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?

  • the documentation of the instrument will specify what happens when the term ends. – mhoran_psprep Feb 17 '13 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. – mpen Feb 28 '13 at 17:31

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.

  • 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. – mpen Feb 28 '13 at 17:28

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