CTB Lowers interest rate | Canadian Tire | Discussion forum

Unfortunately, that's always one of the pitfalls of keeping your money in high-interest savings accounts where posted rates are subject to change without notice. It's sort of the banks' equivalent of the gas stations changing their posted gas price signage overnight. With TFSAs, the problem of "rates subject to change" is compounded by the high transfer out fees. Mind you, if you're transferring $15,000 out to another institution, they'll usually reimburse the transfer in fee if you ask nicely and consider locking it in. 🙂

Cheers,
Doug

It may be a bit misleading, but no more so than retailers who price things as $5.99 instead of $6.00 to lure consumers into thinking the price is actually closer to $5.00. Eventually, like the example I've named, people do catch on to their tactics. While I may not endorse CTB's practice, it is entirely legitimate as it was in fact an "everyday rate, not a promotional rate". They just decided, on a certain date, that their "everyday rate" needed to be changed. Where the problem with constant rate switches on TFSAs lies is in the "transfer out" fees that make it harder to switch institutions. However, so long as the TFSA rate is still among the highest (it is), people likely won't be bothered to transfer it out until the end of the year when they can just do a full withdrawal (including interest) and re-contribute the following year.

CTB was likely luring people in with very attractive rates that they could not sustain in a sole bid to buy market share. They likely lost a lot of money (although I don't think they'll break those numbers out within their parent company's annual report). The problem with that strategy is it likely cannot be sustained, especially if their higher interest credit card balances are not growing at the same rate as their deposit growth, then they have no need to continue buying deposits to fund the credit card balance growth and thus that erodes overall profitability. When they ultimately lower their artificially high rates, they will ultimately lose market share, though hopefully not below what it was when they started.

The onus is somewhat on the consumer: beware of artificially high rates, especially on TFSA savings accounts where extra fees may be involved, when no other competitor is offering the same rates. Also, look at their growth of their other businesses - do they need the deposits and for how long? You may want to delve into their interest rate spreads, if you can find that information broken out.

Cheers,
Doug

I do agree it is somewhat misleading on CTB's part, but I would defer to my main point of the old adage, "buyer beware". Or, in this case, "saver beware". Beware of virtual banks offering vastly superior rates than the competition, especially on TFSAs where extra "transfer out" and "withdrawal" fees may apply. There's a reason the competition can't match them on those rates - when CTB is offering 3.5% for deposits in a TFSA (a savings account, not even a locked-in GIC) and the competition is offering five-year closed mortgages at or below 3.5%, one ought to realize that the rate is too good to be true. CTB was buying market share with a rate they could not sustain as they would be losing money by the month on those deposits. HSBC Bank Canada did the same thing several years ago with their Direct Savings Accounts - they paid out tens of millions of dollars in interest in order to buy market share but in terms of profitability, they were bleeding money.

Hope that clarifies,
Doug