Savings Account Interest Rate Chasing Can Be Rewarding

Savings account interest rate chasing can be rewardingI recently opened a new Tangerine savings account to take advantage of the $150 in sign up bonuses they are offering as part of their rebranding efforts. What I didn’t mention was that one of the main motivators for opening this new account, other than the sign up bonuses and great features, is to start doing a little bit of interest rate chasing.

Interest rate chasing – what’s that, you ask?

Well, it’s almost exactly as it sounds. It means you keep a keen eye out for the highest interest rates and you continually move your money around from bank to bank to make sure that you’re always getting the best rate. Sound like a lot of work, right?

Well, it could be a lot of work if you are inefficient with it and always jumping ship for an infinitesimal increase in your rate. It would also be a lot harder before the days of online banking, quick and easy electronic funds transfers, and nearly instant rate comparisons using the internet. Going into branches to open accounts, writing cheques to yourself or paying for money orders or wire transfers to move your money around, and then calling up every bank to keep on top of their rates would be a logistical nightmare.

Managing dozens of accounts can also be very cumbersome and stressful ... there must be a better way!

Chasing Interest Rates Can Be Easy

Trust me, the last thing I need these days is a lot of work! Fortunately, I’ve noticed a pattern this past couple of years with how online banks like Tangerine (formerly ING Direct) and PC Financial do interest rate promotions. Here’s how it works:

Related: Can You Get A Better Rate On Your Insurance?

Regular Short Term Offers With Big Rate Increases

There isn’t a big spread between the interest rates offered by the highest paying banks and the more average paying banks and to get the highest payouts you have to start giving your money to banks you’ve never heard of before like People’s Trust and ICICI. While many people do it successfully, it does make you feel a bit uneasy.

However, short term interest rate promotions have become a very popular thing to both attract new clients and to get existing clients to either open new accounts or deposit more money. These promotions typically last for about 3 months and they will often add up to 1.25% to their regular interest rate during that period. Right now, that is essentially doubling the regular interest rate you would get in a savings account and is much better than you would do with a GIC without having to lock in your money.

“New Money” Qualifies

Even better, these bonus offers don’t typically just apply to new customers or even new accounts. It has become the norm to offer the rate increase for all new money deposited into any and all of your accounts after the promotion starts.

Related: 6 Tips For Keeping Better Tabs On Your Money

Yes, that even usually includes chequing accounts which typically pay almost non-existent interest. They essentially take your total account balance across all your accounts just before the promotion starts and compare it to your average account balance across all your accounts for the duration of the promotion. Then, they give you bonus interest as a lump sum payment at the end of the promotion on the difference between those two numbers.

Now Start Bouncing Your Money Back And Forth Like A Yo-Yo!

Since Tangerine and PC Financial both offer these promotions regularly and linking your accounts is easy, automatic, and almost instantaneous when you open a new Tangerine account – all you have to do is transfer your money to the other account when a new promotion pops up. That’s right, in a few clicks using online banking you can go from earning 1.3% or less to 2.5% interest for 3 months.

Once you have this set up the first time, you can repeat the process over and over again so you are almost always earning much higher interest. You could mix in a third or fourth online bank like Canadian Tire Financial Services as well to give yourself more options and catch more promotions, but for now I’m going to keep it simple and just use the other two I’ve mentioned.

How Much Extra Money Can You Earn?

People will be quick to point out that on a balance of $5,000 for a period of only 3 months an extra 1.2% interest only works out to $15, or $5 a month. Whoop-de-do, right? $15 for a couple of minutes of work is nothing to sneeze at, but this definitely might not be worth the effort for some people. But, don’t forget, if you can do this every 3 months or so you can quadruple that to $60 every year. We’re now getting closer to real money!

A Great Way To Temporarily Park Large Sums Of Cash

Where this strategy really starts to shine is when you find yourself with a fairly large lump of cash that you don’t want to invest and risk losing.

I now find myself in this very position because we sold our house and moved to another city. We are currently renting waiting for the right time to buy another house but we’re not exactly sure when that will be. As we all know, houses aren’t cheap these days and earning one percent interest on such a large amount of money while housing prices continue to rise is a bit of a depressing thought.

Related: It Pays To Plan Ahead

At least with this strategy, I can most likely beat inflation and still remain completely liquid so I can act immediately when the right opportunity comes along. That could be a priceless positive all by itself!

A $50,000 Example

Say you have $50,000 sitting in your account for a reason similar to mine or you happen to have a really large emergency fund. Let’s do the math on that:

Extra Interest Earned At 1.2%:

1 month = $50

3 months = $150

1 year = $600

That’s some pretty decent extra money for almost no effort. So if you have some extra scratch lying around earning a pittance, why not give it a shot?

If you do sign up with Tangerine, be sure to use my Orange Key - 41502230S1 - to earn an extra $25 on top of other bonuses as soon as you open your account and fund it with a minimum of $100.

Disclosure: Some links in this article may be affiliate links. We're letting you know because it's the right thing to do. Here’s a more detailed disclosure on how HTS makes money.

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Comments

Peter's picture
I recently wrote an article that recommended Tangerine as well. This one is great too, good work. If you or your readers are interested in other wealth-building tips, and career advice you can check us out at http://www.seekingwealth.ca.
May 10, 2014 @ 8:13 pm
Stephen Weyman
Stephen Weyman's picture
I don't mind people linking to their blogs on my site, but I prefer they do it in a less self-promotional way. Please try to add something to the discussion and leave the link to your blog for when people click on your name. If you happen to have a very relevant article to the one you've just read on my site, then you can link to that directly if you wish (not every time). However, just self-promoting by linking to your main site isn't something I typically allow. I'll leave your comment up this time, but please try to add some value in the future.
May 10, 2014 @ 8:58 pm
Andrew
Andrew's picture
Any idea if this works with TFSAs? I know it is is trickier to transfer money between those accounts, which might reduce the convenience factor. However, this might make it even more worthwhile as any interest earned would be tax free.
May 14, 2014 @ 11:09 pm
Stephen Weyman
Stephen Weyman's picture
For Tangerine, yes TFSA's do qualify. You will have to be mindful of over-contributing to your TFSA when you do this because when you make a withdrawal the amount you withdrew doesn't become available for deposit until the following year I believe. Here's what it says on the Tangerine website:
Enjoy a great interest rate of 2.50% on all new deposits made by July 31, 2014 to a new or existing Tangerine Savings Account, RSP Savings Account or Tax-Free Savings Account.
May 15, 2014 @ 10:06 am
Andrew
Andrew's picture
I was talking with someone at PC Financial, and unfortunately, for TFSAs, most banking institutions charge a transfer fee to move money out of these accounts (their's is about $50), so it would not be worth it. I am not sure if Tangerine charges something similar.
May 18, 2014 @ 9:53 pm
Stephen Weyman
Stephen Weyman's picture
You mean moving money out of a TFSA and into a chequing account at the same bank costs money? I actually didn't know that if that is the case. My TFSAs are investment accounts, not regular bank accounts so I haven't had the opportunity to transfer money out yet.
May 18, 2014 @ 10:11 pm
Melanie
Melanie's picture
I don't think you'll be charged for moving your TFSA money and putting it in your chequing account. I think you'll be charged a transferring fee when you switch banks, for example, you have a TFSA at RBC and wants to transfer it to the Tangerine TFSA to take advantage of the promotion.
May 20, 2014 @ 12:14 pm
Stephen Weyman
Stephen Weyman's picture
Right, that's what I thought. So theoretically you could withdraw the funds to your chequing account and then move them over to the other bank and deposit them back into a TFSA account there. However, in doing so you will have the caps to keep in mind. This could still work at least once a year for someone who is only using about half of their contribution room.
May 20, 2014 @ 12:41 pm
Don C
Don C's picture
The promotional interest periods at PC and Tangerine have often coincided. However, at this moment, Tangerine is not offering any promotions whereas PC is offering 2% on new deposits from August 1 to Oct 31st, but that is on deposits above your baseline balance on all accounts as of July 25th. Of course their earlier promotion of 2.5% ended July 31st, so most customers would have not withdrawn from their accounts prior to the start of August. My impression is that PC and maybe others such as Tangerine are becoming more aware of how people are trying to capitalize on their interest promtions, and maybe now are overlapping the promotions to deter customers from moving money out to seek a promotion somewhere else. I'm also noticing the financial institutions are getting a little more subtle in advertizing these promotions. Since they really want to target "new" money, and "new" customers, their advertizing in more on signup, and thus the existing customers are not as aware of these promotions. For example, the 2% promotion is nowhere to be found on PC's site, but if you contact them directly they will let you know IF you ask about it. Think I will continue to stick with PC, but may establish a chequing and savings account at Tangerine, just so I can move money between the two to take advantage of these promotions. May be a little more challenging to find out when these promotions are scheduled and in effect.
August 13, 2014 @ 6:27 pm
Stephen Weyman
Stephen Weyman's picture
Yes, this kind of thing definitely might not last forever but I appreciate that it is even possible right now. I fortunately had my money in Tangerine for the last 2.5% promo so I was able to move my money to PC Financial already for the new 2% promo that you mentioned that is ongoing. Also, interestingly, when I went to transfer my money out of Tangerine they offered me a 1 year GIC at 2% which is MUCH higher than their usual GIC rates for 1 year. I almost took that offer but decided I would prefer the flexibility of having the cash available. A good strategy might be to employ a 3rd company like People's Trust who has interest rates that are among the highest (1.8% all the time lately) and transfer your money there as soon as any interest rate promo you are taking advantage of is done. Then you will always be ready to add "new funds" when a good promo pops up. I don't think People's Trust runs promos like this at all. Just good rates all the time.
August 14, 2014 @ 9:39 pm
shoparamic
shoparamic's picture

Hey, hi Stephen. Great read, but dated info as you emailed me Jan. 2017 - do you have up to date interest promotional bank rates? Also, I have a question, I hope you can answer it, it is rather involved, PLEASE bear with me. I have a child with a disability. The government announced a savings program, RSDP (Reg. Disability Savings Program) approximately ten (?) years ago now. I had to stop working to care for him, and so have been living much as your site promotes for about eight years now. (although I only found your site about six months ago - found a GREAT ISP and got unlimited internet for $29.99 a month! - 1yr contract & free- ). Not one of the banks I contacted had a clue as to what this program was and eventually my bank set up a telephone appointment with it's head office, and I was able to register my son JUST before the end of the fiscal year of the program and thus maximize my return. Fast forward, the bank now charges for any withdrawl from the account ($50.00 each withdrawl !) regardless of the purpose of the withdrawl. Also, I did not realize I would have to declare interest earned, and pay interest to to the government as it grew, AS WELL AS pay interest on withdrawls. The horrible part of all this paying out is that although anyone with a child/person with a disability can set up one of these accounts, it was created for those with low and limited funds to be able to set up some sort of income savings safety net for their loved one so that when their caretaker(s) died or were otherwise unable to continue to support them, the funds would be available for the recipient to better their lifestyle however they saw fit, and it was supposed to be safe from ODSP (On. Disability Support Program) clawback - the form of income many persons with a disability often have to exist on. Due to many caretakers having to leave work to care for their loved one 24/7, (support is very poor and limited from the government, and does not support you remaining the wage earner) myself included, we have lived and learned how to thrive on ODSP and ACSD (Assistance for Children with Severe Disabilities) . Still with me? Sorry, I had to give you some background to help you understand. So, my child is 15.5 yrs. old now and when he is in his 11th month of his 17th yr. our life will have a DRASTIC change-so drastic that some families have been torn apart by the changes. Why? All support ends for the family at that point-because the aforementioned child is now a grown up and no longer needs any supports that were available the day previously. If the person goes into any sort of government care ie. housing, then those monies are reinstated not to the client, but to the business or organization running these programs. The family is left either with half it's income gone to try and carry on, or the caretaker must try to find work to maintain the family standard of living ( which often is below the poverty level already) and leave the person with the disability alone, whilst working. If the person does try to live in society on their own, the family may have to move or otherwise under great upheaval in order to adjust to the income change. In out case. ODSP will give my son a stipend for rent - which will be deducted from my ODSP as "income" leaving us with less income for rent, which it already does not approach the actual cost of the rent. He will also receive a small "living allowance" for his personal needs. FINALLY my question! I received these details from a person within this government quagmire, who suggested I withdraw the monies from the RDSP I have nickle and dimed over the last 10yrs. day by day in order to fund the yearly requirement to access the maximum funds available per year-you can check it out for your readers if you like, but this is long enough!-and my question is.... what would you suggest? Can you dig alittle and find any information I may need to more fully explore my options?ie. hidden costs to close the RDSP or hidden benefits of moving the account? Please edit as you see fit if you use this question, and keep remove items not needed to clarify the question and your answer. Other info to help you: I am now 55yrs., my son is 15.7yrs.,my bank is BNS, the total value of the RDSP is approximately $50,000.00, my contributions , in cash, before any bank fees for closing or moving the account are approximately $10,000.00, our current income is approximately $3000.00/mo., our income on June 1st. 2018 will drop to approximately $1700.00/mo. I have no family or other supports to assist us, financially or otherwise. I do not expect you to solve this for me, I simply would like an impartial, financial opinion and any guidance or ideas you, in your travels and work may have, that I may not know or have considered. I Thank you for your time and effort. I also would like to say how marvelous I think you are for caring enough about others that you have created and maintain this self help site . There is a huge gap in our society that you are seeking to fill, namely we teach our children to spend, BUT do not teach them any thing else about money, it therefore becomes this magical unknowable realm where few dare to enter, and fewer still emerge whole, healthy, and financially adept. Bless you.

January 08, 2017 @ 6:08 pm
Stephen Weyman
Stephen Weyman's picture

I really wish I could help you on this - but it is so far out of my area of expertise that it would be negligent of me to even try. I think you need to seek out professional fee-only financial advice from someone who is well versed in the RDSP.

Another blogger I know of who is well versed in the RDSP is Big Cajun Man:

http://www.canajunfinances.com/

I wish I could be of more help.

January 10, 2017 @ 1:10 pm
Mike
Mike's picture

Hi Stephen, I am 19 years old and my scotia account is switching to some basic account with a fee. I don't like the idea of any fees plus online banking is great for me. So I'm thinking of Tangerine/PCF and was wondering which would be best? Also i'm unsure if they are VISA cards so I can buy things through amazon/online places which I do often. I'm probably going to skip college due to personal situations or maybe go for two years(something short). I would like both a chequing and savings account, and I've also been reading about local credit unions that open accounts? Somehow they are better than those big 5 banks? I was thinking of switching to them when i'm older or something, anyways any form of help would be appreciated; merci.

March 06, 2017 @ 2:06 pm
Daniell Budney
Daniell Budney's picture

I would like to Know is there a master card which gives you aeroplan points

May 08, 2017 @ 4:00 am

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