A few years back, ING Direct was pretty much the only game in town, offering online savings accounts with much higher interest rates than anyone else. Today, Canadians have such an array of choices available that ING Direct is not the de facto or the best option anymore. Here are some of the recent (and not-so-recent) developments in high-interest savings accounts:
ING Direct is not the leader anymore
Despite what its commercials claim (”ING Direct offers the highest interest rates of any of the major banks…”), ING Direct is now a laggard in the field. Online savings accounts offered by competitors such as E*Trade (Cash Optimizer account offers 4.15%), Achieva Financial (Daily Savings Account offers 4.1%), PC Financial (Interest Plus pays 4% if you maintain a balance of more than $1,000), etc. sport a much higher interest rate than ING’s regular rate of 3.5%. When the Bank of Canada hikes interest rates, ING Direct is also a lot slower in increasing the interest rate on its savings account. For instance, the Bank of Canada raised interest rates on but ING Direct is still offering the old interest rate. Even Royal Bank was quick to match the BOC hike with its eSavings account now paying an interest of 3.75%.
Promotional rates
Online banks are taking a leaf from car dealers and furniture retailers and offering promotional interest rates (Hurry! Sale ends August 31st!). Typically, if you open a new account you are initially offered much higher interest, which will revert to the regular rate at the end of the promotional period. For instance, HSBC Direct is paying 5.0% until October 10, 2007 on new accounts opened between July 10 and October 10. ING Direct is even running a “Summer Savings Sale”, in which new money deposited into an existing savings account will attract a higher rate for a limited time. Presumably, this is done to prevent existing customers from bolting to the competition.
More Choice in US Dollar Savings Accounts
E*Trade’s Cash Optimizer is now a strong competitor in US Dollar Savings Accounts offering a rate of 4.75%, which is better than ING Direct’s 3.5%. I have personally tried the US Dollar Cash Optimizer account and it works smoothly. ICICI Bank offers a USD account that pays 5% but customer service problems were reported in the press last year and I haven’t personally parked money with them.
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19 responses so far ↓
1 brad // Jul 31, 2007 at 5:58 am
What I’d like to see too is a rundown of low-fee or no-fee banking packages. Maybe these are available in other parts of Canada (they’re common in the US), but I have yet to find any bank that offers no-fee unlimited accounts for chequing, savings, Interac, etc. here in Québec.
2 MillionDollarJourney.com // Jul 31, 2007 at 6:29 am
ICICI bank offers 4.5% return now for Canadian accounts. I believe this is the highest of all “high interest rate savings accounts”.
3 Phil S // Jul 31, 2007 at 7:59 am
To Brad. The President’s Choice (PC Financial) division of CIBC seems like it offers no fee banking. Take a look at their website. I am considering the same thing as BMO requires me to tie up $2500 of zero-interest rate balance in my chequing account in order to qualify for the no-fee banking. I agree with your observations in the USA - it sure seems silly in this day and age of competition to NOT have any no-fee banking choices available to us!
4 Canadian Capitalist // Jul 31, 2007 at 8:15 am
Brad: I have a President’s Choice checking account. There are no fees - free cheques, free Interac, no minimum balance etc. As far as I know, it is the only no-fee bank account available in Canada.
FT: Yes, ICICI Bank offers higher interest, but there have been customer complaints reported with them. Not sure if the extra 0.35% is worth potential hassles. Also, E*Trade and Achieva haven’t matched the BoC 0.25% hike yet, so the difference would only be 0.1%.
5 hepman // Jul 31, 2007 at 10:06 am
Go to following link for an excellent comparison of most of the players in the high interest savings sweepstakes.
https://hermes.manulife.com/canada/repsrcfm-dir.nsf/Public/AdvisorquickreferencesheetbankaccountratecomparisonAdvantageAccount/File/SavingsAccComparison.pdf
6 Jon D. // Jul 31, 2007 at 10:55 am
Here is a list of “low fee” bank accounts, Ie. $4 or less per month:
http://www.fcac-acfc.gc.ca/eng/consumers/BankInsurance/Accounts/LowCostAccountsSum_e.asp
CIBC/BMO/TD offer no fee with minimum balance.
Citizen’s Bank of Canada offers no fee unlimited for $1000 minimum balance:
https://www.citizensbank.ca/Personal/Products/BankAccounts/ChequingSavings/
7 Rob // Jul 31, 2007 at 11:38 am
One thing to consider with US$ accounts is that they are NOT covered by CDIC. CDN$ deposits under five years are covered up to $100K, but this is not the case on accounts denoninated in US$.
Keep this in mind when choosing the offerings of smaller trust companies. After the last real estate boom in the early nineties, some small trust companies such as Standard Trust went broke and uninsured deposits were gone forever.
A US$ T-Bill will offer government protection and is probably a better option for larger amounts.
Although the above advice applies to US$ accounts, the same advice applies on CDN$ deposits above CDIC limits. If you are in the fortunate position to have several hundred of thousand you need to park for a while (say you have sold a home but not yet bought a new one for example), then spread the money around so it is 100% insured. Far better to keep things safe.
8 telly // Jul 31, 2007 at 12:03 pm
We use our TD line of credit as our primary chequing account (we closed our other ‘expenisve’ TD account). TD allows you to keep a positive balance (technically negative since it’s a LOC) & make direct deposits so it’s pretty much a free chequing account with free overdraft (at a lower interest rate) if you need it.
(I love PC but since my pay is in US$ it makes sense to use TD - TD Banknorth for transfers.)
9 brad // Aug 1, 2007 at 9:34 am
Thanks for the recommendations on President’s Choice, but unfortunately it’s not available in Québec, according to their website. Rats!
10 Combo // Aug 1, 2007 at 11:25 pm
Canadian Capitalist said:
“Yes, ICICI Bank offers higher interest, but there have been customer complaints reported with them. ”
CC, this was the feedback reported about a year ago. Is this still the case? Are customers still complaining about the quality of ICICI service?
11 Canadian Capitalist // Aug 2, 2007 at 10:53 pm
Combo: I don’t know if ICICI’s service level is now improved. I don’t know of any recent complaints about them.
12 LMG // Aug 8, 2007 at 10:49 am
telly,
You mention that “(I love PC but since my pay is in US$ it makes sense to use TD - TD Banknorth for transfers.)” Are you directly transferring money between a US Bank and a CDN Bank? I work in the states and was looking for a direct transfer but haven’t found one yet?
Can you help me out with some details?
13 ashish // Aug 25, 2007 at 8:10 pm
i was surprised to know that 70% of icici clients are canadians and other foreign nationalities though its an indian bank.i have good experience dealing with the csr’s,in brampton branch.
14 Dave // Sep 20, 2007 at 12:17 pm
Yes, ICICI banks customer service is still bad. Any time that I ever called them, it felt a lot like I was on a tan-can & string phone. I assume that they were using VOIP and you could feel the lag. The CSRs don’t seem to give a crap about politeness when dealing with customers. It was quite common to have to call multiple times to have something simple done.
There website is also abysmal. Setting up a recurring transfer was a royal PITA, they listed Semi-Monthly transfers but really meant every two weeks.
This is all as of August, 2007 or so. I have since left them and returned to using my old ING account.
15 Jeremy // Oct 9, 2007 at 1:26 pm
Rob, the US has FDIC. Those who were NetBank customers found that out when their bank was shut down recently. (Actually, ING Direct was able to “buy” the customers for only 10% down.)
16 Sherrylyn // Mar 26, 2008 at 3:17 pm
I’ looking for low or no bank fees, no minimum balance, high interest rate savings, chequing account in Canda. I have read that ING direct no longer offers the best interest rate.
17 Canadian Capitalist // Mar 26, 2008 at 3:26 pm
Sherrylyn: Try PC Financial. They offer free chequing account with no fees, free chequebooks etc. For savings account, you can simply pick one from the list by first checking that there are no fees. It’s true that ING doesn’t offer the best rate anymore but they are near the top and have no fees whatsoever.
18 Shoeb Ahmed // Mar 26, 2008 at 6:38 pm
Go to http://www.canadiancapitalist.com/2008/02/24/high-interest-savings-accounts-revisited
19 Anthony // May 26, 2008 at 6:44 pm
The key is RBC. If you have a visa with them (no fee Visa is fine) as well as an RRSP (no minimum) then your chequing account activity is free. So buy a tiny RRSP with them, apply for a credit card, and do the rest of your banking free.
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