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Email this7:16 am
January 17, 2021
Offline
I would like to have the communities comments on this situation.
I was approached by FI to renegotiate interest on 5 yr gic held in rrsp.
The gic is in its 3rd year, with a fixed rate of 3%. They suggest that they will increase interest rate to 4.15% for the last 2 years, plus the partial yr of 3rd yr.
they advise I will be approximately $1,000 better off by the end of year 5.
For the 3rd yr, they will give me 0% for the days that have gone by already, 2/3 of yr, and 4.15% for the 1/3 of year to come.
I will have to convert to RRIF before the end of the 5yrs, as I reach 71 in the 5th year of the gic. The end of the year I turn 71, is still a few months away from 5 yr end which is in the next calendar year.
Rough calculations do confirm that i would be 1,000 better off after the 5 years.
The first group of calculations, shows term as bought , 5 yrs at 3%.
The second group of calculation shows an approximation of suggested new terms.
The difference approx, $`1,000.
WHY ARE THEY DOING THIS? AM I MISSING SOMETHING, WHAT IS THE DOWNSIDE?
3.00
$200,000.00
103.00 $206,000.00 $6,000.00
103.00 $212,180.00 $6,180.00 $200,000.00
103.00 $218,545.40 $6,365.40
103.00 $225,101.76 $6,556.36 31,854.81
103.00 $231,854.81 $6,753.05 231,854.81
3.00
$200,000.00
103.00 $206,000.00 $6,000.00
103.00 $212,180.00 $6,180.00 $200,000.00
4.15 $214,664.83 $2,484.83
104.15 $223,573.42 $8,908.59 32,851.72
104.15 $232,851.72 $9,278.30 232,851.72
7:43 am
March 30, 2017
Offline
assume ur calculation is indeed correct and matches what they say as well,
I am highly perplexed as well why they just call you up to give u an extra $1k over the remaining term.
Or they mean ur are $1k better off the remaining 2yrs, but ur effectively enter into a new 5y GIC at 4.15%, which is way below a 5y GIC market of 5%+. This prob makes more sense why they are doing it ?
7:52 am
October 21, 2013
Online
It might be useful to ask them to send you this offer in writing.
If they won't, then it can be safely ignored.
8:24 am
January 17, 2021
Offline
a follow up email from them, after a phone discussion, confirms what I described
9:33 am
September 11, 2013
Offline
Lotsa folks in 5-year GICs might be unhappy these days so maybe they're trying to sweeten you up, give you a pleasant surprise, so you're more apt to keep your RRIF with them. Kinda weird that you forfeit your interest for year 3 so far, maybe you can counter with you want your interest for year 3 so far too. Otherwise, I'd ask them why they're doing this unnecessary offer and if it sounds plausible take the offer, after confirming maturity date remains unchanged. Check your next monthly statement to make sure all looks as email says.
12:11 pm
October 21, 2013
Online
Do you have any reason to think you have recently become more "valuable" to this FI? e.g. did you get a credit card from them, open a new account, bring in more money or transfer out a large chunk? Such activities might bring your name forward for more intensive marketing.
12:32 pm
March 30, 2017
Offline
anita555 said
a follow up email from them, after a phone discussion, confirms what I described
so they really just reach out to you to hand u an extra $1k over the next 2 years with no strings attached ?
Sounds like a charity more than a bank.
Congrats, you won the lottery !!
P/S Is your 5y GIC redeemable or one of those resettable by any chance ?
1:44 pm
November 9, 2022
Offline
For any of you here that dealt with a subsidiary of Vancity called Citizens Bank.
If you bought a GIC and the rates went up they would also renew the current value of your other GICs (principal + int) and give it the higher offered rate with the same maturity date. Pretty good eh!!!
2:02 pm
October 21, 2013
Online
I too have 3 GICs that I am re-setting at the 3 year mark, and this will be worth several thousand dollars to me. However, I knew this would be an option when I bought the GICs in the first place and am now choosing to take advantage of it. Nobody has phoned me about it. I've already made one such conversion this month.
Question to OP: Are you willing to tell us which FI this is, or at least whether it is a bank or CU?
3:20 pm
March 30, 2017
Offline
I would guess both OP and Loonie has it with Meridian.
If so that is a feature of the raise-the-rate GIC. Effectively the initial rate is lower than the best rate out there compares to other FIs, the holder has the right to ‘up’ the rate once.
so it’s not really them calling a customer and giving away free money. Well I guess it still is, as most ends up not exercise this free option or forget about it..
7:13 pm
October 21, 2013
Online
No, my GICs are not with Meridian. It was simply a condition of this particular issue of GICs, which were at a promo rate which was the highest on the market at the time. (Closed bond CU.)
5:19 am
March 30, 2017
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Loonie said
No, my GICs are not with Meridian. It was simply a condition of this particular issue of GICs, which were at a promo rate which was the highest on the market at the time. (Closed bond CU.)
Ah I stand corrected. If ur GIC has 1-2 year remaining, now is prob a good time to up the rate, assuming that CU curve is more or less inverted as well ?
Also the OP indicated the new 2y rate will be 4.15%, which is quite a bit lower than mkt. I prob guess that one wrong as well, not Meridian or a simple raise the rate feature. Still perplex why the FI is giving away 1% on 2 years, vs simply issuing a new 2 year at 4.8% etc. why pay 1% away vs 0.65%….
9:28 am
October 21, 2013
Online
No, the curve is not inverted, but I don't think it needs to be. All it needs to be is significantly higher than the original, which it is. I could have waited one more year as I have two years left, but I felt it was not worth the risk plus it would have to be quite a bit higher to compensate for no raise in the coming year. The rate they gave me this time is a bit higher than what is posted for some unknown reason.
I wonder why we haven't heard any more from OP. Perhaps there was a misunderstanding.
Please write your comments in the forum.