A bit of free money from ING Direct

ING Direct is trying to beat the fray of banks that will be offering TFSAs in January 2009. Even though, to the best of my knowledge, the federal government hasn't yet published the full TFSA rules and details, based on the details available now, banks are starting to jump in.

Here's the announcement they made on October 7th:

Earn special Bonus Interest between October 4th, 2008 and December 31st, 2008 and get saving tax-free earlier!

Because we just couldn’t wait until January 1, 2009 – we’ll cover your taxes!

Bonus Interest!

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.

Tax-Free

With the new Tax-Free Savings Account, any interest earned in an ING DIRECT Tax-Free Savings Account will not be taxed.

It seems this account is identical to their regular savings account, except it automatically gets registered as a TFSA on 1 January 2009, and on 31 December 2008, it gets a bonus interest payment equal to all the interest paid in the last 11 weeks of the year (from now until 31 December). They're marketing the bonus payment as a way to offset taxes paid on the regular portion of the interest in 2008, since TFSAs don't yet exist.

I'm not normally a fan of trivial quarter-point rate chasing between banks, but assuming you've got a savings account at ING Direct already (I keep my emergency cash at ING), I see absolutely no downside to getting in on this.

It took me about 2 minutes to login, create an anticipated TFSA, and transfer 5000$ from regular savings to the new account. At the current 3% rate, with monthly compounding, the expected interest on 5000$ between now and December 31st is around 35$, so they're giving away 35$ for two minutes of work.