My wife, who is an ING customer, received an email last week with a new promotion for the TFSA account which becomes effective in January. The rules for the TFSA are that you can open up a TFSA account with a financial institution starting December 1, 2008 but you can’t transfer any money to the new account until Jan 1, 2009 – or more likely Jan 2 since Jan 1 is a holiday. This is kind of an odd situation since there isn’t much motivation for a person to open up an account early and then have to wait a month to put money in it. Of course there is a lot of motivation for the financial institutions to get you to open up an account so that they can get your money!
The deal is that if you open up a TFSA account with ING right now – they will pay you 3% (their current rate) and then on Dec 31, 2008 they will pay you another 3% interest. Keep in mind the 3% is annual so you will only get a small fraction of that. The idea is that for someone in a high tax bracket who pays almost 50% tax – by doubling the interest payment, they are essentially paying the income tax and creating an effective TFSA starting right now. Of course, for someone in a lower tax bracket, this bonus is that much better. According to my rough calculations the “extra” bonus should work out to about $35 on a $5,000 deposit. Not a huge amount but it seems like a pretty good little bonus to me. ING isn’t really putting your money in a TFSA account but rather an open account (taxable) and paying for your taxes (and then some).
We’re planning to put $5,000 into a TFSA for next year and this offer sounds pretty good to us. I haven’t been too big on emergency funds in the past because of the tax drag but the TFSA certainly takes care of that concern.
Is anyone else going to take advantage of this offer? Are you going to wait until the new year to worry about it?