Investing

Negative cash balance TFSA...how much will they charge me in interest?

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  • Jan 25th, 2020 8:03 pm
[OP]
Newbie
Apr 6, 2007
84 posts
1 upvote
Toronto

Negative cash balance TFSA...how much will they charge me in interest?

I made a mistake with my investor TFSA account and I overcontributed with one of my investments. So I had a negative cash balance of -$9000 in my TFSA account. I fixed it by selling off the portion so I have a positive cash balance. But I'm wondering how much interest will my bank charge me for having a negative cash balance? Will it be an insane amount or just a small fee? It was only for a day.
10 replies
Sr. Member
Jun 28, 2018
752 posts
495 upvotes
Toronto
I overcontributed with one of my investments. So I had a negative cash balance of -$9000 in my TFSA account
Not sure what you mean by this, by contributing your balance would be in positive. But in any case you bought shares and went into a debit balance of 9k?

Did you sell something the same day or next day in order to cover the 9k? If same day then no problem. Otherwise the days elapsed in between buy and sell would be counted for any interest charges.

Check your brokerage commission/interest schedule as it varies between brokerages.

If it's a few days, it isn't much anyways. More of a waste of money than anything.

9k @ 7% (example) / 365 days = $1.73 per day
Say 7 calendar days = $12.11
The Distracted Investor

Dividends through quality companies 😃 Though I usually lose money with trades :facepalm:
[OP]
Newbie
Apr 6, 2007
84 posts
1 upvote
Toronto
Sorry I used the wrong wording. I used money from my TFSA account to buy mutual funds, but I used too much money so my cash balance went in the negative.

It's been about 2 days since I did that. Today I sold some of the mutual funds in order to get a positive cash balance again. Assuming the order to sell goes through today, it'll only be 2 days. If not today then probably Monday (since markets close on weekends), then that would be 5 days.

As long as I don't have to pay a huge amount for going over, then it looks like I'll be okay from what you're saying. Shouldn't be more than like $100 in fees right?
Deal Addict
Sep 19, 2009
1943 posts
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You are not at fault here. By law, all registered accounts are "cash" accounts which means that your buying power is your cash balance. Your broker should have declined to execute the order.

If you place an 100 billion dollar order to buy 10% of AAPL, you think your broker should do it and start charging you interest on the balance :)

Would you care to share the name of your broker? This is a very serious violation of the regulatory environment and I would file a complaint with OSC.
Deal Fanatic
Nov 22, 2015
5574 posts
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andrew4321 wrote: You are not at fault here. By law, all registered accounts are "cash" accounts which means that your buying power is your cash balance. Your broker should have declined to execute the order.

If you place an 100 billion dollar order to buy 10% of AAPL, you think your broker should do it and start charging you interest on the balance :)

Would you care to share the name of your broker? This is a very serious violation of the regulatory environment and I would file a complaint with OSC.
Not necessarily. Depends on how their system is setup. Many FIs do not have a system that automatically rejects margin trades on registered accounts. Once the trade settles in 3 business days, it should be reversed.
[OP]
Newbie
Apr 6, 2007
84 posts
1 upvote
Toronto
I use CIBC. No one manages my account; I self manage.

As long as the interest fee isn't more than $100, then I'll be okay.
Deal Fanatic
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Jun 19, 2009
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deity307 wrote: I use CIBC. No one manages my account; I self manage.

As long as the interest fee isn't more than $100, then I'll be okay.
It shouldn't be over $100. It depends on the interest rate CIBC charges on debits. Some FIs don't even have debit interest rates coded on registered accounts as in theory, you should never be able to get debits in there. But regardless the charge should be small. Best to speak to someone on the platform to confirm.
Sr. Member
Jun 28, 2018
752 posts
495 upvotes
Toronto
deity307 wrote: Sorry I used the wrong wording. I used money from my TFSA account to buy mutual funds, but I used too much money so my cash balance went in the negative.

It's been about 2 days since I did that. Today I sold some of the mutual funds in order to get a positive cash balance again. Assuming the order to sell goes through today, it'll only be 2 days. If not today then probably Monday (since markets close on weekends), then that would be 5 days.

As long as I don't have to pay a huge amount for going over, then it looks like I'll be okay from what you're saying. Shouldn't be more than like $100 in fees right?
Mutual Funds (MF) have a trade settlement of T+2. Settlement means by Trade Date plus Two Business Trading Days the MF you purchased will be under your ownership and your funds officially transferred from your account.
  • Jan 22: Buy MF (T+2)
  • Jan 23: MF Buy not settled.
  • Jan 24: MF Buy settled.Cash debit balance begins accruing interest starting today. Stock (and/or MF) sold to cover (T+2).
  • Jan 25: Weekend, Saturday, Interest Charge. Stock/MF Sell not settled.
  • Jan 26: Weekend, Sunday, Interest Charge. Stock/MF Sell not settled.
  • Jan 27: Interest Charge. Stock/MF Sell not settled.
  • Jan 28: Stock/MF Sell settles. Account credited with proceeds of sale. No more Interest Charge.
Net you're exposed for 4 days of interest. No way you'll be charged an annualized $100 interest for 9k.

Look up CIBC's interest fee and apply the calculation I gave you as an example.
9k @ 7% (example) / 365 days = $1.73 per day
Say 7 calendar days = $12.11
The Distracted Investor

Dividends through quality companies 😃 Though I usually lose money with trades :facepalm:
[OP]
Newbie
Apr 6, 2007
84 posts
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Toronto
Okay that is relieving to know that it won't be such a huge interest fee. Thank you!
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Mar 10, 2018
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deity307 wrote: Sorry I used the wrong wording. I used money from my TFSA account to buy mutual funds, but I used too much money so my cash balance went in the negative.

It's been about 2 days since I did that. Today I sold some of the mutual funds in order to get a positive cash balance again. Assuming the order to sell goes through today, it'll only be 2 days. If not today then probably Monday (since markets close on weekends), then that would be 5 days.

As long as I don't have to pay a huge amount for going over, then it looks like I'll be okay from what you're saying. Shouldn't be more than like $100 in fees right?
First what did your bank (And Not RFD) says?
Also isn't there a penalty about buying and selling withing 30 days?
I dont care about Ethics, morals, rules or laws. I will apologies only when I get caught.
I try not to apologies but sometimes do it. not because its right thing but it benefits me.
New Mantra for idiots Just ask RFD before searching answers anywhere.
[OP]
Newbie
Apr 6, 2007
84 posts
1 upvote
Toronto
When I spoke to them on the phone, they said they weren't exactly sure of the interest fee rate. But they said it shouldn't be more than $10. And they didn't mention anything about a penalty about buying and selling within 30 days.

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