GIC Questions

Banking and Saving strategies, maximizing interest rates, budgeting, GICs, HISAs.
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coolsal
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GIC Questions

Post by coolsal » 17 Jun 2005 15:57

I have a dilemma. I have $45K that I want to park either in a high interest savings account (RRSP) or an RRSP GIC.

The savings account, in Achieva, gives me a 2.85% annual rate. Going with this alternative will allow me the flexibility to move to a better option when interest rates go up.

On the other hand, a 5 year RRSP locked in GIC will produce me 4.05% annually. But the terms are not redeemable and I risk losing the opportunity to move to a better option when and if interest rates go up.

Certainly no one knows what can happen but would be interested in hearing your opinions.
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Post by SpikeOPath » 17 Jun 2005 17:00

People usually set up GIC ladders in your case. Maybe provide for an extra rung as play money to put in the Achieva until a year of very high interest rate offer?
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Post by adrian2 » 17 Jun 2005 21:17

For borrowing, the conventional wisdom is that going with a floating rate is better than locking in a mortgage rate - historically, in about 85% of cases.

Flipping your hat to be a lender (i.e. saving money), the conventional wisdom would be that locking in should be better in about 85% of cases.

I happen to believe that we are now in the 15% of cases, for a mortgage.
Conversely, I would go floating rate with my savings.

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buying GIC's through a financial planner - ?

Post by demann » 21 Nov 2005 01:30

I want to buy some GIC's. A financial planner said she could get me a better interest rate for my deposit than I could on my own. It seems to be true. Is it too good to be true? Am I taking a risk that I might loose some or all of the principal? I'm told that the deposit would be made with a credit union which has "insurance" like CDIC up to 100k. If the deposit institution is sound, is there a concern that the the planner could run away with my $$$?

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Post by pitz » 21 Nov 2005 02:00

Well if you are looking to buy GICs, then do your own shopping first.

Generally www.outlookfinancial.com has the best deal going -- a Winnipeg-based Credit Union. 4.3% annual, or you can go with their 'escalator' option that gives you an extra 10th of a percent of so, at the expense of a longer duration over a 5-year term.

If the 'financial planner' can beat that, great, if not, then you know where to go for a better rate...

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Re: buying GIC's through a financial planner - ?

Post by Bylo Selhi » 21 Nov 2005 08:31

demann wrote:Is it too good to be true?
Not necessarily. Planners who use deposit brokers generally can get you a higher rate than your local bank because they have access to GICs from a much wider range of institutions, including smaller ones that have to pay higher rates in order to attract deposits.
Am I taking a risk that I might loose some or all of the principal? I'm told that the deposit would be made with a credit union which has "insurance" like CDIC up to 100k.
This has been discussed several times on threads like Achieva Financial.
If the deposit institution is sound, is there a concern that the the planner could run away with my $$$?
You should write your cheque to the financial institution that issues the GIC, not the deposit broker. If a broker suggests otherwise, run -- don't walk -- out of their office.
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$1000, One GIC

Post by arnyk » 03 Jan 2006 18:16

I got $1000 kicking around at a TD account, so with an amount so low, you'd think they'd be laughing if I asked for a higher rate. But it never hurts to try. ;)

So go to any big bank with $1000, make sure that's all the money they'll ever see, and see what you can get in the ways of a 1-year GIC, cashable AND non-cashable.

Here's my story thus far. Finanical rep insisted they had no discretion on the Wait and See GIC, even though I knew they did (looking for around 3.15%). After 5 minutes, I let that one alone and pushed for the non-cashable. Their best posted rate was 3.05%. Another 10 minutes passes (alot of it small talk), I finally push it up 20 bps to 3.25%. Keep in mind I haven't even played the "manager card" yet, this is just a rep. So she says that they're about to launch a special campaign where there may be further bonuses on the rates, and so I should wait a week to see how much higher she can go. Of course she forgets to call me today, which I don't really mind because nobody's going to remember $1000. Follow-up call gives me an appointment tomorrow. I plan to push the rate slightly higher, add in any "bonuses" from their campaign, and finally get the manager in (who might just have a "little" more discretion).

So who says you have to accept the posted rate with just $1000? It certainly is alot harder, seeing as you're just a blip to them. Someone with $100 000+ would just have to make a simple phone call. But hey, I enjoy a challenge, fighting for the little guy - plus this develops my "people skills". ;)

Anyone else wanna give it a shot? :roll:

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Post by like_to_retire » 03 Jan 2006 18:42

You can do a lot better by just phoning up your discount broker......

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Re: $1000, One GIC

Post by Bylo Selhi » 03 Jan 2006 18:58

arnyk wrote:So who says you have to accept the posted rate with just $1000?
Accepting the posted rates on GICs and mortgages is like paying list price for a car.
Someone with $100 000+ would just have to make a simple phone call.
Not necessarily. The best TD would offer me on a Wait and See GIC was 3.15% even though the amount involved was significantly more and even though we've been banking with them for some 40 years. BNS just down the street OTOH was hungrier. They offered 3.35% even though I've never had an account with them. When I mentioned the difference to my TD manager, she phoned HQ at least twice on my behalf. They told her they couldn't match that rate. According to her that was above their wholesale rate. She thought they thought I was bluffing. I wasn't. They lost.

That said, from a practical perspective, 1% on $1,000 is $10/year. So even if you manage to squeeze 3.35% out of TD, at best it'll buy you a coffee and donut at Timmies (in a year's time.) ;)
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Re: $1000, One GIC

Post by Arby » 03 Jan 2006 19:03

arnyk wrote:Anyone else wanna give it a shot?
See here for GIC rates from various financial institutions. Most discount brokers offer a number of 3rd party GICs.

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Post by Shakespeare » 03 Jan 2006 19:13

1% on $1,000 is $10/year
And the value of one's time wastedspent on negotiating such minor amounts is....?
“A wise man should be prepared to abandon his baggage at any time.” -- R.A. Heinlein, The Door Into Summer.

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Post by Bylo Selhi » 03 Jan 2006 19:18

Shakespeare wrote:
1% on $1,000 is $10/year
And the value of one's time wastedspent on negotiating such minor amounts is....?
Priceless!

One does it with such small amounts for sport, or to hone one's negotiating skills, not to get rich.

(And one does it with larger amounts in order to keep the other guys honest. We'll see what TD has to say after Dodge's next hike when the BNS GIC becomes cashable.)
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Post by Shakespeare » 03 Jan 2006 19:42

One does it with such small amounts for sport
I prefer to leave such negotiations to meaningful, not meaningless, amounts.
“A wise man should be prepared to abandon his baggage at any time.” -- R.A. Heinlein, The Door Into Summer.

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Post by arnyk » 03 Jan 2006 19:49

You'd probably lose money if I put $1000 into a brokerage account. First off the minimum amounts through a broker are usually at least $10 000. Then you add in commissions at 0.25% for one-year, plus the annual account fee for amounts under $20k and voila - your $1000 becomes $900 by the end of the year. ;)

Besides, it never hurts to get aquainted with your branch. Besides having alittle fun with this negotiating project, I cancelled my cousin's chequing account that was charging like 7 bucks a month and set her up with a LoC. The bank rep kept telling me,

"You know, most people like to have a savings account and a chequing account. How it works is that they spend money using the chequing account, and save money using their savings.".

Ok...thanks for that...now close the damn account.

I was gonna get them to waive the passbook fee (measly buck a month, they'd do it to keep your business), but I remember not feeling too well having just came from Wendy's. That stuff'll burn a hole right through your stomach.

If I can wrestle 3.00% even for the cashable, I'll be a happy camper for the new year. Like Bylo said, it's not for the extra donut at Timmies, but practice makes perfect. ;)

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Post by arnyk » 03 Jan 2006 19:51

Did I mention I'm barely 18 and so it's either this or get wasted...or maybe both. :roll:

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Post by Bylo Selhi » 03 Jan 2006 20:05

Shakespeare wrote:
One does it with such small amounts for sport
I prefer to leave such negotiations to meaningful, not meaningless, amounts.
Yabbut, when I was 18, a grand was a very meaningful amount. I also had a lot more time and energy to pursue this sport and got a lot more satisfaction from playing it well ;)

Now that I'm older and wiserslower, I agree, it's not worth the effort.
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Post by arnyk » 06 Jan 2006 14:48

Well, it's alllll over now. The rep spoke to her manager, who actually told her she wasn't allowed to give 3.25% on any amounts less than $10 000. Fortunately, as the quote had already been "written", she made an exception. :lol:

Anywho, credit unions aside - assuming the overnight rate gets upped +75 bps through the spring, what would you expect a 2.45% vairable with the BA rates go to? 3 rate hikes of 75 bps thus far pushed it from 2.05% to 2.45%. Grade 9 extrapolation shows a rate of 2.80% come April, with a max of 3.20% if you add on 75 bps straight up.

Well, I guess it was a learning experience. They wouldn't even admit to offering 3.15% Wait and Sees, I guess Bylo's a liar. :roll:

All in all, I'm going to the branch tonight (after 1 week's "work") and request that my $1000 be rolled over to my Bond Index eFund in my RSP. ;)

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Post by crustie » 06 Jan 2006 19:57

It's usually been the case for many years, that a person buying bank stock does a lot better than buying a fixed income bond. Maybe it's a good idea.

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Post by arnyk » 06 Jan 2006 20:59

^You're saying stocks have generally had higher returns than bonds? Wow, and all this time I've been fooling around with GICs. :roll:

And so the story continues...I walk into the branch tonight, ready with my bond fund instructions. But wait! An interesting twist has arisen, it seems the "computer" has put a "cap" on the max rate I can receive on that certain GIC.

Interesting, let's put off the bond fund for a second. It seems that they can give all the discretion they want, but when it comes to overriding the rate, the smart lil' computer locks them out.

"Lemme tinker with it tonight," she says, "I'll make it work.".

So I let her tinker, heck the settlement dates won't be 'till Monday anyways so I have all weekend. :roll:

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Post by Pobre » 07 Jan 2006 14:40

When seeking a preferred rate or reduced fees or whatever...ask yourself whether the request makes sense from the financial institutions point of view bearing in mind your past business and current request. If it clearly does not...then forget it...you are only building yourself a reputation as being a pain in the arse. And even if you win on this one...you may find that there is a note on your file that will make it that much more difficult to swing a deal when it would be more meaningful to yourself. Be fair and expect /demand to be treated fairly...no more and no less.

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Post by crustie » 07 Jan 2006 20:31

When you think about it, with all the paperwork, the bank managers' time, inflation etc., for a measly $35 payout, the bank probably loses money. That's why they're probably hoping that you'll take a hike.

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Post by arnyk » 08 Jan 2006 11:45

Done.

All the GICs issued by "TD Mortgage Corp" had caps which prevented manual overrides. However, the ones I ended up getting were issued by "The Canada Trust Company". So I guess they still have a couple subsidiaries kicking around.

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Post by Donut » 12 Jan 2006 10:06

There are insurance agents and others who act as agents for the various GIC issuing institutions. They could get you a minimum of 3.8% on a 1 year GIC. That would save you the expense of operating a discount brokerage account with little money in it. When you have more to invest the discount brokerage account is definitely the way to go.

Or just put the money into ING Savings for 3% compounded monthly. The difference between that and 3.8% on $1000 is about $7 over a year.

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Post by Donut » 12 Jan 2006 10:12

After thinking about it, ING is the way to go. They pay 3.75% on a one year GIC and you don't have to kiss any butt to get it. Meanwhile, they will pay you 3% on your savings account while you save up for your next GIC.

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Post by dakota » 14 Jan 2006 10:13

crustie wrote:When you think about it, with all the paperwork, the bank managers' time, inflation etc., for a measly $35 payout, the bank probably loses money. That's why they're probably hoping that you'll take a hike.
Hmmm, maybe yes and maybe no..Most banks look at young people as future (hopefully) long term customers. Like when the 18 or 20 yr. old buys a car, gets married borrows for furniture not to mention a mortgage. It is not a one shot deal with them.
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