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Canada’s New Tax Free Savings Account at Trader’s Narrative

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If you would like to receive a free copy of Robert Dorfman’s book, Hedge Fund Trading Secrets, enter the draw by leaving a brief comment at the above link (making sure you leave your correct email).

The Canadian government introduced a really smart new way for its citizens to save for their future by introducing Tax Free Savings Accounts (TFSA).

These are special accounts that allow your assets to grow sheltered from taxes. You can contribute up to $5000 a year (the limit for 2009) with this limit rising with inflation in $500 increments. As well, any unused contribution limits can be carried forward. So let’s say that you don’t contribute for 5 years and then receive an inheritance of $25,000. You would be able to put that lump sum and have it grow tax free. But any contribution over the $5000 a year limit gets a 1% a month penalty (similar to Registered Retirement Savings Plans).

Unlike RRSPs, you don’t need to have any income to make contributions to a TFSA account. But neither will you receive any tax benefit for simply making such a contribution.

The really amazing thing is that you can also withdraw the money at any time with no tax consequences! So unlike a RESP or RRSP your money is not locked in. And since contribution limits are carried forward, when you make a withdrawal, you have increased the contribution amount for future years by the same amount.

But the real flexibility of this new account is that it can hold bonds, GICs, mutual funds, equities and equity options. So if you combine it with a brokerage account that would allow you to trade the account, you have the best of both worlds: a trading account which grows tax free!

questrade 50 dollar free comissionsAlthough I still like and recommend Interactive Brokers to active traders and even lackadaisical long term investors, for some reason, they refuse to offer registered plans (RRSPs, RESPs, or TFSAs).

Knowing Interactive Brokers’ penchant for thrift, it probably has to do with the cost and human labor involved with setting up and administering such accounts. So with Interactive Brokers out of the picture, Canadians who want to open up a TFSA are left with the usual options of the big banks as well as a few independent brokers.

I’ve looked at all the options out there, and for Canadians, the best option for a TFSA is Questrade.

If you are an IB client like me, something else that you may not have realized is that buried within the agreement you signed with Interactive Brokers, is a clause that says you must have another brokerage or trading account. So if you don’t already have a ‘back up’ account, this is a great way to set one up. Not only will you be earning tax free capital gains, dividends, interest, etc. but you will also be saving money by paying the lowest commission rate in Canada (second to IB).

Questrade Commissions
For equities, Questrade charges 1 cent a share, with a minimum of $4.95 and a maximum of $9.95 per trade. As well, with a regular Questrade account you can trade options, futures, forex, mutual funds and physical gold.

And on top of all that, as a reader of Trader’s Narrative, if you sign up using the link in the banner, you get $50 in free commissions! What else can you ask for?

With Questrade’s low commission structure and no annual fee, you can quickly transform your tax-free savings account into a tax-free trading account. Just imagine, within a few years of contributions, you can have $25,000+ growing tax free.

Of course, the only disadvantage is that if you have losses in this account, you can’t use them to offset your taxes. So depending on how confident you are in your ability to be profitable in this account, you might want to use this as more of an investment account for high dividend paying stocks, REITs or bonds. But remember, since this is a registered account, you can trade and hold any asset in your Questrade TFSA account except forex and futures. And for the same reason, you can’t use margin - this is a cash account.

Since capital gains are already 50% tax-free, you might want to only include bonds or bond ETFs which would otherwise be taxed at the full amount. Another option is to take advantage of the bear market and buy a leveraged equity ETF to ride the recovery. Whatever your strategy, take the time to learn about this new option or speak with an advisor to find out how it can benefit you.

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12 Responses to “Canada’s New Tax Free Savings Account”  


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  2. 2 Babak

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    check with CRA to make sure but I think you have to have a SIN number (be a resident).

  3. 3 prairie_piper

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    I am with IB and was disappointed they are not interested in offereing TFSA/RRSP accounts….so I went ahead and opened both a TFSA and self-direct RRSP with questrade, hoping to trade up the TFSA with leveraged ETFs and options… me to remembering the $25,000 minimum needed to bypass the Daytrading rule in the U.S. I noticed Questrade says they do not follow this rule. Does that mean I will be able to daytrade (I really only play in the U.S. markets) no problem in these two accounts?? I think it makes sense seeing how these are cash accounts?

  4. 4 T.F. Savings

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    The Questrade account is by far the most promising of the TFSA offers out of the initial gate. Look for this to get more competitive as the major players figure out how to put their own spin on things. Great question by Prarie Piper, looking forward to hearing the thoughts on this one.

  5. 5 Zack C.

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    I have had the single worst experience of my entire life with Questrade over the last few days, as I write this MY ACCOUNT IS MISSING $923.45 or 35% of my entire account balance & life savings after 3 CONSECUTIVE DAYS OF ACCOUNT IMBALANCES. I am actively spreading the word of my ordeal through any medium I can until the problem is fixed I have gotten a letter to the editor posted in the Kingston Whig-Standard and am awaiting publication of my letters to the Toronto Star, Toronto Sun and the Globe and Mail. My uncle is one of the webmasters at Craig’s List so I should have a leg up in informing as many people as possible.

    I have personally traded stocks, options and funds for 7 years and ETF’s, FOREX and bonds for 5, so I consider myself informed about the online broker business. I am not a wealthy person but I enjoy investing in a ‘hands on’ fashion. I had an account with E*Trade for 6 years with no problems. A few months ago I left them for Questrade because of the cheaper commissions and their favorable consumer ratings.
    Up until the morning of March 5, 2009 I had a very good experience with Questrade, I even got my account set up in only 4 business days, which was very impressive!

    *Note all figures include commissions and exchange rates at the time of the transaction. Also, I have a TaxFreeSavings account, which means no margin account, no loans, no borrowing, no overdrafts. I can do transactions up to my current cash balance, any more money and it will reject the order because of insufficient funds. I can prove all claims/ figures through screen shots of history and physical account activity forms mailed to me after every day that I traded. With that in mind……

    The night of March 4, 2009 at 4:05PM I bought 23 shares of FAZ (an ETF) @ $79.80 USD=$1,840.44 USD (total after trade commission) x 1.27(the exchange rate at the time)=$2337.36 CAD worth of stock in my account $54.72 CAD in cash left in my account=$2392.08 CAD is my total account balance.

    The morning of March 5, 2009 at 9:33AM I sold the same 23 shares of FAZ I carried over from the day before @ $86.86USD=$1992.81 USD (after trade commission) x 1.2785(the rate at the time)=$2547.81 CAD $54.72 CAD (cash left in account since night before)=$2602.53 CAD total cash in account now. But there was actually $2232.04 CAD showing in my account balance when I checked it after the trade like I always do. That means my account was $370.49 CAD… just like that.

    I’m not going to go in to greater detail but the same thing happened the next two days as well taking $165.04 CAD on the morning of March 6,2009 and then again for $396.96 on the morning of March 9, 2009. I suspended my account at that point and stopped trading. They had taken $923.45 CAD by the end of it, or 35% of my life savings (I am still young and busy paying off student loans). I would’ve suspended it after the first day but they assured me it would be fixed and after the second day I was waiting for this manager to call me back, which he failed to do.

    Now you would think that in the face of this irrefutable evidence, and the fact that they admit a computer glitch took money through faulty a exchange of currency from a bunch of other people’s Tax Free Savings Accounts over these same days, that they would admit the error. Boy was I wrong, the real fight had just begun as I spent 2 hours and 06 mins. that day (have long distance phone bill to prove it) on the phone to 3 different people at customer service, trading desk, etc. They just tried to explain it away going down a checklist of things; didn’t add in trade commissions (even though the totals I used from webtrader history have them added in), exchange rate (which I took from the forex website), my miscalculations, etc. Each person would say they would “send a report to the back office and someone would follow up with me in the next few days. Guess what, not one of them did, I called again on Friday March 6, 2009 and asked to speak with a manger that didn’t call me back for 4 business days and when he did he brushed me off, even though they admitted “some money was taken from my account and put back”, $181.82 CAD on March 5, 2009. He refused to understand that I sold stock for this price and then my account balance said I had much less then what I sold the stock for, even though this is very simple concept. Robert Chandler is the name of the “manager” I spoke with. He at one point 30 mins. into the conversation said hold on for 5 mins. and pretended to have an audit done on my account, even though another manager told me audits take at least 3-5 business days. Apparently Rob is a superhuman adding computer… either that or a bald faced liar. I called him on the amazingly quick audit he was able to do and he hung up (I have a witness who was also listening to the call), after 45 mins. of denials. I spoke with him a few days later and said he couldn’t bully me into submission, that I wanted a real audit of my account. He told me a real audit is $75 an hour charged to my account. I asked if Questrade was found to be at fault, would the audit be free? He said no the audit would be around $500.00 in total and would not be refunded even if they found that Questrade took money from my account.

    I then attempted to go higher then Rob by using a good comment blog post and contacting Emil Vojkollari and Nicholas Roussos, both in middle management, who seem to help people on the blog I saw solve problems with Questrade, and guess what? I have left 2 messages for Emil seeking assistance in the matter and 4 for Nicholas asking him for help as well and both HAVE YET TO RETURN ANY OF MY 6 MESSAGES. That is not client support, that is an abomination and I intend to make it my hobby for the next few months until every cent of my $923.45 CAD is returned to me with an apology of mass proportions. The ironic thing is that after my forensic auditor finishes his assessment I can take them to small claims court where if found guilty of taking money from me they would be on the hook for $1000’s to pay for my legal counsel (my dad, who charges $300/an hour) and $1000’s for their own legal counsel plus have to explain the verdict to the IIROC Canadian securities regulatory body and risk losing their retail broker license.

    Sorry it took so long to read, but PLEASE, ANYONE WHO DOESN’T ALREADY HAVE AN ACCOUNT WITH QUESTRADE…DON’T, ANYONE THAT HAS AN ACCOUNT ALREADY…CLOSE IT. THIS AGGRAVATION HAS GIVEN MY WIFE AND I WEEKS OF SLEEPLESS NIGHTS AND UNTOLD STRESS. This recession has been hard enough on everyone let alone being taken for 35% of my families entire savings. Questrade are at best a terrible company with horrendous customer service and complaint response, and at worst criminal with gross misconduct on the part of ROBERT CHANDLER. You don’t hang up on someone or lie and say you are doing an “audit” that was magically finished in 10 mins. instead of the standard 3-5 days. The fact that neither Emil nor Nicholas has bothered to return my calls proves that the upper management is also not taking customer’s complaints seriously. It’s sad what this world is coming to sometimes, I hope between the huge ad on Craig’s list and the letter in the Whig-Standard, the letters hopefully in the Tor. Star, Tor. Sun and Globe & Mail: people will recognize the absolutely vile way they have handled me. I was only trying to get my family ahead using a discount broker to save fees, I didn’t deserve this, my wife didn’t deserve this and my 5 month old daughter certainly didn’t deserve this. Shame on you Questrade.

  6. 6 Babak

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    Zack, it is unfortunate that there were irregularities with your account. Questrade is a reputable company but slip ups are bound to happen as the number of clients grow. The best remedy is to talk to a person as high up in Questrade’s corporate ladder as possible. As well, to contact the OSC (or other provincial regulator if you’re in another province) and the IIROC. Running around and writing this in blogs or forums isn’t going to fix your account. Hope you get this solved soon.

  7. 7 Jon Stoski

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    I have a Questrade account, and as far as fees go it is pretty good. You can directly deposit electronically by making a bill payment. However, the marketing for the dual currency accounts is misleading. They say you can have US cash in your account. This is accomplished by buying a US dollar mutual fund. Every transaction on this US position costs $5. I have searched the Questrade site pretty well and have not found this amount disclosed anywhere.

    Let me give you an example of a trade I made, and the fees that were charged.

    1. I bought a US ETF option for $89 US. $11 commission. Total $100 USD. Canadian dollars were exchanged @ 1.25 and $125 CAN was removed from my account.

    2. I sold the option for $181 to close the position. $11 commission. Total $170 USD. US mutual fund units were purchased. $5 commission. Position 165 US MF units. (This is what they call the US Cash position)

    Sneaky, huh? But it gets worse! IF I buy another US option, here’s what happens:

    3. US mutual fund units are sold. $5 commission. Account is credited with CAN @ 1.24. OK.. 165 @ 1.24: $204.60 CAN.

    4. Buy a US ETF option for $149 US. $11 commission. Total $160 USD. Canadian dollars are exchanged @ 1.25 and $200 CAN is removed from my account.

    Wow. So the spread is about $2.30, plus the $5 for trading with US Dollars, plus $11 for the options trade. Total: $18.30 (one way) That can add up real fast.

    If you call Questrade and ask them, they will say they are NOT converting the US funds to CAN before making US purchases, but simply “valuing your US cash in CAN at the time of the trade to determine your buying power”. Regardless,any trade made with this “US cash” position will cost $5 plus .5% spread, and the account will be debited according to the value of the US dollar in Canadian at the time of the trade, so I don’t see what the difference is.

    Hope this helps.

  8. 8 alan

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    Alan // May 19, 2009 at 11:07 am

    I am taking Questrade to court to recoup my $11,000 loss in amargin call. They had my money to cover the margin but depts at Questrade were not conmmunicating well enough. Also I checked IIROC webpage, IIROC had a hearing about Margin issue on 4/28/2009. If anyone have same experience like me, Pls send me email(

    I’d like to hear more about their incompetence. Maybe we have a class action case and share some information and experience. Thanks a lot.


    Mike Madej, I don’t know your email. Pls send email to Thank you!

  9. 9 MS

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    Please advise whether you could do day trading of CAD and US stocks with Questrade without maintaining a balance of $25,000

  10. 10 prairie_piper

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    Yes, I have been able to trade in and out of the US markets as I wish in a TFSA and RSP account without a full $25,000 in either account….although neither of these accounts allow you to trade on margin (which also means you cannot enter a short position).

    It could be a different story if you try to daytrade with a regular margin account with less than $25,000…

    Hope that helps!

  11. 11 Dale Surnet

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    Fuck Questrade… They are a bunch of cunts!

  12. 12 Albion

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    Everyone loves your web site! Do you have a twitter or fb page? I’d really like to hook up and focus on a couple of things. I appreciate you for all of your work.

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