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Simple vs compounding rate
August 9, 2020
1:19 pm
bird
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I noticed that all GICs I've had with my bank calculate simple interest, yet agents stated that it would be daily compounding. Did anyone else notice this discrepancy? In the US banks promote a compounded APR rate in big font along with a tiny print of the smaller actual rate. Here I see only one rate regardless of its compounding features...So which is it?

August 9, 2020
1:44 pm
Norman1
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I've never seen a GIC or term deposit that compounds daily. It is usually annual or monthly compounding.

The only one I've seen who does daily compounding is Canada Revenue Agency.

Are you sure that agents weren't talking about the daily accrual of GIC interest?

September 6, 2020
7:11 pm
topgun
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Norman1 said
I've never seen a GIC or term deposit that compounds daily. It is usually annual or monthly compounding.

The only one I've seen who does daily compounding is Canada Revenue Agency.

Are you sure that agents weren't talking about the daily accrual of GIC interest?  

If you deal with CIBC or Simplii they show daily compounding.
Simplii
1 year Annual Rates.897% APR .90%

Have a Great Day

September 7, 2020
7:49 am
Loonie
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Savings accounts normally say "calculated daily", which is not at all the same as "compounded daily". It just means that day's interest is calculated on that day's balance, then added to the next day's and so on; not compounded.
APR, by definition, doesn't include compounding.

September 7, 2020
1:28 pm
Norman1
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This is the fine print for the Simplii GIC's. As Loonie described, interest is calculated (not compounded) daily at the 0.897% APR rate and compounded monthly to give the 0.90% APY rate:

*Interest is calculated on the daily closing balance based on the simple interest rate and is paid or compounded (depending on the interest option chosen) at the end of each month. Your GIC is non-redeemable and must be held for the entire term. …
…
³ Annual percentage yield (APY) - the effective interest rate, illustrating the effect of compounding, or earning of interest on interest.

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