Tell me more ×
Personal Finance & Money Stack Exchange is a question and answer site for people who want to be financially literate. It's 100% free, no registration required.
up vote 2 down vote favorite

ING Direct is currently offering 2.5% interest for a 90-day GIC, 1% for 180 days, and 1.5% for 270 days.

What would be the advantage of locking my money in for longer if I'm just going to get paid less?

share|improve this question
the documentation of the instrument will specify what happens when the term ends. – mhoran_psprep Feb 17 at 12:10
@mhoran_psprep: Yeah, it told me on the next page though. They really didn't make it easily findable. Essentially you can choose to rollover the principal, principal+interest, or nothing. If you rollover, you have 10 days after maturity to change your mind, otherwise it goes into a new term of the same length with the new rate. – Mark Feb 28 at 17:31

1 Answer

up vote 4 down vote

IMO this means one of two things:

  • the bank thinks that 3 months from now, the interest rates it plans to offer will be lower than 1%; after 180 days, it will go up again.

  • the bank needs more short-term cash than mid-term cash right now, so it offers you a better deal.

In either case, it is unlikely that your 90 day intrest rate will be available 90 days from now, and most likely it will be below 1% unless the bank yet again needs short-term cash from its customers.

With those proposed rates, I would go for half in 90 days and half in 270 days.

Disclaimer: am no economist, just spent a lot of time the past year fretting over the same kind of questions. Feel free to tell me where I'm wrong if you think I am.

share|improve this answer
That makes sense. I was expecting interest rates to start coming up though, so I like your 'need short-term cash' theory better. I've already stuffed my money into the 90 day, so I guess we'll see what happens. Just a small investment, no biggie. – Mark Feb 28 at 17:28

Your Answer

 
discard

By posting your answer, you agree to the privacy policy and terms of service.

Not the answer you're looking for? Browse other questions tagged or ask your own question.