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High Interest Savings Accounts at Discount Brokers

Canadian Capitalist — Wed, 30 Nov 2011 01:00:35 +0000

[Note: The following post was originally published on May 18, 2010. Recently, I noticed that TD Waterhouse now offers a lot more high interest savings accounts than they used to and I have extensively revised and updated the original post with new information. I intend to keep this post current, so feel free to have it bookmarked.]

In response to yesterday’s post on the Renaissance High Interest Savings Account (ATL5000), reader Joseph pointed out that a number of savings accounts are available through discount brokers. These accounts typically pay much better interest than money market funds and may be ideal for parking cash in RRSP accounts. A note of caution: first check with your broker that no fees of any kind are charged for purchasing, selling or redeeming these funds early. I wrote about the Altamira Cash Performer account many years back and the biggest knock then was the steep redemption fees and penalties charged on these funds.

The savings accounts offered through discount brokers have one huge advantage over high interest savings accounts offered by online banks such as Ally and ING Direct. Since the trades executed settle in T+1 day, these accounts offer an ideal way to temporarily park your cash in RRSP, TFSA and taxable accounts and have it readily available for your trades. In contrast, online banks are not practical for registered accounts and it may take 3-4 business days to transfer money to and from an online bank in taxable brokerage accounts. These savings accounts are also a much better alternative to traditional money market accounts because they pay a much higher interest rate. For example, as of this writing, the TD Canadian Money Market Fund sports an yield of 0.42% which is much less than the 1.2% yield of high interest savings accounts.

List of High Interest Savings Accounts (interest rate as of Nov. 30, 2011):

Renaissance High Interest Savings Account (ATL5000): 1.2%.
Altamira Cash Performer (NBC100): 1.20%.
Dundee C$ Investment Savings Account (DYN500): 1.2%
Manulife Bank Investment Savings Account (MIP510): 1.25%
Manulife Trust Investment Savings Account (MIP710): 1.25%
ICICI Bank HIISA (IBN100): 1.40% (Note: Not available for RRSP accounts).
RBC Investment Savings Account (RBF2001, RBF2010): 1.2%
TD Investment Savings Account (TDB8150, TDB8155, TDB8159): 1.25%

Many discount brokers also carry US$ high interest savings accounts. Note that US dollar denominated products are not eligible for CDIC insurance.

Manulife Bank US$ Investment Savings Account (MIP511): 0.20%
ICICI Bank US$ HIISA (IBN200): 0.25%
Dundee US$ Investment Savings Account (DYN400): 0.20%
RBC US$ Investment Savings Account (RBF2014): 0.20%
TD US$ Investment Savings Account (TDB8152): 0.2%
Altamira US$ High-Interest CashPerformer (NBC101): 0.2%

Notes:

1. You can park cash in these accounts by pulling up a quote for the fund code and clicking on the “Buy” button.

2. Most of these funds have an initial minimum investment of $1,000. Interest is accrued daily and paid monthly.

3. Typically, these accounts are sold without any loads or minimum holding periods or any fees of any kind but as noted earlier, always check first before buying.

4. If you have a large cash balance, make sure you split your savings in chunks of less than $100,000 between a number of these accounts. That way all your savings will be fully covered by Canada Deposit Insurance Corporation.

5. If you have a TD Waterhouse account, RBC Investment Savings Accounts in Canadian dollars (RBF2011) and US dollars (RBF2015) which offer an interest rate of 1.45% and 0.45% respectively will show up in the list. However, these are F-Series funds and though TDW will allow you to place an order, it will be rejected later because the fund is only sold to fee-based accounts.

6. The multiple savings accounts from TD Bank and Royal Bank are equivalent. They are offered by subsidiaries and can be used to work around the $100,000 CDIC deposit insurance limit.

7. Most of these high interest savings accounts are available through TD Waterhouse. Your mileage may vary at other discount brokers. For instance, only RBF2010 is available to clients at RBC Direct Investing.

Update (Oct. 22, 2010): RBC now offers a similar savings account. Fund Code is RBF2001. Most of these funds are now yielding 1.2%.

Update (Oct. 31, 2010): B2B Trust High Interest Investment Account. Fund code is BTB100. Not available at TD Waterhouse. (See Rob Carrick’s column How to get some bang for your safe bucks).

Update (Nov. 29, 2011): Updated with new high-interest savings offering at TD Waterhouse. Also check out Canadian Couch Potato’s post on parking cash in your portfolio.

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Why isn’t Ally more popular?

Canadian Capitalist — Tue, 29 Nov 2011 06:01:25 +0000

It is a mystery to me why Ally, which consistently offers better savings and GIC interest rates isn’t as popular as ING Direct. Take high-interest savings accounts: Ally has long offered a 2.0% interest rate compared to ING Direct’s 1.5%. And here’s how Ally’s GIC rates compare with ING Direct:

	Ally	ING Direct
1 Year	1.75%	2.00%*
2 Year	2.00%	1.60%
3 Year	2.25%	2.00%
4 Year	2.50%	2.25%
5 Year	2.75%	2.50%

* – Special “Cyber Monday” interest rate.

Now Ally’s product line-up is not as extensive as ING Direct’s (Ally does not offer RSP savings accounts, business savings accounts or chequing accounts) but as you can see from the table above, Ally’s GIC rates are consistently better than ING Direct’s. Even Ally’s early redemption rate is better: 1% compared to 0.5% at the big Orange. I have held savings accounts at both Ally and ING Direct and found little difference between the two – both offer much higher interest rates than the competition and typically do not charge any fees. One explanation for cool response to Ally may be its association with GMAC. However, Ally is a product of ResMor Trust Company which is member of Canadian Deposit Insurance Corporation. CDIC deposit insurance should provide peace of mind for savers worried about the financial health of Ally.

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Goodbye Bell, Hello Teksavvy

Canadian Capitalist — Tue, 17 May 2011 03:23:50 +0000

We’ve been Bell Internet customers for a long time. In the past, I’ve considered leaving Bell but whenever I grumbled about high prices, Bell almost always offered a discount on the regular rate. The catch is the discounts are offered for a limited time (six months or one year) and when the deal expires, you have to remember to call Bell to get a discount yet again and be prepared to haggle over whether you want to sign a contract. One reason I continued to stick with Bell is sheer inertia: we received reliable service and we heavily depend on the Internet to telework regularly and I didn’t want to undergo the hassle of finding out that a smaller provider’s service was less than reliable.

But when Canadian Money Forum members said they were very happy with Teksavvy’s Internet service, I decided to take the plunge. The regular rate on Bell’s 5 Mbps Internet service with monthly bandwidth capped at 25 GB works out to $51.87 (including HST). If you net out the bundle savings of $5 that Bell provides to customers with multiple services, Bell’s High-Speed Internet service works out $46.22 per month.

Teksavvy’s Internet pricing is straight forward — $36.10 per month for 5 Mbps and bandwidth of 300 GB. No limited time deals, contracts or bundled savings. You do have to purchase a modem that Teksavvy sells for $75 plus shipping but you can pick it up at local computer stores for around $60.

We’ve had Teksavvy for about a month now and I don’t have any complaints. Internet is reliable and download speed is close to advertized numbers. The high bandwidth caps offer plenty of room to try out download services such as Netflix. And now that Bell has increased the monthly rate on home phone service by $2 — basic home phone service costs $24.27 at Teksavvy compared to $30.72 at Bell — I’ll be soon severing all ties Bell, hopefully, forever.

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Saving Big by Flying out of US Airports

Canadian Capitalist — Wed, 16 Feb 2011 03:15:00 +0000

A friend who lives here in Ottawa recently reported that she saved big on a recent vacation to Miami by flying out of Syracuse. The plane ticket on jetBlue from Syracuse to Miami for my friend and two of her family members cost her $650. The best prices she could find for flying out of Ottawa during the same period was $650 per person. Now, Syracuse is a three-hour drive from Ottawa and even accounting for parking at Syracuse ($70), gas and other incidentals, my friend figures she saved a total of more than $1,000 on her trip.

Of course, there are some risks involved. If the weather is bad, driving from Ottawa to Syracuse could turn out to be tricky. You may have to put up with unpredictable border-crossing times. Also, it is easier to deal with flight delays and cancellations when flying out of or back to Ottawa directly. And if you have a young family, you’d likely do anything to avoid driving three hours with the young ones in tow.

And it’s not just my friend. A number of Canadians have wised up to how much they can save by driving across the border. Vancouver residents are flying to U.S. destinations out of Bellingham, Winnipeggers out of Grand Forks, Torontonians out of Buffalo and Montrealers out of Burlington, Vermont or Plattsburgh, N.Y. A recent CBC news report said that an estimated 2.5 million Canadians cross the border and fly out of an U.S. airport. Canadian airports are blaming high rents charged by the Federal Government for the problem.

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Hubert: A new online savings bank

Canadian Capitalist — Tue, 16 Nov 2010 04:01:15 +0000

There is yet another entrant in the already crowded online savings accounts marketplace. A tiny Manitoba-based credit union has started offering online savings accounts, term deposits, TFSA savings account and TFSA term deposits under the Hubert brand through the website happysavings.ca. The savings account offers an interest rate of 2.25 percent and the 2- to 5-year term deposits yield an average of 3.075 percent. Though the interest rate on the savings account is one of the highest available, it is largely negated by a $2.50 service charge per withdrawal from the savings account. Just like competing online accounts offered by credit unions, Hubert accounts are not CDIC-insured and deposit insurance is provided by the Credit Union Deposit Guarantee Corporation. New customers are required to purchase a $5 member share.

Hubert joins two other online savings accounts currently offered by credit unions: Outlook Financial and Achieva Financial. Outlook Financial offers a 2.0 percent interest on a savings account and 2- to 5-year GICs that provide an average yield of 3.11 percent. RRSP, RRIF and TFSA accounts are also available from Outlook Financial but watch out for the fees. One free withdrawal can be made from a savings account every month but each subsequent debit transaction is charged a fee of $1. A fee of $50 is charged for RRSP / TFSA transfers to another institution.

Achieva Financial currently offers a 2.0 percent interest on a savings account and 2- to 5-year GICs are yielding an average of 3.09 percent. RRSP, RRIF and TFSA accounts are available but again watch out for those fees. The first debit transaction is free but each subsequent debit is charged a fee of $1. Online bill payments from the account are charged a fee of $0.50.

Online savings accounts from credit unions do seem to offer a smidgen more interest on savings accounts and GICs than most of their competitors. But, other online products such as those from ING Direct and Ally make up the difference by providing a CDIC guarantee and not charging any fees. Also note that you can park cash in your brokerage accounts in high interest savings accounts that can be purchased like mutual funds.

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Energy Savings Often Exaggerated

Canadian Capitalist — Wed, 22 Sep 2010 03:12:22 +0000

While avoiding waste and conserving resources is a very good thing, the conservation lobby often exaggerates the pay off from conservation efforts. A case in point is a recent column in The Ottawa Citizen, in which Stuart Hickox of Project Porchlight suggested that Ontario residents who are facing steep increases in their hydro rates (See post Steep Increases Forecast for Ontario Electricity Prices) can cut their electricity bills by as much as $750 per year by taking half a dozen simple steps. Here are the six steps suggested in the column:

Stuart Hickox’s Six Steps to Saving $750 a year
1. Replace incandescent bulbs with compact fluorescents. Annual savings: $200
2. Eliminate vampire power from unused electrical devices. Annual savings: $200
3. Get rid of the old beer fridge. Annual savings: $120
4. Get a programmable thermostat from Hydro Ottawa’s Peaksaver program. Annual savings: $140
5. Lower the temperature on your electric water heater. Annual savings: $50
6. Switch off the dry heat function on your dishwasher. Annual savings: $40

Considering that the average Ontario household reportedly pays $1,330 on their electricity bill, it will be quite a feat cutting it by 56 percent. Take the suggestion to replace incandescent bulbs with CFLs. A typical CFL consumes about 50 Watts less than a comparable incandescent bulb (if you buy the claim that a 11 Watt CFL produces the same amount of light as a 60 Watt incandescent and not everyone does). Only a household that keeps 20 lights on for an average of 4 hours a day will see savings of $200. I’m going out on a limb here but exactly how many households are light up like a Christmas tree throughout the year?

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THRiVE: A New No-Fee Chequing Account from ING Direct

Canadian Capitalist — Wed, 18 Aug 2010 23:56:19 +0000

It has been long speculated that ING Direct will introduce a no-fee chequing account to complement its existing high-interest savings accounts and Streetwise mutual funds. The announcement today that ING Direct is launching THRiVE, a new no-fee chequing account makes that speculation a reality. THRiVE, which ING Direct is hoping to have up and running in early 2011 has the following features:

No-Fee Daily Chequing: No monthly fees. No deposit, withdrawal or transfer fees. Unlimited bill payments and Interac transactions. First chequebook is free. Account will pay a modest 0.25% interest on balances of less than $50,000 (Hey, it’s at least better than the big fat zero that TD Canada Trust pays).
ABM Access through the Exchange Network.
Free e-mail Money Transfers.
Free Overdraft Protection up to $250. No fees or interest on overdrawn funds up to $250 provided it is paid back within 30 days. Accounts that remain overdrawn for more than 30 days attract a $2.50 fee for every 30 days the balance is negative. A NSF fee of $25 kicks in for overdrawn funds above $250.
Bank drafts can be ordered online and delivered to your home for a fee of $10.

While we have plenty of choice when it comes to high-interest savings accounts, President’s Choice Financial still remains the only major game in town when it comes to no-fee chequing accounts (Citizens Bank briefly offered a no-fee chequing account but shut it down in less than a year). Consumers who already have a PC Financial account will see very little reason to switch because though ING Direct’s fees are lower for some features, the savings may not be substantial. For instance, e-mail money transfers cost $1.50 at PC Financial. Quebec residents will be pleased to know that unlike PC Financial products, the ING Direct no-fee chequing account will be available to them. Current clients of ING Direct can register for a preview of THRiVE through their online account or register through your185.ca.

Update 1: Reader Michael pointed out that the Exchange ATM network isn’t as extensive as CIBC’s (PC Financial clients have free access to the CIBC ATM network). A quick check revealed that while I can find just 5 ATM machines within a 5-km radius of where I live, I can find 42 CIBC ATM machines.

Update 2: Rob Carrick in The Globe and Mail – ING jumps into no-fee chequing fray.
The Star – ING Direct offers no-fee chequing.

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Scotiabank’s Let the Savings Begin Bonus

Canadian Capitalist — Tue, 27 Jul 2010 02:24:21 +0000

Scotiabank has launched a campaign called Let the Savings Begin to encourage Canadians to save more. The bank says its market research found that saving an additional $1,500 would improve the financial well-being of 72 percent of Canadians and it has designed a campaign to do just that. It’s not just empty words — the Bank is offering a nice bonus for clients who participate in the campaign.

If you are already have an eligible Scotiabank chequing account, the Let the Savings Begin campaign allows you to earn a bonus of 10% on savings that you accumulate over a 16 month period between July 5, 2010 and October 31, 2011. The maximum bonus amount is $150. The savings should me made through a combination of at least two of the following:

Bank the Rest program that automatically rounds up every purchase made using a Scotia debit card to the next multiple of $1 or $5 and the sweeps the difference between the purchase total and the round up amount to a Scotia Money Master Savings Account.
Scotia Momentum Visa card that earns a 2% cash back on eligible gas, grocery and drug store purchases and a 1% cash back on all other eligible purchases.
A new or additional automatic transfer of at least $50 into a savings or investment account.

If I were a Scotia customer, the easiest way to earn the $150 bonus would be to sign up for a pre-authorized contribution (PAC) deposited into the Money Master account, which normally pays a pitiful 0.15% interest on balances below $5,000 and one of the other programs. The actual PAC amount would depend on the estimated savings from the other program. You can find the terms and conditions of the savings bonus here.

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Installing a new hot water heater

Canadian Capitalist — Tue, 22 Jun 2010 02:15:01 +0000

It is quite common for homeowners to rent their hot water heaters here in Ontario. The rentals cost anywhere between $15 for an old tank to $20 or more for a new one. Years ago, we stopped renting our old water heater and I’ve been meaning to replace it for a while now. But, what with one thing or another, I never got around to it even though Michael James warned everyone on the mess that a leaking water heater makes in your basement.

Well, last weekend, I finally paid the price for keeping an old, rusted, water heater around a little too long. The bottom of the old water tank had rusted through and leaked water into the furnace room and to my basement office. After shutting down the valve, draining the heater and cleaning up the mess, I went shopping for a replacement. Home Depot carries water heaters and offers installation services (for some reason, Rona doesn’t) and for a fee, is willing to do a rush job. Here’s what installing a new tank will cost you:

GE 50 gallon gas water heater: $683.00 (60 gallon tank: $712.00)

Water heater measure: $40.00
Installation: $300.00
Weekend, evening & holiday fee: $165.00
Haul away & dispose: $40.00
Total Install Charges: $545.00

Grand total (including GST): $1,289.40

We’ve stopped renting for more than 4 years now and the old rental was costing us $13.99 every month. Installing a new heater and then renting it costs about $20 per month in addition to certain one-time installation fees that are charged upfront. Netting out the savings of about $750 over four years from buying out the old water heater, the new tank cost us $540. If renting the same heater costs us $20 per month, the new tank will break even in just over two years. Plus we will be on hook for any maintenance or service calls.

It seems to me that owning a water heater is much cheaper over the long run than renting it as long as you are willing to absorb the expense of an unexpected maintenance call. Perhaps, that’s why homeowners in most provinces do not bother with renting and it is time Ontarians wise up to how much renting our water heaters is costing us.

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Peoples Trust: Reader Choice For Savings Accounts

Canadian Capitalist — Thu, 27 May 2010 02:08:54 +0000

Many readers are clearly uncomfortable parking their savings with Ally (See Ally: A Good Choice For Savings Accounts) because even with CDIC coverage they are concerned with GMAC ownership of Ally. They would like to avoid Ally because, after all, a cash account should provide peace of mind, not sleepless nights over whether money is safe. Reader Robert recommends Peoples Trust instead. Peoples Trust is a Vancouver-based bank that offers savings accounts, Tax-Free Savings Accounts, RRSP Savings Accounts and GICs.

Peoples Choice pays a much higher interest rate on TFSA accounts of 3.0% and a slightly higher rate of 2.1% on its regular savings accounts. There are some fees but 5 free transactions per month should be plenty for most people. Peoples Trust offers non-redeemable GICs with interest rates that are better than ING Direct’s but not as good as Ally’s. All savings products have CDIC coverage. Here’s a slightly edited version of Robert’s note:

Ally is paying a decent interest rate but Peoples Trust pays a higher rate of 2.1%. I have been dealing with them for some time transferring funds back and forth from my bank account linked with them. No problem, no fees and guaranteed. Online transfers arrive the next day.

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