Banks like to come up with all kinds of offers and promotions to drum up business.
Open an account and get a free gift.
Yeah! Who needs a free toaster?
Open an account and get a special interest rate for a few months.
Take out a mortgage and the bank will cover your moving costs.
I get all kinds of special offers from the various financial institutions I do business with, and most of them just aren’t special enough for me to take action.
No thanks, buddy!
What I consider “special” and your definition might be miles apart, but let’s always keep some things in mind.
First off, we want a good deal with the least amount of hassle.
That starts with opening a bank account. Look at the various bank accounts offered from the big banks in Canada, such as TD and CIBC. Unless you’re a student who gets a free account, or you keep a minimum balance of a few thousand dollars, most clients pay a monthly fee of $10 to $15.
Why should I pay a bank a monthly fee to let them keep my money within their walls?
If you find a financial institution that offers a free account, unlimited transactions, and no minimum balance, then that’s the place you do your business. Right away you’re saving over $100/year because you no longer have monthly fees. Woo hoo!
Many credit unions and online banks have free accounts and no minimum balances, so that’s where you take your business.
Paying a bank a monthly fee to keep my money there, is NEVER going to be a “special offer” to me.
If you feel the same way, shop around. Just because your parents kept their bank accounts with one of the big banks their whole lives doesn’t mean you have to bank there as well.
My “Special Offer” from Coast Capital
One of the places I have a bank account is with Coast Capital, a credit union in British Columbia. There are no fees for chequing and savings accounts, and I get a debit card with unlimited transactions. I don’t earn interest on the chequing account and their high interest savings accounts (HISA) earns a whopping .75% interest as of the time of this blog is being written, late October, 2019.
On October 21, 2019, I received an email from Coast Capital with this “special offer”:
Grow your savings faster with special rates on term deposits. Enjoy 2.50% on a registered 3-year non-redeemable term deposit or 2.40% on a non-registered term deposit.¹
Need to tap into your savings earlier? Our 18-month non-redeemable registered term deposit is available at 2.30% or 2.20% for a non-registered term deposit.¹
These rates won’t last! Call us today …
OK, well I certainly hope those rates won’t last! LOL! They SUCK!
Comparison shopping for banking
If you’re like me, you shop around for the best prices before buying a pair of cowboy boots or even a carton of chocolate almond milk to make sure you’re getting the best deal.
Term deposits and GICs are low risk investments that are guaranteed by the CDIC, Canada Deposit Insurance Corporation, for up to $100,000 in case of a bank failure, so you’re not going to lose your money in a worst case scenario.
The investor puts their cash in for a set term, usually between one and five years. Longer term investments pay higher interest rates. Some of these investments you can cash out after a shorter period of time if you need the money sooner. They might be redeemable after 30 or 90 days, and the interest rates are lower for these cashable products.
Depending on the financial institution, there might be a minimum dollar amount to buy term deposits and GICs.
Most financial institutions post their rates on their websites so you can compare rates.
My online trader, Questrade, lists GICs and rates from just about every financial institution in Canada. If I’m in the market for a GIC, I can quickly do comparison shopping. I will say that Coast Capital’s “special offer” is in the ballpark with other financial institutions.
Do you need a GIC or term deposit?
Let’s look a little closer why someone might need a GIC or term deposit.
First off, both these investments are very similar and bankers often use these phrases interchangeably.
Say you have money set aside for a down payment to buy a house or you’re closing in on retirement and you don’t want to take a risk in the stock market on losing any of your money. They are a safe investment.
I have a redeemable GIC with Coast Capital that’s my emergency fund, so I can access it quickly if I need to. I recommend everyone who has an emergency fund to either keep it in a HISA with a better interest rate than Coast Capital or a redeemable GIC. When you need that money NOW, you don’t want to be crying about a 3 year term plan you signed up for.
Some people do what’s called a GIC ladder.
Let’s say you won $100,000 in the lottery and you want to stretch that money out for five years. You would spend $20,000 each to buy a GIC for one year, two years, three years, four years and five years. But say at the end of the year when that first $20,000 can be redeemed, you decide you don’t really need that cash. So you reinvest it for 5 years, because you know in another year, that two year term you bought last year can be cashed out.
Know your risk tolerance, and if it’s low, buy a term deposit or GIC.
The “Special Offer” from Coast Capital
Coast Capital is offering 2.5% interest on a registered account. They don’t specify, but that would either be a TFSA (Tax Free Savings Account) or RRSP (Registered Retirement Savings Plan). Or 2.4% interest if it’s in a non-registered plan, in other words, the interest is taxable.
The other special deal on the term deposit Coast Capital offers is 2.3% interest locked in for 18 months in a registered account. Or 2.2% interest locked in for 18 months in a non-registered account.
If you have an account with EQ Bank (no fees and no minimum deposit by the way!) you are already earning 2.3% interest! Wow! You’re rocking it! That’s the thing with these online banks. They don’t have bricks and mortar locations so they can give their clients better interest rates. And we’re covered by the CDIC for up to $100,000! Yippee!
So right away, those of us with accounts at EQ bank earning 2.3% interest with no minimum requirements and no locked in agreements are laughing at the suckers Coast Capital is reeling in for the 18 month term deposit. LOL!
And even the 2.5% and 2.4% interest are no big deal because it’s locking up your money for three years for just a teensy bit of difference.
Money savvy clients
Banks and credit unions are counting on clients who aren’t money savvy and who aren’t comparison shopping the competitors.
Coast Capital sends out this sparkly email and hopes their clients who have money kicking around in their savings account at .75% interest will be interested in getting a better interest rate.
In addition to the normal 2.3% interest rate at EQ Bank, people could look around and see that Tangerine Bank has a deal for new clients who open a savings account where they can earn 2.75% interest for 6 months. After that, Tangerine’s accounts pay 1.10% interest. That’s still a better rate than Coast Capital and most other financial institutions.
So if you’re new to Tangerine Bank, you could open an account and earn 2.75% interest and after 6 months transfer your money over to EQ Bank for 2.3% interest. You’ll be doing better than the “special offer” Coast Capital is currently promoting.
Let me just throw out the GIC rates from EQ Bank for cost comparison. Three months, yes months not years, is 2.35% interest. Three years is 2.55% interest. The one year GIC pays 2.45% interest.
My momma told me – you better shop around!
We have to be smart with our money. If we have savings accounts for an emergency fund or toward a big purchase, and don’t want to take risks with this money, it makes sense to look for a high interest account like EQ Bank. And maybe play around a bit with Tangerine who often have these short term high interest specials for new clients.
However, if you want your money to grow at higher levels of return, and your risk level allows you to do so, you need to invest in the stock market. Exchange Traded Funds (ETFs) are similar to mutual funds except they’re traded on the stock market and have MUCH lower management fees, are a good place to start. Read the Canadian Couch Potato and take a look at the Model Portfolio.
You will need a stock broker.
Nah! You can become your own stock broker. No one cares about your money more than you do! With several choices of online trading platforms, you can be a DIY investor just like me!
(Disclosure: I’m a Questrade associate and if you click on the Questrade links and sign up for an account, I will earn a commission. But you will also get free money! We both get $50!)
Sign up for an online trading account. I use Questrade. They don’t charge you a fee for buying ETFs the way other brokers do.
Look around their website. You will need to transfer in a minimum of $1,000 to open an account. And then you’ll be on your way to managing your portfolio! You go!
Banks want exclusive business
Coast Capital is no different from every financial institution out there. Every bank wants to be your sole bank or credit union and take over all your financial business. No financial institution wants you dealing with different banks. They want you transfer all your accounts to them. They call it consolidating all your banking business in one place.
I call it putting all your eggs in one basket. .
It’s a good idea to have a couple of different financial institutions and different financial products. That’s called diversifying.
Don’t put all your eggs in one basket!
I’ve never had a loan or a mortgage with Coast Capital. And I probably never will. Likewise, the banks that I’ve had mortgages with, I didn’t do my daily banking with them.
When it comes time to getting a loan or a mortgage, you want to shop around for the best deal. Just because you apply for a loan with your main financial institution doesn’t mean they’re going to approve your application.
Credit card application
I just remembered something while I was writing this post. Many years ago I decided I didn’t want my TD Visa any more, so I applied to Coast Capital for their credit card. I don’t remember if it was a Visa or Mastercard. I’m pretty sure it was a Visa and I just thought I’d be doing a cross transfer thing. I had at least $5,000 limit on my TD Visa so I noted that on the credit card application with Coast Capital and sent it in.
I’ve been a member since I was a baby when my mother signed me up for a joint bank account back in the days before the name change. It was called Surrey Credit Union when I was a kid before going through a couple of name changes over the years to now be known as Coast Capital. I think the current name is the best out of all the past names.
Anyway, Coast Capital declined my credit card.
Don’t know why. Doesn’t matter. I have two other major credit cards with their competitors with much higher limits than the TD Visa, so it’s not like I’d want to apply for one of their damn credit cards now anyway.
I get the picture. Coast Capital doesn’t want my business in that department. They don’t want to extend me credit on a credit card, so why would I bother wasting my time applying for a loan or mortgage where they’d have to extend way more money.
Coast Capital wants all my financial business
Every time I see a “financial advisor” at Coast Capital, they’re always trying to convince me to transfer all my money from other financial institutions over to them.
Nope, ain’t happening! I’m not putting all my eggs in one basket!
Like really, what am I going to do for credit cards? Ha ha! Can’t get one from Coast Capital!
The financial products I want to invest in and the financial products that Coast Capital wants me to buy are MILES apart.
I like Exchange Traded Funds with their very low management fees and Real Estate Investment Trusts. They provide dividend income which is very important to me. These are the products I like and they’re the best choices for my portfolio and financial goals.
Coast Capital does not like my financial goals. I choose products that are traded on the stock market and Coast Capital can’t help me there.
Instead they want me to buy mutual funds and the transactions have to go through the incompetent buffoons at Worldsource Financial. Due to Coast Capital’s affiliation with this horrible company, I’ve been gradually transferring my money out.
Special offers from banks
The moral of this story is if your financial institution is slinging propaganda at you about a “special offer”, make sure you do your comparison shopping.
Don’t jump on this “special offer” as soon as you hear about it.
Check out rates and financial products from other financial institutions. You can probably find a better deal, or at least make you question how “special” that special offer is that your bank is promoting.