How to Evaluate a Promotional Interest Rate Offer

On the Thrifty Blog we like to bring to your attention promotional interest rate offers on savings accounts so that you can make an informed decision about how to make your hard-earned savings grow.

Not all promotional offers are created equal, however, and details matter.

With that in mind, here are our Top 10 Suggestions for how to evaluate a promotional interest rate offer.

1. Do You Qualify for the Offer?

Existing vs New Customers Only: Is the offer open to existing customers or new customers only? We see both types of offers. (For example, this promotional offer from Simplii is open only to new customers)

New Deposits Only: A common feature is that the offer only applies to “new deposits”. Terms and conditions vary. Read the details on what is or is not a “new deposit”.

Other Required Products: Do you need to subscribe to more than just a savings account to receive the offer? Some offers require customers to open up a savings account and other products, such as a chequing account or credit card.

2. Will the Bank Confirm You Are Registered for the Offer?

Many banks have outdated systems and may not automatically confirm your registration.

Getting a written confirmation upfront will avoid a battle with your bank later on.

Trust us, we have seen customer complaints and you may find yourself fighting an uphill battle. And, if you have a negative experience with a bank, let us know — we are sometimes able to help.

3. Are There any Minimum Balance Requirements or Maximum Balance Limits?

4. Are There any Fees That Will Eat Into Your Return?

5. What is the “Non-Promotional” Interest Rate?

There is usually a significant difference between the promotional and non-promotional rate — that is to be expected. If that is the case, you will want to remember to re-evaluate your options when the promotion ends.

6. Will You Remember When the Promotion Ends?

Many people “set it and forget it” and if there is a big step down in rates between the “non-promotional” and “promotional” rate, you may find yourself disappointed.

Set yourself a reminder which will allow you to transfer your money in a timely manner, if you choose to, and to double check that you have been credited with the promotional interest.

If you decide to transfer your money out, you may want to try calling the bank to see if they will extend the offer. You may be surprised at the result.

7. When is Interest Payable?

Every month? At the end of the offer?

Paying a “bonus” at the end of the promotional period and not at the same time as regular interest can reduce your overall return (because the additional interest is not compounded). However, if your offer crosses over from one calendar year to the next you will be able to defer income tax on the bonus payment by another tax year.

8. How is Interest Calculated?

Is it based on the daily balance? The lowest balance of the month? (yes, we’ve seen that before).

A rate that initially looks attractive might be disappointing on closer examination (as is the case with some Manitoba credit unions, as we point out in our article).

9. What Happens When Interest Rates Change?

Promotional offers are generally comprised of a “regular” interest rate and a “bonus” interest rate. What happens to your “all-in” rate if rates change during the term of your offer?

……Last, but not Least…..

10. Is it Worth Your While?

Your time is valuable and opening a new account can be an administrative headache — application forms, void cheques, verifying trial deposits, mailing in forms, etc.

Chasing promotional offers is not for everyone.

Make sure it’s worth it before you dive in!