In its early years ING Direct was a pioneer in the high-interest savings accounts space offering an interest rate that was far and away better than any of the banks. But for many years now, the best rates can be obtained not at ING Direct but at one of its new competitors.

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 accounts that are sold like mutual funds.

In an earlier post, I compared GIC rates available from ING Direct and Ally and found that Ally offers higher rates across every maturity and it remains true even today. Ally also offers a better rate for cashing out early compared to ING Direct. A quick check at TD Waterhouse shows that investors who can put up a higher initial investment of $5,000 can an interest rate that is 0.35 percent better for non-redeemable GICs at the discount broker.

This pattern can be observed in other products offered by ING Direct as well. Its THRiVE no-fee chequing account appears to be comparable to the competition. The Home Equity Line of Credit from ING Direct has an interest rate of 3.65 percent which even Royal Bank is able to beat with an interest rate of 3.5 percent.

While ING Direct may not offer the best rates anymore, it remains a leader in an important way. It offers a whole range of banking products in one place with better rates and lower fees than the big banks. The convenience factor of all accounts in one place is perhaps the reason why ING Direct, despite the competition, continues to remain very popular among cost conscious Canadians.

This article has 13 comments

  1. ING’s sub-accounts are a great cash-management tool. Seeing your balance separated like that helps to avoid mistakes that could easily wipe out an extra $5-10 in monthly interest. I haven’t heard of any competitors offering them so far.

  2. I’m personally sceptical of the wisdom of moving significant balances around in the hunt for yield on savings accounts and GICs. A bank that offers a significantly higher yields needs to take significantly higher risks with those funds to earn the return it is promising to pay to depositors. This was a factor that contributed to the savings & loan crisis in the US, as S&Ls competed fiercely to attract brokered certificate of deposite depositors, then needing to make questionable investments, particularly in real estate. I believe savers got their money back if they were within the FDIC limits, but the whole debacle was costly for the US government (and a hassle for depositors in the failed S&Ls).

    If property values in Canada dive, even if you are within CDIC limits, ask yourself if you want to be be holding deposits in a financial institution that is heavily invested in bad mortgages. Of course, who would expect that history could repeat itself?

    Of course, this generation of asset/liability managers at financial institutions learned the lessons of the savings & loan crisis, right?

    • The problem is that it is darned near impossible for depositors to make intelligent guesses on the health of their financial institution. I have bank accounts with TD. Is TD Bank safer than Peoples Trust? I don’t know.

      I would say that it makes no sense taking on risk by reaching for extra yield as depositors who parked money in ABCP products found out. However, provided one is within CDIC limits, the extra interest rate may be substantial.

      Example: A TFSA cash account at ING Direct with a $20K balance earns $280 per year. The same account at Peoples Trust will earn $600 per year. That may be enough for a depositor to open up a Peoples Trust account.

      On the other hand, compare the interest rate on an Ally account on $5,000. It is $90 per year compared to $62.50 one can get at a discount broker. For me, the difference isn’t enough to give up the convenience of aggregating all accounts in one place and not waiting for money transfers to be complete.

      • Interestingly, capital adequcy and financial statement data for banks operating in Canada can be publicly accessed at the website of the Office of the Superintendant of Financial Institutions.

        http://www.osfi-bsif.gc.ca/osfi/index_e.aspx?ArticleID=554

        There is also data available on trusts and other financial institutions.

        That being said, a typical depositor isn’t likely to be able to make sense of this data.

  3. ING Direct’s website remains the best of the virtual banks. Well designed, easy to use and great little touches like the sidebar that tells you how much interest you’ve earned since opening an account. But because of their move away from market-leading interest rates, I’ve lost a lot of love.

  4. Don’t forget that ING pays out quite a bit for incentives and referrals. This summer they offered a $50 bonus to open a new account. That’s significant when you consider $1k in savings will earn you $13.50 a year.

    They also offer a $100 incentive to switch your payroll to their Thrive account (it was cash, now it’s an Apple gift card).

    Before opening an account with a bank, you should weigh the pros and cons based on your needs, and not just pick the highest rate.

  5. Great point Echo. I like how you pointed out the pioneer roll that ING played in the overall market CC. I know that loyalty will eventually cost you money if you cling to the concept in the business world (it likely already has if anyone is still with the Orange crew vs Ally), but do you think there is anything to be said for simply supporting the company through an obvious transition since they basically paved the way for this style in banking in Canada (is calling it a revolution pushing things too far?)?

  6. I had an ING account but in the end it didn’t make sense to continue using it. We moved to People’s trust for our TFSA (3% is nice in a volatile market) and PCF handles out chequeing. I like the ability to use CIBC machines which incur 0 fees.

  7. @Robillard: I agree that bank customers so inclined can find out capital adequacy ratios. I doubt 99.99 percent can be bothered though 🙂

    @Sam: I still like ING Direct’s website the best. But I don’t have personal accounts there anymore. The discount broker high interest savings accounts are “good enough” for me these days.

    @Echo: I would say it depends. One might be willing to run through a hoop or two if the differential is large enough. Example: People’s Trust TFSA Savings accounts offer 1.6% more than ING Direct. That may be substantial for those who keep $20K in a TFSA account.

    @TM: I have zero loyalty to a financial institution. I’ll go with whatever is best for me 🙂

    @Sustainable PF: For no-fee chequing, I’d go with PCF for exactly the reason you mention: CIBC and Loblaws bank machines. I hope Scotia allows access to its bank machines for ING Direct account holders. It would be a very nice improvement.

  8. With ING you can use any CU or trust ATM fee free…and next year you will be able to use BNS ‘s ATM fee free…..ING will have their own CC too.

  9. On a related note, RBC intends to buy Ally Financial’s Canadian business.

    http://www.reuters.com/article/2012/10/22/allyfinancial-canada-idUSL1E8LMBZW20121022

  10. ING allowed a third party to eft WITHDRAW from my account without my or consent. Speaking with ING they admitted that once some has the account numbers they can pull the money out no matter who they are and its not ING’s fault or problem. That’s exactly what they told me and it was a supervisor who told me this.