Zag Bank 2.5% Promo + Contest | Zag Bank | Discussion forum

Existing customers will qualify aswell!..

I agree, Peoples' may be the best place for a 2yr GIC.

But a savings account is for money you can't tie up for two years - and for some people this is because they think rates will rise in the interim. For others, they expect to need access to the money. I think the reason these short term deals are so common right now is because fewer and fewer people find it worthwhile to lock in. Banks are having to compete for very short term money.

What we are getting these days is the savings account equivalent of 3 to 6 month GICs, for those who won't likely take the money out and don't want to lock in.

Thus, I think that for most people the point of comparison is other savings account rates, not 2yr+ GICs. The best non-promo savings rate right now is about 1.8%. Compared to that, these promo deals make sense, even with the 2 wk hold. And, usually, interest is paid on one end or the other even during a hold period.

It's mostly about whether you want to be bothered, i.e. how you value your time, and whether the economies of scale are in your favour.

100,000 x 1.8% x 6 months = 900
100,000 x 2.5% x 6 months = 1250
100,000 x 1.8% x 14 days = 69.04
100,000 x 2.5% x 14 days = 95.89

Net benefit of 2.5% over 1.8% rate on $100,000 over 6 months, assuming 0% interest on the former for a period of 14 days and a stable rate of 1.8% on the latter = 1250 - 900 - (95.89 - 69.04)
= $323.15

Even if you assume you will not receive any interest on either end during the 14 days, you are still ahead at 2.5%:
1250 - 900 - 95.89
= $254.11

However, if you only have the minimum $1,000 to deposit, it probably isn't worth the bother, as you will only net 1% of the above, i.e. $2.54 .

This is probably why banks like Tangerine (backed by Scotia) and PC (backed by CIBC) put a limit on how much you can deposit for the promo rates. For new smaller banks like Zag, this is probably less of an issue, as who is going to risk going over CDIC limits for a bank that has no track record?

Net after taxes depends on the individual, of course, and needs to be considered accordingly, and thus I cannot calculate it. This consideration would apply no matter what the interest rate. It still boils down to the price of a coffee at the low end and a fancy restaurant dinner at the other, depending on which establishments you patronize..

Tax rates, brackets, allowable deductions, tax credits and rules affecting registered plans could change for 2016 (regardless of who is in power), so it's impossible to do these calculations with guaranteed accuracy at this time.

However, yes, it's always a good idea to consider what your after-tax results might be.

hi all members
how safe is zag bank?
would u go over cdic limit .
pls comment
tks

I think what Yatti probably means is that one could open different TYPES of accounts. I'm not sure what-all Zag offers, but remember that non-registered GICS, savings accounts, chequing accounts held by one individual all count as one unit for CDIC purposes - in other words you can have TOTAL of 100K in all of them. And you can double this if you have joint accounts with someone else.
TFSA is separate, as is RSP, each counting for up to another 100K per person. There are no joint accounts for TFSA or RSP, by definition.

At one time I thought GICs were covered separately from bank accounts, allowing for an extra 100K in non-registered GICs, but I looked it up and found that was not true.

The big banks all have more than one corporation, so, with careful planning, it is possible to spread your money around through these various corporations so that you get additional coverage, as each corporation usually has separate coverage (you must check to be sure) - although I can't think of a good reason why anyone would want to bother as they pay so poorly. But Zag is new and small and it is highly unlikely that it has more than one CDIC-insured corporation.

Also, never rely on the institution in question to tell you what is covered by CDIC. Always check into this for yourself.

Loonie said

...
But Zag is new and small and it is highly unlikely that it has more than one CDIC-insured corporation.
....

Desjardins Trust Inc. is the trustee of Zag's TFSA and RRSP products. It is a also a CDIC member.

In theory, Zag could too increase CDIC coverage by allowing clients to select either Zag Bank or Desjardins Trust Inc. as the issuer of the accounts.

Norman1 said

Loonie said
...
At one time I thought GICs were covered separately from bank accounts, allowing for an extra 100K in non-registered GICs, but I looked it up and found that was not true.
...

GIC's can have separate coverage by CDIC when they are issued by a separate, but related, CDIC member.

With TD, I remember way back that one could select CDIC member TD Mortgage Corporation as the issuer for some of their GIC's. Their chequing accounts were issued by CDIC member The Toronto-Dominion Bank. In such a case, the GIC's would be covered by the $100,000 limit of TD Mortgage Corporation and the chequing account would be covered separately by the $100,000 limit of The Toronto-Dominion Bank.

Yes, that was what I was trying to refer to in my subsequent paragraph. TD also has Canada Trust, which is a 3rd corporation which can be useful. And they have a 4th one which I can't remember which I have never found a use for.