Orange Key $25 bonus Code

ING Direct now offers the highest interest Tax Free Saving Account (TFSA) in Canada at 3.0%.  Not only is it free, they are offering a $25 bonus directly into your account when you use an “orange key” code Note that the bonus requires a minimum deposit of $100 with the initial registration cheque.

Get the latest Orange Key Referral Code

Regular reader, Rajesh, gave me the heads up that ING Direct has taken the initiative to have the first Tax Free Savings Accounts (TFSA) available in Canada.  Yes I know, TFSA’s aren’t supposed to be available until Jan 1, 2009, however, ING has taken a creative approach to allow you to open one now.

How?  They will double the interest on the TFSA from now until the new year and automatically register your account with CRA on January 1, 2009.  The double interest will pay for any tax owing from their regular interest rate earned until the account is converted to tax free status.

More from ING Direct:

While we can’t help you avoid taxes in 2008, we can pay you more than enough bonus interest to cover those taxes! Effective January 1, 2009, funds deposited in the promotional Tax-Free Investment Savings Account opened between October 4 and December 31 will be transferred to a new Tax-Free Savings Account so you won’t miss a minute of Tax-Free interest.

Open an ING DIRECT promotional tax-free Investment Savings Account today and on December 31st we will double your interest payment. This should be enough to cover any tax you’ll need to pay on interest earned and will help you get a head start for tax-free saving in January.

Seems like a smart move by ING Direct to take advantage of the TFSA hype and being the first to market.  I’m waiting in anticipation for other institutions offer their TFSA’s, especially the discount brokerages.

How will you use the TFSA when it becomes readily available?

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This seems like a good deal. I’ve scheduled a post for next week on it – I can’t get away from the market volatility stuff this week!!! :)

We’ll be doing $5k for sure – maybe more.

Isn’t the TFSA best used for “growth” stocks? Or maybe foreign dividend payers so you can get the tax shelter?

I say growth stocks because if you get a big gain from the 5k/year, all the additional gains on that initial gain are also tax free. So, it seems to me like putting it in a low interest account isn’t the best way to go.

Any thoughts?

Scotiabank will also allow you to pre-register as well but without the double interest initiative, so not as good.

Also, I haven’t been able to see a set up yet where you are given an option of designating the TFSA as the destination account when buying investments online.

Does anyone know if registering with one of the banks vs. a broker will mean you are limited to what the banks can offer in terms of investments?

Thanks for the ING tip. I shall check it out.

I am planning to max this account yearly, likely with stocks.

As someone who might not have all the info, I have a question for all the intelligent and gifted members of the blogosphere.

Within the TFSA, I buy a growth stock. It goes up 300% (…riiight?).
I then sell it and hold cash within TFSA. Then take the cash out with no capital gains?

I have commented on this before: If I put the whole $5000 in right now, ING will pay about $31.64 (taxable in your hands) in additional interest between now & December 31. So I see $62.28 less taxes = approx $44.30. Those of you in a higher tax bracket will see even less!

If I bought $5000 of dividend stock returning 5% (lots of those available this week) I would earn at least $52.08 (more depending on dividend date). Taxed at -1.48% I see 52.85 at year end. This dividend rate is likely to continue. ING’s 6% ends Dec 31, so you would have to change your holdings to see continued growth.

I feel this is inexpensive advertising for ING, who will get each customer they hook at a cost of about $30. If they can keep those customers in that account rather than a GIC product until September, they will have recouped their costs.

Just my $0.02


I think it depends, dividend income is not taxed as much as investment income so I prefer to use my tfsa’s for investment income such as gic’s or high interest savings account.
Don’t forget if you use for stocks and you lose money I do not think you would be able to deduct it as a capital gains loss, I am not too sure about this though.

DAvid – excellent point.

I think however for people who are going to start use their TFSA as an pseudo-emergency fund (like me) – the ING deal is pretty good since I want to keep the money in a high interest savings account.

You are right – they are just paying a small fee for each new customer.

I’d be interested to see the difference of putting $5k of borrowed money (ie: from HELOC) into a regular investment account vs. a TSFA account (for say, purchasing stocks). Since you cannot claim the interest on the HELOC if investing through the TSFA, I’d like to find out which method is more efficient.

BTW, I’m not sure how David came up with a tax rate of -1.48% on the dividend payouts. Can you explain further?

There are so many variables to your question about TFSA, that you might wish to narrow it down a bit, so a comparison can be made. For instance, in BC just now Large Corporate Dividends are taxed at such a low rate, that you could earn a dividend income of about $70,000 without paying taxes, or even getting a rebate! Thus, depending on the income you have, and it’s source, the TFSA might never match tax deductible interest. On the other hand, if you invest in stocks that have a high return (on the order of twice your marginal tax rate) due to capital gains, then the withdrawal of that income might benefit you over the tax deductible route.

So, $5000 invested via TFSA per year for 5 years at 7% would grow to $28754 less $3375 in loan costs (4.5%) gives a profit of $379.

But $5000 per year in non-registered at 40% tax rate would grow at a 7% rate of return to $28754 for $3754 gain less capital gains taxes ($750) less loan costs ($2025) leaving $979 profit.

Remember TFSA is a tax-free Savings Account. Trying to use it as an investment account therefore may not work as expected.

You can find info on BC dividend tax rates here:


Another advantage of a TFSA over dividend income is that even though a large amount dividend income is tax free (if it is your sole source of income) it still counts as income and can effect your ability to recieve Old age benefits after 65….plus dividend income is grossed up when calculating your eligibility for Government benefits….whereas any income from a TFSA will not be counted as income even in regards to qualifying for some government benefits….not that this will matter for most people for many years but still something to think about over the long term…..

Ing may be the first to offer INTEREST on the TSFA, but Scotiabank is the first chartered bank to offer the TSFA. You can visit the branch now and complete the paperwork in advance of the January 1 active date. You can also schedule your pre authorized deposits. In fact, this site has an ad at the top right for the BNS TSFA.

Thanks for posting that information. I’ve only seem limited information from TD & BNS so far, but ING appears to be disclosing as much as they can in the hopes of getting out of the gate first.

Our thoughts were for this year we’re going to roll our emergency funds into our TFSA for this year, and in subsequent years use it for investing.

Its great positioning by ING. They position themselves as the savings bank. Being the first to offer the product is great for them.

I’ve seen a TFSA analysis reports done by a bank economist. I see this as a product that the banks will be pushing more in 2-3 years when the maximum account size is worth their while.


Does anyone think that a person could hold the ING TFSA until Jan 2 and then start one with an investment broker for stocks instead? The ING details line about registering the account with the Cda Gov makes me feel that you are locked into the account with ING and can’t move your money around like this.

Basically, if you have a $5K account with ING TFSA registered, can you empty it and start a TFSA with someone else?

Thanks. Great blog btw.

We actually have a ING High interest savings account in my wifes name (stay at home mom) for savings for our child. This past weekend we opened a TFSA at ING and moved all of the money over into it to catch the higher interest. At least now the interest won’t be taxable and thus take away from my dependent claim!

I actually can’t believe it has taken the banks this long to be the “first” out of the gate. Sometimes the tortoise does win the race!

This is somewhat off-topic but I am looking at opening a TFSA in January to park my emergency fund, which currently sits in a high interest savings account. However I do my banking and investing with TD and it would be nice if I could consolidate all my money there. Since their choice of savings account is rather poor I was wondering if it was worth it to put my emergency money in a money market fund instead (e.g. TDB164).

I also have a somewhat off-topic question but I hope some expert here can answer me.

Let’s say, I deposit 5k into my TFSA at the beginning of the year. Luckly, I get 20% return in 2 months. Then I withdraw all the money , 6k here, from the account.

Here is my question. What is the future contribution room for my TFSA in the rest of the time of the year? 0k, 5k, or 6k?

In response to Marvin, it appears that if you max out your contribution room in a year, and withdraw any amount, the room provided by the withdrawal will not be available until next year.

Once I’ve withdrawn my money, is that contribution room lost?

A: No, you never lose your contribution room – in fact, you can recontribute amounts you have withdrawn. You have to wait until the next year to recontribute, but you can carry forward the recontribution room indefinitely.

For example, say you contribute $5,000 to your TFSA in January 2009 and another $5,000 in January 2010. Then, in the summer of 2010, you withdraw $3,000 to pay for some repairs to your home. You can’t recontribute that $3,000 in 2010, but in 2011 it will be added to your contribution room again, meaning you could contribute up to $8,000 in 2011.

I assume transfers from existing investments accounts are permitted, but does anyone know if they will be transferred in kind without the need to sell and hence pay capital gains on the way into the account?

Even if they can be transferred in kind, you will most certainly have to pay taxes on the paper gains the moment it goes into this tax free account.

Otherwise people would invest outside the account and only transfer the profitable investments to the account, taking the tax loss on the unprofitable ones.

So yes, transferring into the account HAS to cause gains to be taxable as of that date. Otherwise it’s a giant tax loophole, and governments in 2008 don’t create such easy accidental loopholes.

As a customer of ING Direct I quickly switched last weekend.

Hi All,

We we wil be using TFSA’s as the first retirement savings plan, since it is superior to RRSP’s for many people, especially anyone saving a comfortable nest egg. Using it for an emergency fund is a wasted opportunity.

There are 2 articles on this blog about TFSA’s vs. RRSP’s and the affect of clawbacks for seniors on the benefits of TFSA’s.

TFSA’s look like they will be basically exactly like RRSP’s, except for the tax consequences for contributions and withdrawals. There were a few questions here about mechanics of the TFSA, which should be just like a similar RRSP.


Finally government is doing something to help with taxes

Do you know if it is possible to open up multiple sub accounts (like ING Direct’s other savings vehicles) in the TFSA account they offer?

I just opened up an account today, and was wondering if this feature is available for the TFSA, so any comments on this would be appreciated muchly.

All in for $5000 a year savings … is the return higher than a 1 year GIC and free of tax

Need some clarification.. (thanks in advance for any help!) will any capital gain earned in the TFSA account be counted towards the contribution room?

E.g. if i deposit $4000 in a TFSA a/c and used that to purchase a stock that I sell for $5000. After selling the stock, I have $5000 cash in my TFSA, do I still have $1000 contribution room left for the same year or not?


ING DIRECT will likely lose a lot of it’s deposit if it doesn’t increase it’s TFSA rate

I have mine with TD Canada Trust. I think the best way to make money is by picking up a mutual fund in an industry that you think will perform. I put my $5000 in a high yield mutual fund.