Thursday, September 30, 2010

Analyzing Canadian Tire Bank's Introductory Interest Rate

Canadian Tire Bank is offering a 1% bonus on the interest rates they pay on high-interest savings accounts (HISAs). For the first 90 days for new customers, the regular HISA currently pays 2.5% and the TFSA HISA pays 3.5%. But, how much is this bonus interest really worth?

If you put $5000 into one of these accounts, the extra 1% interest over 90 days will earn you a bonus of a little over $12. After the 90 days are up, the interest rate will return to normal, which is currently 1.5% for HISAs and 2.5% for TFSA HISAs.

Getting an extra $12 is better than a kick in the head, but the important thing is to compare the regular interest rates offered on savings accounts by different banks. Unfortunately, the banks tend to trumpet introductory rates and downplay regular rates.

If you're thinking about taking Canadian Tire Bank up on their offer, a couple of points in the fine print to consider are that the bonus 1% has a balance cap of $100,000 and that interest rates are subject to change without notice.


  1. Better than a kick to the head? I guess you're lucky you never pursued a career in marketing. I imagine Big Cajun Man would have come up with "40% more interest than our usual awesome rates!"

    Your comment reminded me when I was a kid we used to say "better than a kick to the head with a frozen boot". Haven't thought about that in years.

  2. @Gene: You're right that my approach to marketing usually doesn't work very well -- understated honesty. There have been a few exceptions, though. Once I was dragged in as a technical guy to talk to a potential customer for a big sale. The customer starting asking questions like, "my understanding is X, is that right?" To almost every question my answer was no, and I went on to explain that the situation wasn't as rosy as the customer hoped. It turned out that I had contradicted several things our salespeople had said. But, the salespeople were still able to close the deal. In this case, I think I actually helped close the deal.