Personal Finance

5 year GIC 2.5 % at Canadian Tire Bank. Warm?

  • Last Updated:
  • Apr 19th, 2017 9:21 pm
[OP]
Jr. Member
Aug 26, 2003
161 posts
42 upvotes

5 year GIC 2.5 % at Canadian Tire Bank. Warm?

Dose anyone has any experience with Canadian Tire Bank? They seem to have the highest interest rate for a 5 year GIC @ 2.50%. It is also a member of CDIC

The next CDIC member (that I can find) with the highest rate is ICICI bank @ 2.05% and CIBC @ 2.00% for a 5 year GIC.

http://www.redflagdeals.com/feature/can ... es-annual/

Any thoughts?
15 replies
Jr. Member
Apr 30, 2006
163 posts
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Toronto
Yes, it's highest, but would you ready to be locked at this rate for 5 years? US Fed is raising interest, but no one know if Bank of Canada would raise or not.
You can high interest saving account at 2% from EQbank. Unless you have significant of amount, I would rather put them in 2% saving and wait 1 year for see the interest change.
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Oct 7, 2007
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alvisblue wrote:
Mar 19th, 2017 10:16 am
Yes, it's highest, but would you ready to be locked at this rate for 5 years? US Fed is raising interest, but no one know if Bank of Canada would raise or not.
You can high interest saving account at 2% from EQbank. Unless you have significant of amount, I would rather put them in 2% saving and wait 1 year for see the interest change.
Even if Bank of Canada does not raise interest rates (they are talking about cutting the rate) the Canadian mortgage and savings rates may go up anyways. Our economy is linked to the U.S. and we cannot operate in a vacuum.
Sr. Member
Feb 25, 2007
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Ottawa
Interesting that (up until this past Friday) you could therefore borrow against your house at 2.35% (hsbc-hsbc-5-year-fixed-mortgage-2-35-2081339/) and just deposit it in a GIC at 2.5% and make risk-free money :)
(Yeah, 0.15% is not much and you'd have to make principal repayments on the mortgage, so not actually *practical* in any way, but an indication of how atypical both this and the mortgage rates are...)
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Feb 9, 2009
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2% for 5 years? Cant even keep up with inflation. May as well wait for a stock market correction and buy a few good quality blue chip stocks.
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Aug 18, 2005
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I would only recommend this for a really elderly person who's living on a fixed income, or someone with exceedingly low risk tolerance.
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Aug 8, 2012
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houska wrote:
Mar 19th, 2017 3:45 pm
Interesting that (up until this past Friday) you could therefore borrow against your house at 2.35% (hsbc-hsbc-5-year-fixed-mortgage-2-35-2081339/) and just deposit it in a GIC at 2.5% and make risk-free money :)
(Yeah, 0.15% is not much and you'd have to make principal repayments on the mortgage, so not actually *practical* in any way, but an indication of how atypical both this and the mortgage rates are...)
Don't forget income taxes ;)
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Sr. Member
Feb 25, 2007
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ace604 wrote:
Mar 20th, 2017 12:00 am
Don't forget income taxes ;)
Interest paid on a loan whose proceeds are used to generate income is tax-deductible, so you'd only pay taxes -- if structured right -- on the 0.15% :)
Of course this would not actually be a worthwhile leveraged investment, but any risk-free arbitrage opportunity means the markets aren't working quite right. In this case, both Canadian Tire and HSBC are both somewhat desperately seeking market share in a way that is long-term unsustainable.
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Mar 8, 2013
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alli, is this for a registered or non-registered account? I think that for an RRSP (not a TFSA), a five year GIC is an OK investment, even if it pays 'only' 2.5%. Choose the compounding option, so you don't have small amounts of interest to re-investment. In that case, I would go for the highest rate, right now Canadian Tire Bank. For a non-registered account, if you are willing to do some 'online legwork' (fingerwork?), you can probably do a bit better by taking advantage of HISA promos and new account bonuses. But not everyone enjoys that game.
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houska wrote:
Mar 20th, 2017 7:00 am
Interest paid on a loan whose proceeds are used to generate income is tax-deductible, so you'd only pay taxes -- if structured right -- on the 0.15% :)
Of course this would not actually be a worthwhile leveraged investment, but any risk-free arbitrage opportunity means the markets aren't working quite right. In this case, both Canadian Tire and HSBC are both somewhat desperately seeking market share in a way that is long-term unsustainable.
Yes.

If you actually did that you wouldn't get 2.35% on an 'investment loan' type mortgage because it would be a refinance or 2nd mortgage. If you want to borrow against your property to invest (elsewhere) you are likely looking at prime+0.5% HELOC, P+0 HELOC, or a higher rate fixed (higher than 2.35%) due to new mortgage regulations.
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[OP]
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Aug 26, 2003
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Thanks for all your advise. I understand 2.5% is not a great rate, but I try not to time the market or predict interest rate. Many, many much more educated and experienced people have tired and failed. I still remember not long ago a 5 year GIC with 4% rate and everyone think it is too low

I just find it interesting that Canadian Tire bank can offer this rate (0.45% higher than the next CDIC member). Like houska said, they are desperately seeking market share and I would like to take advantage of any market inefficiency.

I simply cannot found any risk-free (and guaranteed by the Government of Canada) RRSP investment that will pay 2.5% at this time
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Oct 4, 2009
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alli wrote:
Mar 20th, 2017 11:20 pm
I just find it interesting that Canadian Tire bank can offer this rate (0.45% higher than the next CDIC member.
Why keep making this statement? Oaken 2.25 and CDF 2.20 to name just two.
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alli wrote:
Mar 20th, 2017 11:20 pm
Thanks for all your advise. I understand 2.5% is not a great rate, but I try not to time the market or predict interest rate. Many, many much more educated and experienced people have tired and failed. I still remember not long ago a 5 year GIC with 4% rate and everyone think it is too low

I just find it interesting that Canadian Tire bank can offer this rate (0.45% higher than the next CDIC member). Like houska said, they are desperately seeking market share and I would like to take advantage of any market inefficiency.

I simply cannot found any risk-free (and guaranteed by the Government of Canada) RRSP investment that will pay 2.5% at this time
Are you near retirement or is this just for a small portion of your portfolio?

RRSP is typically a long-term horizon for retirement so if you are not near retirement 2.5% is just going to barely keep pace with inflation.

Better to invest in some ETFs or stocks that pay >2.5% dividend and also keep pace or exceed inflation rate at the same time.
POLL: How many credit cards do you CARRY?
Plastiq: Pay any bill with credit card for 0-2.5% fee (help meet min spending and keep old cards active!)
Rewards program transfer times (e.g. SPG->Aeroplan, Marriott->SPG, Amex MR->SPG...)
[OP]
Jr. Member
Aug 26, 2003
161 posts
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S5 wrote:
Mar 21st, 2017 8:37 am
Why keep making this statement? Oaken 2.25 and CDF 2.20 to name just two.
I am not aware that either Oaken or CDF is a member of CDIC. They are not listed on the CDIC website, although under further looking, there own website did mention they are covered under their respective parent company.

I understood that there are many EFT or stocks that can pay more than 2.5%, but I am looking purely for risk-free ones for this portion of the portfolio. Thanks
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