, more lucrative business with ING Direct, with mutual funds, mortgages, business accounts, and more.

Out of the blue, I recently got a package in the mail from ING Direct consisting of:

– The 272-page book The Orange Code: How ING Direct succeeded by being a rebel with a cause.

– A letter explaining their expanded referral program (both the referrer and the referree still get $13; however, they raised the limit from 20 referrals to 50 referrals, and extra monetary bonuses after you’ve referred 10, 20, 30, 40, and 50 friends:

Summary of ING Direct's new refer-a-friend structure

— This letter also notified me that ING Direct had made a deposit to my account for back-dated referral money from before the referral program was changed. (I was lucky to refer over 20 people a couple of years ago from this post.)

Why is this smart?

By sending the package in the first place, they are showing some customers that they care.

With the free book, they are enticing customers to learn more about them. Presumably, this will spur readers to talk about the book and the story behind ING Direct. (Note: I haven’t read the book yet.)

The revamped referral program structure is designed to get influencers to work cheaply for ING Direct. When I say “influencers” I mean consumers that other consumers listen to, providing free, effective, word of mouth advertising, provided that the influencers actually like your company. If you have the capability to refer up to 50 people, you are probably well connected or have an opinion or channel that people respect. ING clearly wants those people on their side!

By back-dating the benefits of a program, you help to keep your existing customers and once again get them to recommend you to others. So many times in the forums, I’ve noticed people complain about how a bank’s new promotion doesn’t apply to existing customers. In other words, those banks usually project an attitude of only caring about sucking people in, but not in treating them well once they’re customers.

I have a friend who received a similar package from ING Direct at the same time as me. Her reaction was: “I couldn’t believe they gave me $50. I love them!” I’m not quite as enthusiastic, but ING Direct certainly succeeded in many respects here.

 

Forum/Topic Started Last post Posts

Tangerine Bank

Tangerine Pay Bills Limits

July 30, 2021
3:10 pm by
Joebart
View

August 1, 2021
2:41 pm by
speedwagen
View

7

Tangerine Bank

New Tangerine Overdraft Protection – Details

August 13, 2015
3:50 pm by
Yatti420
View

July 15, 2021
8:09 am by
hwyc
View

13

Tangerine Bank

Jun30 promotion ending, new retainer promotion offer ?

June 25, 2021
10:54 am by
savemoresaveoften
View

July 12, 2021
6:26 pm by
COIN
View

57

Tangerine Bank

You Be The Judge! 🙁

June 7, 2021
9:35 am by
Dean
View

June 10, 2021
5:10 pm by
smayer97
View

48

Tangerine Bank

Targeted offer for existing clients: 1.5% on new deposits from Jun 9th to Oct 31, 2021

June 9, 2021
1:26 pm by
hwyc
View

June 10, 2021
9:32 am by
Dean
View

8