The Globe and Mail reports in its Wednesday edition that it is better to consistently get a good rate than deal with a bank that pays a minimal rate and strategically offers out tasty rate bonuses to a select few.
The Globe's Rob Carrick writes that savings accounts are a big deal these days because they offer an efficient way for banks and credit unions to vacuum up money they can lend out at higher rates. The spread between rates on deposits and loans is a foundation of bank profits, and bonuses are an increasingly popular strategy for competing in the savings account category. Tangerine, Bank of Nova Scotia's on-line bank, pays 1.2 per cent on its savings account. In a recent promotion, however, it offered 2.75-per-cent interest for six months to new clients opening a savings account, tax-free savings account or registered retirement savings plan. If you get 2.75 per cent for part of the year and 1.2 per cent for the other part, your overall rate is a blend of the two rates.
Banks offer rate bonuses in a targeted way that lets them appear generous in some instances while adding only incrementally to the total amount of interest paid. The major banks all have saving accounts paying around 1 per cent at best.
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