Canadian Tire TFSA Review: It Won’t Make You Better Financially

Disclaimer: I am not a financial advisor. You should consult a financial advisor for any investment decisions. Do your own due diligence when considering investing, and this information is for education/informational purposes only. The article “Canadian Tire TFSA Review: It Won’t Make You Better Financially” serves as educational content, not investing or financial advice.

If you’re like me, then you probably didn’t realize Canadian Tire offered banking services. This doesn’t come as a surprise for everyone as they have partnered to offer Triangle Rewards, which offers a credit card exclusively as well. Nonetheless, I had no idea they offered a TFSA.

Imagine that, not only have you been able to get Canadian Tire bucks, you can now have a Canadian Tire tax free savings account. Why does it seem like the major retailers are getting into banking?

Anyways, I want to take a little time to discuss the accounts they offer, but primarily focus on their TFSAs and determine if they offer the best Canadian TFSA nationally.

I’ll also provide my two cents (maybe two Canadian Tire bucks in this case, ha) as to whether I would personally use any of their accounts.

Let’s start.

What Is a TFSA?

If you’re new to this website, I have talked about TFSA’s in the past. In my guide to investing for beginner’s I have elaborated on what the type of account it actually is.

how to start investing in Canada: Everything you Need (2021)

I recommend checking out the article if you’re looking into investing as a beginner.

Anyways, a TFSA is known as a tax-free savings account. It’s an account that is registered with the Canadian government that allows you to put money into it and earn tax free income.

TFSAs are very popular and I’m sure that you have heard of them. They are certainly my favourite investment account for the sole reason that its tax free.

They are traditionally popular to use for retirement accounts or for stock trading. Just to illustrate the point, let’s look at a very quick example.

TFSA calculation

Here we have Serge who decides to invest into a TFSA. He deposits $1,000 into his account and purchases some stocks and bonds with a good dividend rating.

At the end of the year, he decides it’s time to purchase some financial books and read more about investing. To pay for these books he decides to sell all of his investments and withdraws everything.

During the year, his investments increased in value by $100 and he earned dividends of $40.

The amount of tax he pays is $0.

He keeps the $1,140 in his pocket tax free. Pretty sweet, isn’t it?

While there is much more to understand about a TFSA, we won’t discuss that here. I will be releasing a guide of a TFSA eventually in the future.

But now you have the basic concept understood, let’s continue.

How long has Canadian tire offered banking services?

To speak a little about Canadian Tire Corporation, specifically the Canadian Tire Bank, (or Canadian Tire Financial Services Limited) they have been serving the Niagara community since 1961.

Previously, they were just offering third-party credit processing for retailers within their area, but began to continuously grow their offers. Eventually they would provide credit-processing facilities for the increasing expansion of Canadian Tire stores.

CTFSL became the first non-deposit financial taking financial institution to launch Mastercard credit cards, which today has over four million cardmembers. That’s pretty impressive if you ask me.

Today, Canadians are able to collect Canadian tire money virtually and through their Mastercard’s still being offered to anyone. The rewards program is now called Triangle Rewards where you can earn points on purchases made at Canadian Tire, Mark’s, SportChek and other select retailers.

While this is all interesting, let’s look at the different accounts that the Canadian Tire Bank currently offers.

Accounts Canadian Tire Bank offers:

There seem to be three different types of accounts they offer:

  1. A high interest savings account
  2. GIC investments
  3. Tax free savings account

You can either have a savings account that earns a high annual rate of interest or invest in GICs. The option is totally up to you.

If you’re wondering what GICs are, it stands for a Guaranteed Investment Certificates. These are a type of investment where you lend the big banks (or any bank that offers them) some cash for a certain period of time.

Usually, they will have certain rates over a yearly period. The longer you hold your money with this GIC, typically the better rates you can earn.

We will look at the rates the Canadian Tire Bank offers down below to understand this concept better.

Features of the Canadian Tire High Interest TFSA:

You’re probably wondering, what is the TFSA interest rate on this?

Currently, the Canadian Tire Bank offers interest rates up to 1.25% whenever you open a TFSA through them. The same rate applies with the Canadian Tire HISA (high interest savings account). While this is considerably good given that we are starting to dig ourselves out of a pandemic, note that this amount does not cover inflation.

On average, inflation has been around 2%+ a year, but with how the economy has been so far into the year, it has been significantly more.  

Savers are 100% losers in this case with this interest rate.

rich dad poor dad summary

Yet there are other benefits to holding a TFSA through the Canadian Tire Bank. There are no monthly fees if you decide to open this type of account with them.

This is a significant advantage for you as some banks or other financial institutions will charge a maintenance fee. For example, TD charges a maintenance fee of $25 per quarter to hold a TFSA through them. However, as they do state, there are certainly ways you can rid of this fee and the fee only applies to you if you hold less than $15,000 in the account.

Additionally, there is no minimum amount that you need to deposit through the Canadian Tire Bank. As long as you have any amount, it seems like you can submit your application to open an account.

Some banks and financial institutions will require you to deposit a minimum amount like $50 for example. So, if you don’t have much money to contribute weekly, monthly, or yearly, this could be a lucrative TFSA for you.

So just recap. The features of this TFSA are:

  • Earn up to 1.25% annually
  • There are no monthly fees
  • No minimum deposit needed to open an account
  • Earn money tax free

Features of the Canadian Tire Tax Free GIC:

Some features are different from the tax-free high interest savings account.

The first is that there is a guarantee for your entire term. This means that you are guaranteed to earn the rate of interest prescribed. So, if you are to earn 0.85% annually, you’ll earn that amount.

While it would be very problematic if they didn’t follow through on their rates, this feature necessarily isn’t surprising. From what I understand, most GICs are generally low risk and follow through with paying out interest.

There is a minimum investment amount you need to deposit to open this type of account. Canadians need to deposit at a minimum of $1,000. $1,000 is quite a bit of money, but regardless, you will not be able to open an account unless you are able to come up with the funds.

With this type of account, you are able to select whether you want your interest to be paid whenever the GIC has matured or earn your interest annually. You will need to specify and inform them of this decision whenever it comes time for you to open the account.  

The terms they offer is only from one to five years but the best thing about this is there are no fees or commissions you need to pay back. With GICs generally there are no fees or deductions taken off the interest you earn. A nice benefit to investing in a GIC.  

Annual rates are similar to their regular GIC investments. GIC rates are:

GIC Years:Annual Rate:
1 Year0.50%
2 Year0.75%
3 Year0.85%
4 Year0.95%
5 Year2.05%

Just to recap. The features of this tax-free investment are:

  • The rate is guaranteed for the entire term
  • The term offered is between one to five years
  • Minimum investment of $1,000 needed to open account
  • No monthly fees
  • Can choose whenever you want to earn your interest

Are there any management fees associated?

No, there does not seem to be any management fees associated with these accounts. There are certain fees and costs associated with their TFSAs, which we will look into next.

What are the costs of their TFSA?

Despite there being no management fees, there are several other costs that are associated with your TFSA with the Canadian Tire Bank.

Here’s a list:

  • Any drafts will cost $5.00
  • Wire transfer to a different Canadian financial institution or bank costs $20.00
  • Wire transfer to a foreign financial institution will cost $30.00
  • If the account goes into overdraft $5.00
  • If you stop payment with complete information, it will cost $10.00
  • Payment stopped with incomplete information will cost $20.00
  • Copies of past account statements will cost $5.00 per copy
  • Transferring the Canadian Tire Bank TFSA to another financial institution or brokerage will cost $50.00
  • Inactive accounts after two years will be charged $20.00
  • After five and nine years the inactive account(s) will be charged $30.00

Most of these costs can be avoided if you are planning to just open the account and save money into it for a prolonged period of time. You can see the full list of costs associated with TFSAs here.

What the TFSA Does Not Offer:

The biggest thing that their TFSA does not offer is a trading account. Now of course, not every financial institution does offer this feature however, if you are looking to have a TFSA with index funds, stocks, or bonds, you will have to look elsewhere.

If you did not know already, you can open TFSAs with select institutions and brokers and therefore be able to trade public securities in the account itself. Honestly, this is what I prefer as I can earn better returns than a traditional savings account will ever offer.

We can count this as a disadvantage because seemingly this may turn away some customers from deciding to open their TFSA through them.

Their savings account is ideally for those who are looking to be passive or defensive investors, where they don’t need to decide what to invest in and want very little risk.

However, seeing the rise of roboadvisors and manager portfolios offered today, this is another disadvantage that the Canadian Tire Bank has for their TFSA’s.

Also, this account does not offer high returns that you could get for a TFSA. Yes of course, the tax free GICs are a nice touch, but the 2% you could earn barely covers inflation and you will barely earn any true returns over time.

With a TFSA, wouldn’t you want to seek the highest return that you can earn possible? Given that the earnings are tax free, that’s what I would personally want to do. And this TFSA, doesn’t offer that.

Pros Vs. Cons of This TFSA:

Allow me to construct a table for your eyes to help visualize the picture of this TFSA.

What I Like:What I Don’t Like:
No monthly feesNo options to trade stocks, bonds, etc.
High interest rateInterest rates may not beat inflation
For GIC: you can choose when you want to be paidOnly way to contact Canadian Tire Bank and customer service is through telephone
For high interest savings account: No minimum deposit 
Low fees for inactivity 

You may be wondering, why would I list their communication methods as a con? Well, it’s a great question. I think with businesses, there’s an extreme importance to offer a couple different ways to be contacted.

Most are simple, businesses can have an email account, telephone number, and even a live chat.

While this seems to be more of a disadvantage for a business, not a TFSA, all I will say is that if there is some error with my account, I will have to contact the Canadian Tire Bank by telephone, which I may not have the time to wait on a call.

It’s a disadvantage to those who want simple and fast communications to sort issues with their TFSAs. Maybe there is some contact form when you use their online banking, but that’s something I’m not aware of.

Would I use their TFSA?

You know, I feel like the answer is probably pretty obvious. The answer is no.

I want to be able to at the very least, somewhat control how I earn income in my TFSA. If it’s just picking a couple index funds or ETFs, I want that control. A simple interest rate does not provide that.

Plus, I want to try to earn the highest amount of a return that I possibly can, so no, I won’t use their TFSA. Savers are losers and therefore it is not deemed an acceptable return for those looking to earn large amounts for retirement.

I will admit that this seems to be a very safe option for those who are low risk investors. You practically can’t lose much in the way of market value losses. I would hope the account opening process is pretty simple, but you may want to call or do some reviews on that.

Does their TFSA offer one of the best tax-free savings accounts rates? Yes, it seems to.

Likewise with their high interest savings accounts, I would undoubtedly consider using their services for the rate alone. The 1.25% annual interest rate being offered is very lucrative and is considerably high than probably most regular savings accounts. The Canadian Tire high interest savings account is very ideal for holding a 12–24-month emergency fund (or 3-6 month, whatever you prefer).

Especially if you have different bank accounts for different reasons, you can use the Canadian Tire HISA for other advantages. The savings account will be one you can set money aside and never touch. Only to be accessed if it is needed. A bonus for those who have trouble keeping their money set aside.

So, all in all, this TFSA is a high interest TFSA savings account that will be very beneficial to a lot of people who are extremely conservative in their investments, have a low risk tolerance, and/or don’t have a lot of money to set aside on a regular basis.

If you are looking to open a Canadian Tire account (for one of these accounts), feel free to click here.

Concluding Remarks:

I know this also turned out to be a savings account review in a sense, but what did you think of the Canadian Tire Bank TFSA? Are you a big fan of their services? Be sure to let me know down below in the comments.

Maybe I should do a review on credit cards like the world elite mastercard to give you more personal finance content, but you can also let me know about that. Talking about banks and credit scores, while I can’t offer a free credit score to you, I can offer you a free budget spreadsheet.

You can get a free budget spreadsheet when you sign up for my newsletter. Just either refresh the page and wait for the popup, or scroll to the top of the page and fill out the information on the right-hand side.

The budget spreadsheet is easy to fill in. In fact, all of the formulas and charts await your details. You are able to budget for each month, compare that with what you actually spent, and look at your year-to-date totals.

I designed the spreadsheet so I could use it myself, and allow my friends to use it and hope they can have a better understanding of their financial picture, that is simple to complete. What’s not to love about that?

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