TD Simply Save Program

[Robillard]

TD has introduced a program that automatically diverts a set amount of cash ($0.50-$5) from your chequing account to a savings account (including a TSFA high-interest savings account) whenever you use your TD Access card. They have also offered a sweetener of $10 for every $100 saved this way up to a maximum sweetener of $200. On the surface, this sounds like a good thing since it encourages savings and makes it automatic; plus you get a sweetener to boot. To take part in this promotion, you need to sign up by July 24.

On the other hand, this offer seems like an attempt by TD to generate additional fees from monthly account charges and per-transaction debits. First consider how many transactions it would actually take to max out the sweetener of $200. If you divert the maximum of $5 per transaction, it would take 400 qualifying transactions to reach the maximum. Furthermore, one would have to be very careful to ensure that their chequing account does not fall below the minimum balance amount, which would trigger the monthly account fee.

Once the funds have been diverted to the savings account, it becomes more difficult to access these funds without paying fees. Most savings accounts offered by TD allow only one or two free debit transactions per month (meaning any debit to the account, not debit card transactions). The charge for additional debits is typically $1.25 per transaction. And of course, the interest rates on savings accounts, even high-interest savings accounts, are very low right now. TD offers 1% interest on their high interest TSFA account, 0.75% interest on their non-registered high interest savings account (with a minimum balance of $5000 to qualify for interest), and 0.05% on all other savings accounts (0.25% for amounts above $5000). So, the additional interest earnings probably won't cover for the additional fees.

My assessment is that while this program is interesting, particularly if one needs help saving, it is a bit of a ploy by the bank to generate additional fees, particularly from people who don't track their money carefully.

[msimms]

Great Analysis. Thanks.

[jordanclark]

I agree that this could end up causing people trouble, but I like to get a freebie when I see it.

Here's my strategy to get $200 for free.

1) I already have the select service account which includes unlimited transactions and is free because I keep the minimum balance.

2) My son has a youth savings account which includes unlimited transfers.

3) Set the payment to the maximum $5 to get the most bang.

4) Each month I withdraw cash for the food's cash budget anyways, so from now on I'll simply split the withdrawal into say 4-6 transactions. Repeat.

5) ~6 months later, boom. Free money, transfer the original cash and the $200 from my son's account back to me, take the family out (don't worry his real money is invested in an resp)

Cheers.

[MoneyGal]

The point to ponder is, where do banks make their money in ultra-low-interest enviroments? By fees, of course!

I should google to see if I can find the percentage of TD profits that come from fees, as opposed to interest charged.

[dustmaker]

I do not understand Robillard's point. You'r making automatically 10% and you're worried about saving accounts not paying high interest?
They have what's called GIA account, it seems there would be no additional fees and could just go for a year and at the end withdraw my $2000 with $200 in interest. Does that make sense? It does to me unless there's something I don't know. I do have a checking account with them already.
Thanks

[CanadianCapitalist]

I wrote about this topic on the blog and I'm enthusiastic about this program. If you already have an unlimited transactions account with TD Bank and you watch out for the traps that Robillard points out, you could use the debit card for routine transactions and basically earn $200 over the course of a year.

‘Simply Save’ with TD Bank

[Robillard]

Originally Posted by dustmaker

I do not understand Robillard's point. You'r making automatically 10% and you're worried about saving accounts not paying high interest?
They have what's called GIA account, it seems there would be no additional fees and could just go for a year and at the end withdraw my $2000 with $200 in interest. Does that make sense? It does to me unless there's something I don't know. I do have a checking account with them already.
Thanks

This whole program is sort of like how TD offers free debit transactions in youth accounts, and adult accounts with a student plan. This encourages young people to make all their transactions debit transactions, or at least as many as possible. When I was a student, I kept minimal cash in my wallet and used my debit card on almost all of my purchases, even tiny ones. After I graduated, and the student fee plan on my account expired, I got a rude awakening in the form of debit transaction charges.

The whole purpose of this program is to engender the habit of using your debit card instead of cash. TD is relying on the average customer being less savvy than the people on this bulletin board. Unwary customers that don't do a good job of tracking their money can easily fall below the minimum balance necessary to waive their monthly chequing account charge. The bank can also earn fees on people making excessive debit transactions per month from their chequing or savings accounts, and from customers withdrawing from non-TD ATMs. Moreover, if more customers are using their debit cards more often, retailers are more likely to want to accept debit card transactions (it wouldn't surprise me if the bank-supported debit card consortiums like Interac charge retailers to use their service).

I will also note that I think my initial assessment was somewhat misinformed. It appears that the sweetener can be earned for an entire year, but you have to sign up by July 24. Thanks for making me revisit my initial post dustmaker. Incidentally, it would take 400 transactions at $5 saved per transactions to max out the sweetener. I figure I wouldn't come anywhere near that number if debit card transactions in a year.

[dustmaker]

One more point. I am assuming this $200 will come to you as interest, and as such will be subject to your marginal tax rate. In my case 44% so our government will make $88 on it and I will keep $112. Will this be the case?
Thanks.

[AdamO]

Interesting product, and discussion on it, Thanks.

It seems pretty close to the return my wife and I get by using our credit cards, to earn the points and never carrying a balance on them, Except it's more forced savings, which I love... Something to think about.

[Retired at 31]

Originally Posted by AdamO

Interesting product, and discussion on it, Thanks.

It seems pretty close to the return my wife and I get by using our credit cards, to earn the points and never carrying a balance on them, Except it's more forced savings, which I love... Something to think about.

You make 10% return on credit card purchases? Or your return of $200ish is similar? If it's the former, sign me up!