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moneysense.ca, 29/10/12
High Interest Savings Accounts at Discount Brokers
[Note: The following post was originally published on May 18, 2010. Recently, TD Waterhouse started offering only TD Bank High Interest Savings accounts to its clients. Therefore, I've updated and somewhat revised this post to make it current. 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 or 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 from (or to) an online bank to (or from) 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 0.38% which is much less than the 1.25% yield of high interest savings accounts.
List of High Interest Savings Accounts (interest rate as of Oct. 29, 2012):
Renaissance High Interest Savings Account (ATL5000): 1.25%.
Altamira Cash Performer (NBC100): 1.25%.
Dundee C$ Investment Savings Account (DYN500): 1.25%
Manulife Bank Investment Savings Account (MIP510, MIP710): 1.25%
Manulife Trust Investment Savings Account (MIP710): 1.25%
ICICI Bank HIISA (IBN100): 1.25% (Note: Not available for RRSP accounts).
RBC Investment Savings Account (RBF2010, RBF2020, RBF2030, RBF2040): 1.25%.
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): 0.20%
Altamira US$ High-Interest CashPerformer (NBC101): 0.20%
Availability at discount brokers
The following information is presented based on reader feedback and Canadian Money Forum posts. Please do your due diligence and check with your broker first before proceeding.
TD Waterhouse: TDB8150, TDB8155, TDB8159 and TDB8152. Other HISAs not available as of mid-2012.
RBC Direct Investing: RBF2010, RBF2020, RBF2030, RBF2040 and RBF2014. Other HISAs not available.
Scotia iTrade: Only DYN500 and DYN400 are no-fee. Other funds are available but iTrade charges a fee of 1% (minimum of $38.88) for non-Scotia funds redeemed within 90 days.
CIBC Investor’s Edge: ATL5000.
BMO InvestorLine: Offers most of these savings accounts. However, BMO has a $25,000 minimum and a penalty of 1% (minimum of $43) for non-BMO funds redeemed within 90 days!
moneysense.ca, 29/10/12
[...] This post was mentioned on Twitter by Canadian Capitalist. Canadian Capitalist said: New Blog Post: High Interest Savings Accounts at Discount Brokers http://bit.ly/d50MeY [...]
You’re right to be concerned with fees. Even if you have $10,000 in cash lying around, a year’s interest at the highest rate you mention, 0.7%, is only $70. It wouldn’t take much in the way of fees to eat this up.
Sorry for the off topic comment folks.
CC, since your migration how does one conduct a search of your past posts? The search function on the top right seems to be for the entire site and doesn’t even go back to topics from a few months ago.
I was looking for this post http://www.canadiancapitalist.com/note-to-kevin-oleary-dont-confuse-gdp-growth-with-stock-market-returns/ and even a search for “Kevin O’leary” didn’t bring it up. Had to manually go back through the archives to find it. That’s another annoyance with the changeover, there are very few posts per archive page, wasting additonal time.
@GSP: Site Search and Archives are still to do. It is on my list of issues to solve but it’s just that I haven’t had much time to spend on coding in the past little while. I will get it done in the near future. Meanwhile, here are two ways to search:
http://www.canadiancapitalist.com/?s=kevin+o'leary
Or like this one Google:
site:canadiancapitalist.com kevin o’leary
I know it is not ideal but please bear with me until I have a search solution.
I am about to move my TD money market fund to either the Manulife Bank Investment Savings Account (MIP510) (0.70%) or the Renaissance High Interest Savings Account (ATL 5000) (0.70%), which one would be preferable? Would they have different MER that affect the actual yield?
@Sunny: First check whether you’ll be paying any fees of any kind on any of these accounts. Ask if there are any early redemption fees. Weed out the accounts that charge you fees because as Michael pointed out, a single fee might wipe out your interest and even cost you money. I can’t stress this strongly enough. Please check and make sure there are no fees before putting money in these accounts.
The interest rate published is this post is what you’ll earn on these accounts. These accounts pay a trailer to the dealer directly, not out of the interest you are paid. TDW told me that they don’t charge a fee on Renaissance (but please check again anyway). I don’t know if there is a fee for MIP510. If all things are equal, I can’t think of a reason why I would choose one over the other.
It’s telling that a 0.7% interest savings account is considered “high interest”. These are tough times for fixed income investors.
The Manulife fund does seem to pay a trailer to the dealer, even if that dealer is a discount broker. See slide number 5 in this presentation:
http://www.docstoc.com/docs/3157514/Manulife-Bank-Investment-Savings-Account
The Manulife fund (MIP 510) is also available in an F-class version (MIP 610), but discount brokers don’t typically offer F-class funds. (They would rather collect the “advice fee” despite providing no advice.) I’m not clear whether the trailer fee comes out of the 0.7% or not. Can anyone help?
Thanks for the reply. I did check that both the MIP510 and ATL5000 will not have any load/redemption fees or holding periods (did confirm over the phone with TD Waterhouse).
When you say refer to the trailer fees paid to the dealer directly, that’s a totally separate fee that I won’t actually see then in my statement ? So assuming I can confirm that there will be no fees of any sort, then the pure difference is the posted interested rate difference?
Seems like Renaissance had just updated their rate to 0.80% this morning!
http://www.renaissanceinvestments.ca/en/products/hisa.asp
CC: Sorry, our posts crossed in the ether. Thanks for answering these questions.
Thanks for the quick reply CC. That Google site specific search could come in handy.
To everyone else out there, sorry for the off topic comments.
If these are treated as regular “No Fee Funds” then one usually must hold them for a minimum period otherwise there is a penalty. For example BMO Investorline:
“an early redemption fee of $43 ($35 for electronic orders) will be charged for funds held for less than 90 days.”
I am going to confirm with BMO Investorline if these funds get any special treatment (which I doubt). If they don’t then using these for parking short-term cash would not make sense.
for TDW, I have confirmed both the MIP and ATL have no minimum holding period, essentially like the TD money market fund- I suppose part of the down side is you always have to call in to buy or cash out.
Hi,
This is Joseph, who mentioned these funds yesterday and on this mention CC has posted about them today.
I’ll just add a few things:
1) These are bought and sold like mutual funds. That makes them liquid – they typically settle next day.
2) They do not provide a return such as an ING, President’s choice, Canadian Tire high interest savings accounts BUT these are separate accounts and you need to transfer money back and forth between your investment account and these savings accounts. This can take days and so these accounts are not as liquid.
3) So bank-based high interest savings accounts offer you a higher rate but lower liquidity.
4) Believe it or not, money market mutual funds can and have actually provided negative returns because they invest in money market based securities which can lose money. So money market funds can be higher risk than saving account mutual funds. Especially in these very volatile and crisis based times.
5) In general, these savings account mutual funds do not charge a redemption fee, they do not have a minimum holding period, and most brokers (@G including BMO Investorline) have no fees to buy and sell, even on early redemption. I often buy and sell these next day.
6) In my opinion, these are best if your broker does not offer a higher interest rate for cash in accounts and you trade often. I trade daily and just take any remaining cash at end of day and buy these funds.
7) If you don’t trade often, then a bank based savings account is better because it gives you a higher return. But then again, it will take a few days to transfer cash between investment and savings account(s).
8) If I have no cash in account, and want to buy a security, I figure out the purchase cost of the security, I then sell an equal amount of one of these savings account mutual funds (SAMF), and then buy the security. The cash from the sale of the SAMF will be in the account before the cash for the purchase of the security is required.
9) Each separate type of account is covered by CDIC for up to $100K – so you are insured for up to $100K for the SAMF in a margin account, and for the same SAMF in a registered account.
*** As a disclaimer, the above information is based on my own research about a year ago with my own broker – do NOT take this info verbatim – things change, please check with your own broker and you can call each of these funds to confirm everything.
Hi,
This is Joseph, who mentioned these funds yesterday and on this mention CC has posted about them today.
@ Sunny – I trade these electronically with my online discount broker – takes a minute and no need to call in to buy or cash out.
Hi, me again.
@GSP:
Are you gonna be fighting Anderson Silva?
I find it so hilarious that we call 0.70% “high” interest. What’s “low” interest? And we pay taxes on that whopping 0.70%. Anybody know the annual inflation rate?
Sort of like driving across town to save 1c on gas. Oh, these funny canucks!
The brokerages, by the way, make a lot of money on the un-invested cash. More than the commissions. I bet the MER’s/fees on some of the funds above are higher than the interest they distribute.
@joseph- do you mind if I ask you which online brokerage you use? Just like CC said previously, I can see the MIP, ATL etc but not sure if I can actually buy them online, and the phone reps have told me twice that they are phone orders only for TD Waterhouse.
Hi me again
@ Alex – Yes I agree they certainly are not high interest and since inflation is higher, I am losing money by investing in these. However, for me, the alternative is to let it sit in cash in my investing accounts in which I get even less, close to zero, or to transfer my money to a “higher” interest (not high, just higher
bank based savings account. But this takes too much time and so is not useful to me.
@Sunny – I am with BMO – I buy these just like any other mutual fund – I called TD Waterhouse Discount Broker and they confirmed you can buy:
Altamira Cash Performer
Dundee C$ Investment Savings Account
Manulife Bank Investment Savings Account
They could not find
ICICI Bank HIISA (IBN100): 0.65%
Note that I have previously bought and sold MIP510 (CAD) and MIP511 (US) through TD Waterhouse online brokerage without having to phone TDW. @Sunny – not sure why the rep is saying you need to call in.
Both Altamira and Questrade do not charge any early redemption fee. Here is an email reponse I got from Altramira`:
“Please also note that all management fees have already been discounted from our funds’ returns. In addition, you may purchase or redeem any of our funds at no cost whatsoever. There are no management fees in this account. “
@Alex: Interest rates are currently at all-time lows. That’s why “high-interest” accounts pay just 0.7% or so. But this low-rate environment may not last very long. Even when interest rates were higher, brokerages paid close to nothing on cash balances. Investors could earn some extra money on parked cash with these high-interest accounts instead of keeping it as cash.
@Sunny: I was also told (twice) that these accounts can only be purchased via phone but when I mentioned that they are available as mutual funds, the CSRs were surprised. Looks like others have purchased through WebBroker, so it appears that TDW CSRs are just misinformed about these accounts.
@Joseph: Thanks again for your comment. TD Waterhouse does not carry IBN100 either.
“However, as reader Lorne pointed out, you could do better with an online bank such as Ally for non-registered accounts.”
CC: above is a casual comment but … are you (now) “recommending” Ally Bank?
I was interested in Ally a while ago, due to their rates and “straight talk” ad pitch – and given the fact that you can’t open a webpage or magazine without being inundated with their ads. Anyway, during my research of Ally it appeared to me that there is some cause for concern regarding the security of investing with Ally, since Resmor Trust and Ally are owned by GMAC Inc.(now Ally Financial Inc.). Readers should be aware that GMAC is using US government bail-out money from various sources to offer the best rates around. Which in turn is helping them raise “deposit” cash: “Ally Bank and ResMor Trust continue to contribute to GMAC’s funding flexibility through deposit growth”. (see summary of issues in web-links below)
So what happens when the US Treasury decides to call the loans, or toss in the towel? What happens when all those new Ally customers race to cash-out their deposits?
Resmor Trust is covered by CDIC but in reality what happens to customers’ deposits if/when a bank or trust company fails? Does the CDIC pay out directly to the trust company so they can cover all deposit withdrawals? Or do individual customers have to “apply” to the CDIC to have their lost deposits reimbursed? How long does it take? How long is a depositor left without their money?
For myself, since I was looking for a place to park my $25K emergency fund I decided it wasn’t worth the risk and I decided to stick with banks with a proven track record (PC Financial/CIBC, ING Direct). Risk vs. return – not worth potentially standing in line at the CDIC for an extra $250 in interest per year.
I’d be interested in your opinion and any research you’ve done on Ally.
P.S. also a lot of negative reports regarding customer service (ironic):
(US Ally Bank): http://moneyning.com/review/ally-bank-review/
Do you know of any similar customer feed-back sites for Canadian High Interest banks?
**********************
See recent article for summary of concerns:
“Ally (GMAC) Bank’s Bailout Deceptions” Friday, 07 May 2010
http://moneynews.com/BerlauMN/ally-bank-gmac-general/2010/05/07/id/358183
And: “TARP Panel Finds Fault With GMAC Bailouts” Published: March 10, 2010
http://www.nytimes.com/2010/03/11/business/11tarp.html
And: http://media.gmacfs.com/index.php?s=43&item=399
Press releases NEW YORK (May 3, 2010)
GMAC Financial Services Reports Preliminary First Quarter 2010 Financial Results: Reported first profitable quarter since fourth quarter 2008.
Announces intention to rebrand GMAC Inc. to Ally Financial Inc. on May 10, 2010
Deposits: Ally Bank and ResMor Trust continue to contribute to GMAC’s funding flexibility through deposit growth.
@gazoo: I opened TFSA accounts with Ally early this year. So far, I have no complaints with opening an account, transferring money or interest deposits. I’m writing about this on Monday. Can we hold off on the discussion until then? Thanks.
CC: cool, thanks.
I found this site after commenting: looks like a good summary site.
http://www.highinterestsavings.ca/chart
[...] Canadian Capitalist points out High Interest Savings Accounts at Discount Brokers, however High is a misnomer, since the rate is less than 1% really. CC is also a board member [...]
Peopletrust in B.C. beats all canadian rates with 100% safety.
You can link an account for next day access with zero charges!
[...] High Interest Savings Accounts at Discount Brokers | Canadian … [...]
[...] High Interest Savings Accounts at Discount Brokers | Canadian … [...]
Received response from BMO Investorline:
“You may certainly purchase online, fund ATL5000; Renaissance High Interest Savings Account, Class A. There is no fee to purchase the fund; however, an early 90 day redemption fee may apply. The minimum purchase amount is $25,000/ subsequent buys of $500.”
Notice the wording “may apply”. I really would love to get a direct answer from them..
I guess this is a good option if you want to reach the 100k threshold with TDW and you are just parking your money waiting to buy.
[...] High Interest Savings Accounts at Discount Brokers | Canadian … [...]
Just a quick update. Manulife (MIP510) is now showing 0.80% yield, the same as the also recently updated rate at Renaissance (ATL5000). Altamira and Dundee are also now at 0.75%, seems like rates are moving up!
http://www.manulife.ca/canada/mBank.nsf/Public/todays_rates
http://www.renaissanceinvestments.ca/en/products/hisa.asp
[...] High Interest Savings Accounts at Discount Brokers | Canadian … [...]
For TD Waterhouse customers, I just set up with them, including a savings and chequing account. I was able to do an online transfer from my free cash balance in the TDW trading account over to my TD chequing account. The amount showed up immediately in the chequing account, and I assume the same would be true for the savings account. TD’s savings account is currently paying 0.85% when the balance is over $5000 (0.25% if below), so this might be a better alternative than one of the high interest funds mentioned above, both for interest and speed of access.
For moving money back out, the savings account has only 1 free debit per month. However, it allows free transfers to other TD savings and chequing accounts in your name, so I can transfer from savings to chequing, and then from chequing into the TDW account. I’m going to check with them whether direct transfers from the savings to TDW should be considered free as well, as it seems somewhat silly not to allow it. For people with other big-bank brokerage accounts you may be able to do something similar, but beware of those banks where the savings accounts have sucky interest or you can’t waive the transaction fees (BMO, I mean you!).
hello re Resmor, i did look at them recently and the only issue at the time was time to transfer funds. at Manulife i can have funds transfered by next day at 6pm and i gather there is an issue that trust companies are using a different system. If you can get funds from Ally next day then please tell because they could only promise T+3 over the phone which is not fast enough.
re Ally, GMAC and bailout funds, i am uncomfortable depositing with a lender that specializes in less that best credit quality however lets be careful and assume that GMAC Canada & GMAC US are different beasts. this is a trust supervised and subject to Canadian banking rules. perhaps there was Canadian bailout funds or loans etc but this is not affiliated with GMAC US and American bailouts, or is it?, i dont think so.
@marv: Though I have an account with Ally, I haven’t transferred money into it. The only time I deposited money was via a cheque when opening the account.
When looking at savings account, all I look for is CDIC coverage. It is impossible for us retail investors to analyze the financial stability of the banks just to park our money.
[...] 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…. Post a [...]
CC, great tip, thanks for the article !!
[...] 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…. [...]
[...] Dollar Journey featured a guest post that offered a primer on money market funds. These days I find parking money in high-interest savings accounts at discount brokers to be equally [...]
@CC: where do you find the ticker symbols for these funds? I can’t seem to access RBF2011, even from RBCDI.
@Blitzkrieg: I found them at TD Waterhouse. It would be really bizarre if TD Waterhouse offers the RBC High Interest Savings Account and RBC Direct Investing doesn’t. Maybe you have to try calling RBC DI?
[...] [Note: For an updated list of high-interest savings accounts, as of November 30, 2011, see this post from Canadian Capitalist.] [...]
@CC: any idea why ICICI Bank HIISA (IBN100) is not available at TDW? I can get a quote for the other funds listed here but not this one. Also, it is interesting that TD now offers a similar product but too bad they can’t offer a better rate if bought in-house at TDW.
@Michael: The last time I checked, TDW told me that IBN100 had to purchased by phoning in a buy order. I did not bother because I did not find the interest differential to be worth my time. I haven’t checked recently.
Thx for updating with the TD options.
Isn’t RBF2011 an F series version of RBF2010, paying the usual .25% trailer to the account holder? These typically aren’t available at discount brokers. Several other accounts on your list also have F series variants so this one kind of sticks out like a sore thumb.
I do see it listed on TDW, has anyone been able to purchase it? I’d try but it would require me selling another product first.
@gsp: It does appear that RBF2011 is a F-series fund. I went through the screen until the final placement of the order and it appears TDW will sell it to me. But I can’t be sure until I actually place an order and I’m not sitting on the minimum initial investment required to go through the order. Also, I don’t want to call TDW and ask because they might discover a mistake and take it away!
@CC: I think you mean RBF2011. I tried to purchase this and TDW accepted my order. However, since I don’t have a fee-based account the order was rejected and I got a call from the mutual funds dept indicating the reason. I was just surprised it allowed the order entry in the first place.
@Michael: Thanks for your comment! I’ll remove RBF2011 from the list and add a note that though the F-Series product appears in the TD Waterhouse list, it can only be purchased in fee-based accounts.
Just now I phoned TDW to place an order for IBN100 for my RSP account- after the agent checked, was told that IBN100 is NOT eligible for RSP accounts, but okay for non-registered or TFSA accounts.
Wonder if there is anything to do with the credit rating of ICIC bank- the agent says for some reason, the “government” isn’t allowing that to be in RSP accounts.
I couldn’t seem to access any of the funds listed by CC through RBCDI except RBC’s own RBF2010. Previously, I had bought and still hold ATL5000, so I wondered what was going on. I sent them this message:
“Hi, I hold the fund ATL5000 in one of my registered accounts. However, I no longer seem to be able to buy or sell units of this fund. What can I do?”
Here is the reponse I received:
“My name is Mathew and I’ll help you with your trade inquiry.
Kindly be advised you will need to call in to sell your units of RENAISSANCE HIGH INTEREST SAVINGS ACCOUNT (5000).
Consistent with how RBC products are offered at the RBC branch level, effective April 18th, 2011 all retail brokerage clients at RBC — including our RBC Direct Investing clients — will now only be offered our own competitive RBC products and solutions within High Interest Savings Accounts (HISAs) and Cashable GICs. While we will no longer be offering third-party solutions, existing client holdings in non-RBC HISAs and cashable GICs are not affected by this decision and can continue to be held in clients’ accounts. Automatic investment plans that were set up for non-RBC HISAs prior to April 18, 2011 will also remain in place. Additional purchases of non-RBC HISAs are no longer available but distributions will continue to be reinvested. Any clients who wish to liquidate any non-RBC HISA holdings can do so by contacting one of our RBC Direct Investing representatives at 1-800-769-2560. For more information on HISAs offered through Direct Investing please visit;
http://www.rbcroyalbank.com/products/isa/
We appreciate your business and thank you for choosing RBC Direct Investing.”
@Sunny: It’s very strange that IBN100 would be eligible for TFSA accounts but not for RRSP accounts. Thanks for checking this.
@Blitzkreig: Thanks for checking with RBC DI. It’s good to know that at least RBF2010 is available. At least the interest rate is comparable.
@Canadian Capitalist: Yes, I found that odd too, although he was quite sure that RSP was not allowed and I did confirm again that non-registered accounts and TFSA accounts were okay.
If anyone else had been able to place IBN100 thru TDW in a RSP account, please let us know.
Sunny, the IBN product does not allow for RRSP inclusion at this time, no matter who your broker is. ICICI has said they are working on making the product RRSP compliant. How long that takes is anyone’s guess.
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[...] XFR’s cash-like risk/return profile, it seems to me that investors have better options. High Interest savings accounts offered through discount brokers currently offer an yield of 1.25%, which is pretty much exactly the same as XFR’s yield of [...]
With the recently added TD Investment savings account, I have been able to buy the TDB 8150, 8155 and 8159, through my TDW WebBroker account, but not the TDB8157 (8158 is the F series equivalent), which is also listed on their own site. Has anyone had any success with that particular one?
http://www.tdam.com/Content/Products/p_LandingPage.asp?PID=27
TD Investment Savings Account (TDPMC) – TDB8157
TD Investment Savings Account (TDPMC) – F Series – TDB8158
Just called TDW to try to purchase IBN100 (ICICI bank at 1.30%), was told that on the TDW system they don’t see a load or trailer fee but the rep said that the ICICI bank website says there is a 0.25% trailer fee on sale, just wonder if anyone can confirm that there is a fee to sell IBN100?
the rate seems to be the best currently of all the other options at 1.30%
http://www.icicibankfas.ca/popup_hiisa.htm#
Addition note:
Note: I looked up the terms of the IBN100 and the document is here
http://www.icicibankfas.ca/images/On…ave_Sp_may.pdf
In the fine print for series A (which is what IBN100 is): states
___
Series A: 25 bps annualized calculated on the daily closing
balance and paid out monthly to the Dealer.
Series F: No commissions paid
Fund Code:
IBN 100 Series A – CAD
IBN 101 Series F – CAD
___
Does it mean that the 1.30% is AFTER the 25bps is calculated? or does it mean it’s 1.30% before this fee?
@Sunny: You won’t be able to buy the F-series versions through TDW. One reader tried to but the order was rejected.
The interest rate quoted is *after* the trailer. So an investor in IBN100 will receive 1.3%.
sorry pls ignore the above post, typo
@Canadian Capitalist: thanks for the answer.
In addition, just called TDW and was told that RBF2001 no longer exists- if one pulls up the quote on RBF2001, the last date of the price was June 2011, so I was told that RBF2001 is now replaced RBF2010… is that correct?
@Sunny: Let me check with TDW and update this post.
IBN down to 1.3%.
MIP710 at 1.3% and link is https://repsourcepublic.manulife.com/wps/portal/Repsource/Products/Banking/InvestmentSavingsAccount/ISA/
@gsp: Thanks for letting us know. I’ll update this post.
Quick update:
2 more HISA now at 1.25%- seems to be the standard now (apart from ICICI at 1.30%), both upped their rate from 1.20% to 1.25% in the last week.
Altamira Cash Performer (NBC100): 1.25%.
Dundee C$ Investment Savings Account (DYN500): 1.25%
People’s Trust and Canadian Direct Financial offer savings accounts paying 1.9% interest and cash TFSAs paying 3%.
[...] Take high-interest savings accounts, for instance. ING Direct offers an interest rate of 1.35 percent on savings and RRSP accounts and 1.40 percent on TFSA accounts. But Ally, a competitor with CDIC coverage, offers a significantly better 1.80 percent on savings accounts. Peoples Trust, a small financial institution with no online access, offers 1.9 percent on savings accounts and a significantly better 3.0 percent on TFSA accounts. In fact, ING Direct’s interest rate on savings accounts is now so average that Canadians with discount broker accounts can get a comparable rate with high-interest savings account…. [...]
Since ScotiaMcLeod has transformed to Itrade they changed the minimum buys on mutual funds and these mutual fund like savings accounts to $500. I think the minimum buy was $50 in the past. Very annoying. It takes a fairly long time to accumulate $500 in a $25000 TFSA with a 3% dividend yield. My money sits around not earning any interest until I get to the next $500 increment. They seem to want to try to keep money sitting around in the account earning nothing.
I take it back. For the MIP510 the minimum buy is $100. I guess I was confused. The initial buy is $2000 though.
@CC you may want to update this post again as disappointingly TD Waterhouse no longer allows brokerage customers to park their cash in competing ISA funds. The only option now is to buy the TD ISA. At least you would think they could offer a better rate if it is offered in-house? Are other institutions doing the same? The (rock bottom) rates for all these products is nearly the same today but this won’t necessarily be the case in the future and is a negative for the customer…
@MB: I agree that this post needs to be updated. I just did a test buy on ATL5000 and I get the error that only a sell order is allowed for the fund. The only options available are TDB8150, TDB8155 and TDB8159. I’ll have to check if other institutions are doing the same. The TD funds also pay 1.25% but I agree with you that it is a negative of choice is reduced for clients.
I still think places like Achieva Financial area better bet. I don’t recall there being any limit and there are no fees. transfers take a couple of days once you’ve set things up. They pay 2% on their savings account. They are insured by the Deposit Guarantee Corp of Manitoba without the $100,000 limit. They also offer much better rates on GICs. I’ve moved a lot of my money from ING over the last year since ING no longer provides good rates.
@Bob: I guess online banks such as Achieva Financial may make sense if you have cash in a taxable investment account. One can easily move money to or from the taxable account without tax implications. However, within registered accounts such as RRSPs, it is simply not practical to park cash in an online HISA. That’s when these funds come in handy. Thanks for your comment.
In a TDW RRSP account, a significant advantage of using a HISA to hold spare cash is that you can enter buy orders up to the value of the HISA without having to enter a sell on the HISA (a nag pops up asking you to enter a sell order, but you don’t have to). So you can keep the cash in the HISA, making nominal interest, until up to 2 days after the buy order executes (if it does). You can’t do this if the cash is in a savings account at another bank/credit union.
@Peter: Good point. I think you’ve explained it better than I have in the post
Since the likes of TD Waterhouse and RBC now only offer in-house ISA products and seeing as they don’t have to pay trailers, it is disappointing that the rates are not higher. It would be nice to get the extra 0.25% and be allowed to purchase F-series version (e.g. TDB8151) or get the equivalent rate. It is not like I am paying for advice on the discount brokerage side to justify the lower rate version (e.g. TDB8150)….
@MB: I agree with you. TD and RBC have cut out 3rd party ISAs from their offering. Granted their in-house ISAs pay the same rate as the competition but the double dipping leaves one with a bitter taste.
[...] This week MoneySense discussed High Interest Savings Accounts at Discount Brokers. [...]
For anyone interested on how BMO InvestorLine offers high interest savings account mutual funds, I’ve written an explanation at
http://financialcrooks.com/high-interest-savings-account-mutual-funds-bmo-investorline/
The kicker is they only permit investments of a minimum of $25,000 in these HISAs.
@Bet Crooks: Thanks for researching HISAs at BMO. I’ve added your research to this post and linked to your source. One wonders why BMO even bothers offering these accounts. A $25K minimum and 1% penalty makes it pretty much useless for almost everyone.
I hate to say it, but I think it’s an advertising gimmick. So they can say, honestly, if someone asks, do you offer HISA no load mutual funds. But then I’m cynical!
Just an update. I did test whether the minimum really is $25,000 for an investment at BMO InvestorLine, as I was getting some mixed messages from client support. I tried selling some of my 25,000 of DYN500, but the sale failed with the error message that I have to sell it all or none. Details are at
http://financialcrooks.com/testing-minimum-required-bmo-investorline-daily-high-interest-savings/
(Also just to clarify. There is no 1% penalty for the “true” HISAs listed as choices by InvestorLine. They can be sold anytime. However if a new HISA was created by a mutual fund company and was available for sale on InvestorLine without being on their approved listed of HISAs, it would be subject to the 1% early redemption fee, if sold within 90 days, even though it might not be subject to the minimum holding requirement of $25,000.)
I just sold some MIP510 today from my Itrade TFSA account in preparation for the new TFSA year. I had tried to sell it a couple days ago and there would have been a $38.88 early redemption penalty. I last bought on some MIP510 on October 1st, 2012. So I held off until today and there was no early redemption fee. $38.88 seems crazy when I only made around $10.00 in interest all year! It’s a scam that they don’t throw you some amount of interest on the cash that accumulates in your accounts and instead force you to jump through a bunch of hoops just to earn a few dollars in interest.
BMO InvestorLine has added new BMO HISA (AAT770 for CAD; AAT780 for USD) options. These can be purchased and held with a minimum $5,000 balance. Still not as good as the $1,000 minimum at CIBC Investor’s Edge, but it’s much more reasonable than the old $25,000 limit. Thanks to John who tipped me off to this new improvement.