Scotiabank’s headline-grabbing new high interest savings account comes with a significant catch – it’s essentially a GIC.
The bank announced Thursday it would offer up to 1.6 per cent annual interest on its new MomentumPlus account, but obtaining that rate requires customers to lock in their funds for a full year.
The interest rates work on a graduated system, paying a base interest rate of 0.7 per cent, and adding a premium ranging from 0.75 per cent for a 90-day hold up to the additional 0.9 per cent if the cash is locked in for 360 days. Any withdrawal from the account resets the clock, nullifying the premium payout.
To boot, customers are unable to use the account at ATMs or for point-of-sale transactions, nor can they be set up for automated bill payments. Scotiabank will also reset the clock if customers transfer funds from the high interest accounts to another Scotiabank savings account, though the base rate of 0.7 per cent still handily tops the 0.02 per cent paid on the bank’s Money Master Savings Account.
Further underscoring the point is Scotia’s current one-year special GIC rate of 1.5 per cent, not to mention higher rates offered elsewhere.
Oaken Financial currently offers a 2.5 per cent rate on one-year GICs, as parent company Home Capital Group beefed up the payout in order to attract depositors after a crisis of confidence drove skittish investors to pull their funds in spite of the fact deposits are insured by the CDIC up to $100,000.
While the term incentives are reminiscent of those offered by progressively longer term GICs, Mike Henry, Executive Vice-President of Retail Payments, Deposits and Unsecured Lending at Scotiabank, told BNN in an emailed statement that the firm views the offerings as distinct and complementary, rather than competing with one another.
"Unlike a GIC, your money is liquid and always accessible," he said. "Customers always have access to their funds.”