1

Look at http://www.ratehub.ca/mortgage-rates-vancouver and observe mortgages available for 2.0% - 2.05%. Look at http://www.tangerine.ca/en/landing-page/bonus50/index.html it gives you 2.5% interest. I can't understand how the bank can possibly afford such a thing, if it is possible to borrow money in any way or form at half a percent lower then how doesn't arbitrageurs bankrupt it??

3

As is so often the case, there is an asterisk next to that 2.5% interest offer. It leads you to a footnote which says:

Savings Interest Rate Offer of 2.5% is available between January 1, 2015 and March 31, 2015 on all net new deposits made between January 1, 2015 and March 31, 2015 to a maximum of $250,000.00 per Account registration.

You only earn 2.5% interest on deposits made during those three months. Also, on the full offer info page, it says:

During the Offer Period, the Bank will calculate Additional Interest on eligible net new deposits

and:

All interest payments are ineligible for the purposes of calculating Additional Interest and will not be calculated for the purposes of determining eligible daily balances. In other words, any interest paid into an Applicable Account, including Additional Interest, will not be treated as a new deposit for subsequently calculating Additional Interest payments.

I couldn't totally parse out all the details of the offer from their legalese, but what it sounds like is you will earn 2.5% interest on money that you deposit into the account during those three months. Any interest you accrue during that time will not count as a deposit in this sense, and so will not earn 2.5% compounded returns. The "During the Offer Period" qualification also makes it sound like this extra interest will only be paid during the three months (presumably at a 2.5% annualized rate, but I can't see where it actually says this).

So essentially you are getting a one-time bonus for making deposits during a specific three-month period. The account doesn't really earn 2.5% interest in the normal sense. The long-term interest rate will be what it normally is for their savings accounts, which this page says is 1.05%.

  • So basically the bank takes roughly a hit, capped at roughly 300 dollars per account openings? Well, I saw other banks downright handing out cash for such so I guess that's not impossible. – chx Mar 6 '15 at 7:33

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