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moneysense.ca, 29/11/11
Why isn’t Ally more popular?
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.
moneysense.ca, 29/11/11
I looked at ally but I like a lot of the other features of ING like the checquing accounts and the RRSP accounts so the hassle of changing doesn’t seem to be worth it. I also do not keep that much money in savings and GICs so the increased return wouldn’t be that great.
They do have good ads on TV.
The power of advertising and brand recognition would be my guess.
The GMAC association worried me back when I was deciding on whether or not to use Ally, but I arrived at the same conclusion regarding the CDIC deposit insurance and opened the account in the end. I’ve been very happy with them so far and have ended up creating a number of accounts for separate purposes: travel savings, property taxes, an account for each of the kids… I’ve yet to hit any limit on the number of accounts which I find great to keep my savings pots nice and separate. Regular automatic withdrawals from my brick and mortar bank for each account and I barely feel it. Nice!
Why not people’s trust which has High Interest Savings accounts within a TFSA with a rate of 3 % and is also CDIC insured?
ING has great marketing and a first-mover advantage. That said, I don’t like to move institutions often and been happy with Achieva Financial for years, which always has among the top rates.
Ally was a latecomer to the “high” interest rate party. For the amount most people have in these types of account, the differences you cite are not worthwhile switching for.
Do you know what the assets of ING & Ally Canada are? How do you know ING is more popular?
One reason I won’t bank with Ally can be found here —-> http://nlpc.org/stories/2009/11/05/consumers-beware-ally-bank-gmac.
Another reason is that I can do much better with a Canadian institution Achieva Financial, where my entire deposit, not just the first $100,000 is guaranteed by the Manitoba government. —> http://www.achieva.mb.ca/
I have had some money at ING from their start, when their rates were the best, but will be moving it out at year end as they are no longer competitive with Achieva Financial or Outlook Financial et al.
Why aren’t all high interest bank accounts more popular than conventional bank accounts?
I suspect those mean TV adds should provide some dislike for ALLY
@James: I hear you on the hassle of having multiple accounts. And yes, the interest rate difference on small deposits isn’t that much.
@SustainablePF: Maybe. Though Ally also advertises a lot and pretty good ads too.
@Pablito: I think it is the CDIC guarantee that’s important. It’s asking too much of depositors to research into the financial health of the financial institution. For all we know, Ally may be stronger financially than ING.
@rj: Good point about Peoples trust. 3.0% on a TFSA account is outstanding.
@Michael: I would have thought first-mover advantage doesn’t amount to much when it comes to online banks but maybe I’m underestimating the power of inertia.
@Mike: I don’t have actual deposit information of Ally and ING. I’m going by what I hear from friends, co-workers and readers about the relative popularity of ING Direct and Ally.
@Ron: I don’t have a convincing reason for why Manitoba credit unions specifically offer much higher interest rates. There are concerns expressed in some quarters regarding this:
http://www.fiscalagents.com/newsitems/letter_ManitobaCUDGC.pdf
@Jim Yih: Good question. The big banks are simply not worried about online banks anymore. I recall reading that online banking growth has plateaued.
ING is more popular because they offer incentives like sign-up and referral bonuses. $25 to open a savings account, $100 to open a chequing account. The bonus offers are worth more than a year or two worth of interest, in some cases. ING is also offers a generous referral program, giving you another $25 for every account opened using your referral code (currrently $50 over the holidays). The power of word of mouth is often more effective than conventional advertising, and it doesn’t take much persuasion to get a couple of friends or family members to sign up using your code.
What does Ally offer? There advantage is nothing more than a quarter of a point difference in interest rates on some accounts.
Really?!?
At 1 or 2% and if its in a taxable account is this even worth discussing? Returns in this day and age are simply a joke. Compare this to years gone by. You might as well make your purchases with your money now. The real rate of inflation is much higher then what is bounced around in the media. The paltry return you get on your money in the bank is eaten away in a month anyway. Invest your money in some kind of product paying you a steady dividend.
Perhaps if Ally did not shun the country’s second most populous province they might get some more business.
I’d like to open an account but they won’t let me. Same goes for Canadian Tire and Canadian Direct Financial. Hard to get a decent rate and CDIC if you live in QC and have a need for substantial cash reserves. Already maxed out at PT and ING and way above the limit at my big 5 bank.
@Echo: It’s true that ING offers sign-up bonuses. However, nothing stops a customer from collecting the bonus and parking their cash with a competitor. I would have thought that online bank accounts are not very sticky, but I maybe wrong.
@Paul N: I think it is. If one has a huge cash balance, every 25 basis points makes a difference. Of course, on $10,000, 25 basis points is just $25 per year, so it won’t matter all that much.
@gsp: Good point. Have you considered high interest savings accounts at the discount brokers. TD Waterhouse offers a ton of these. I just updated an old post with the latest accounts I found and the list is now quite long..
http://www.canadiancapitalist.com/high-interest-savings-accounts-at-discount-brokers/
Thanks for the updated list CC. However there’s not much there to consider, those are big 5 type rates. Also don’t really like mixing investment dividends with cash reserves which invariably happens inside brokerage accounts. I’d go through the trouble of opening new brokerage accounts if something was offered in the 2% range but 1.4% by phone is not worth my time. Not worried about CDIC limits at my big 5, only at these online institutions. At least for now…
A couple of reasons.
1) ING direct spends tons of $$ on advertising. “Save you money”, that guy, and its orange shows up again and again in commercials, bus stops, newspapers, etc. Better brand recognition.
2) Ally does not have cheque account. Personally, I used Ally before but I hate to transfer money in and out all the time. also, 0.5% difference is not huge unless you have very deep pocket. But those wealthy people will not favor saving account too much, only working poor, paycheque-reliance people shopping saving rate around, like you and me.
@Minghui: Good points both. ING does advertise more. I even see a number of billboards during my commute. And yes a wider product portfolio helps.
@CT: Good point again that a jump from old Canadian big bank savings account to ING Direct was a sea change compared to jumping from ING to Ally. Funny you should mention mounting an antenna in the attic. I’ve been looking into it recently. I’m sick of paying $40 per month for Rogers basic cable.
Ally’s advertising is clever. I like them, but my use of a PVR, on-demand video, ad-block software and so forth – I don’t see them very much, as opposed to back in the day when the Dutch ING guy was always telling me to ‘save my money.’ Perhaps he still is. I never see him either, but his work was done for me.
A half-percentage difference isn’t something that moves me to start filling out forms right away, nor does it lodge itself into my mind and stay there. “It’s a fine deal,” I think, “though rates do fluctuate…”, and then I tend to a chore that needs done, and I’ve forgotten Ally.
When I switched to ING, it was against my use of a traditional bank that had much lower interest rates, and munched at my money with fees ($7ish a month). ‘Save your money’ was echoing in my head frequently. I was dissatisfied with my bank, the ROI of effort was much higher, and it was in the forefront of my mind.
Traditional bank to Ally might be the same story for me if they were around then. ING to Ally becomes a matter of very fine-tuning…perhaps a few dozen dollars a year difference, and it’s not like I’m starting from an unhappy place. No disrespect to Ally, but I see much better return by slowing down on the road and mounting an antenna in my attic, so for now – my efforts and brain power are there.
@CanadianCapitalist: I’m a fellow Ottawa-boy – if you have any questions for someone who’s expertise is “I did that once,” feel free to shoot me a mail.
Was an answer to the Manitoba CUDGC letter ever received?
@CT: Thanks for your offer and I will contact you via email.
@Ron:Not that I’m aware of. I have contacted Fiscal Agents to find out. I think this issue needs more attention because after all, fixed income products should be absolutely safe.
I’ve been using ING for quite a while and it is very simple to use and far better than banks for many things. However, lately they’ve not had as good rates as others. So I’ve started using Achieva Financial for RSPs, TFSAs and regular savings. They have far better rates … 2% for savings account. 3.5% for 5 year GICs, etc. They do have some fees but I’m using the service for longer term things and won’t do many transactions (they allow 1 free withdrawal each month and they give you $1.00 each month if you don’t require paper statement). They are not part of the CDIC but have better (?) insurance with the province of Manitoba (without the $100K limit).
For those worried about Ally, the Canadian version is a subsidiary of Resmor Trust, a Canadian institution (which in turn is owned by Ally Financial in the US). Resmor is a CDIC institution regulated by the Canadian banking regulators, and would have to satisfy them on its own merits in regards to capital and so on. Ally in the US can’t just simply drain money from the Canadian operations if they are in trouble, and of course there is the CDIC insurance (if you want to deposit over the CDIC limits you’d want to do your own due diligence, as with anything). For those who dislike Ally because the US parent took bailout money, don’t forget that ING’s Dutch parent also took a big chunk of Dutch bailout money (one of the reasons they are selling their US operations). For those looking to park cash, Ally has a very nice online interface – you can easily connect up any number of external accounts, and both push and pull money from them. Even if you use someone else for chequing or RRSP, having a 2% account for the excess can be useful – an extra half point on $10,000 is $50 for the year; a nice little bonus for very little work.
As far as the Manitoba credit unions are concerned, now that Hubert has done an about-face and become another me-too 2%-er, anyone uncomfortable with Manitoba insurance as opposed to CDIC can get top-end HISA rates from CDIC places like Ally, Canadian Tire and Peoples Trust, without any need to go to Manitoba. Manitoba GIC rates are still significantly better, though. FWIW, I’ve been doing a fair bit of digging into Manitoba, and I suspect there may be some sour grapes in the letter mentioned above – it is from a GIC broker, who has to compete against 3.5% 5-year GICs with 2.75% non-Manitoba ones. I suspect that in part the Manitoba CUs are feeding through what might otherwise be dividends or patronage rebates into interest rates – either way benefits their customer-members. Many of the Manitoba CUs are also very “efficient”, in the technical sense of operating costs to revenue. They seem to have evolved to pay out higher interest rates, although the why isn’t really clear. They don’t seem troublesome in terms of capital levels and so forth.
As far as ING vs Ally popularity, OSFI (the Canadian banking regulator) posts various financial statements it requires regulated institutions to file. I pulled the consolidated monthly balance sheets for ING and ResMor for Sept 30/2011 and looked at the reported “Demand and notice deposits” figures for Individuals. My assumption is that while ResMor offers GICs under that brand, it doesn’t have savings/chequing accounts, so all those figures should be for Ally.
If so, and I’m reading things right, Ally would seem to have about $1.2 billion in regular deposits, plus another $35 million in TFSAs (since it doesn’t have RRSPs). ING would seem to have about $15 billion in regular personal deposits (that would include chequing accounts), plus another $5 billion in registered accounts (TFSA and RRSP). ING has close to another billion in US-dollar accounts.
Canadian Tire seems to be around the half-billion mark. There is something weird about President’s Choice – their values are zeroed and the balance sheet is mainly about mortgages. I suspect their deposits may be on the books with CIBC, or somewhere else.
NorthernRaven – Thanks for an interesting and well researched post.
@Ron: Fiscal Agents came back with this response:
http://www.fiscalagents.com/newsletter/emailnews/bull_nov11_mancredunions.htm
I’m a bit confused about FA’s argument. My understanding is that CDIC doesn’t have an explicit guarantee from the Federal Government either, though one could argue that the threat of a run on banks will compel the Government to step in, just like the US Government did when it appeared that money market funds were about to break the buck.
@NorthernRaven: I agree with you that FA has a vested interest in their viewpoints. However, I’d like to hear it out while keeping in mind that the opinion may be coloured by self-interest. I’ve never been comfortable with the CUDGC guarantee which I think is weaker than a CDIC guarantee. If CDIC cannot make good on its deposit insurance, the Federal Government would be forced to step in simply because not to do so would be financial Armageddon. I’m not convinced that’s the case if CUDGC cannot make good on its promise.
Thanks for digging into the ING versus Ally question. I looked up the OSFI website the other day but clearly I didn’t look hard enough.
Interesting that Ally+ResMor Trust have a total of $158m in tax-sheltered GICs and $1.95B in taxable GICs. For ING Direct the total is $2.1B in tax-sheltered and $4.3B in taxable GICs. (I’m assuming “Individuals->Other” means taxable accounts. If so, shouldn’t individuals be holding more of their GICs in tax-sheltered accounts and not taxable accounts?
For others interested in OSFI data, you can find it here:
For Banks: http://www.osfi-bsif.gc.ca/osfi/index_e.aspx?ArticleID=554
For Trusts: http://www.osfi-bsif.gc.ca/osfi/index_e.aspx?ArticleID=560
I’d be happy to give FA the benefit of the doubt, but they certainly seem to be more interested in pushing a somewhat questionable viewpoint, rather than trying to help actually resolve these issues.
I actually asked DICO about whether their guarantees are considered legal obligations of the Ontario government. They declined to answer and referred me to the Ministry of Finance – I’m waiting to hear back. I’d be surprised, though, if I get anyone to actually state that Ontario is on the hook, legally – I’d suspect that if super-Armageddon came, and a “We Hate Credit Unions Party” was in power and willing to let a chunk of Ontario’s economy implode rather than provide one cent more than legally compelled to, DICO debts probably turn out to be separable.
On that basis, you have Ontario, with an anemic fund of 0.4% of insured deposits, and a big Ontario government line of credit (a loan provision) which takes that to around 1.5%. And you have Manitoba, with a robust actual cash fund of around 1%, but no explicit government line of credit. It seems extremely unlikely that Manitoba wouldn’t also provide support similar to Ontario’s if required – $50-$75 million in loan guarantees would bring them up to that 1.5% Ontario level, and after that it is caveat emptor on both sides. Manitoba credit union assets represent something like 30% of their GDP (it is more like 5% in Ontario), and you have to guess that the government would be willing to absorb a hefty amount of pain to provide a credit backstop before letting that sector implode.
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Ally is not available to Quebec residents, because it sells risky investments? No, Ally’s investments are covered by CIDC insurance. Why is Ally not available to Quebec residents, because they do not meet the French language law requirements? Maybe!
More likely because they have to be cleared by financial/legal requirements that have little value or meaning. In Quebec we wait years while our provincial watch dogs check to ensure that that investments covered by CIDC insurance are a safe place for residents of Quebec to deposit their Canadian dollars. (The dollars most probably having been transferred to Quebec by the Fedral Government to support a have-not economy. Is all this too sarcastic…. I will not go on….
I would not consider Ally for two reasons.
1. Because of their Advertising which is deplorable in the way it treats the children and I have informed them of my feelings and had no response.
2. I have my car financed by Ally through GM ( not my choice) and I believe that ALLY has the poorest most inflexible administration system that I have ever encountered
Why don’t you look at Outlook Financial for great GIC rate.
There 1-5 year rates are 2.25-2.60-3.00-3.25-3.50%
Better yet, check out Happy Savings – another Credit union in Manitoba. They were paying 2.50% on daily savings till recently – now down to 2.00% the same as Achieva. Unlimited deposit guarantee and their GIC rates range up to 3.55% for 5 year term. Their EFT system is simple, fast and free.
Oops – I forgot – Happy Savings (also known as Hubert or Sunova) is available outside Manitoba. They don’t do RRSPs yet, but say they are working on it.
I’m glad it’s not just me who hates their ads! What is it with commercials these days about being mean to children as well as adults (some cereal commercials). Are they supposed to be funny?
Also associating with GMAC worried me. ING has been around for a long time, they are all over Europe and I’ve never had problem with them. So not worth switching.
And I hate those ads!
Lets remember that it was ING that was the first to take on the Big Banks–Government backed pathetic rates, and if it wasn’t for ING, Ally and the rest wouldn’t be offering such attractive rates. If ING were suddenly not here, everyones rates would drop.
(back in 1998, one got personalized cheques for one’s Canadian (and US) SAVINGS account at ING, (still have some) but the Big Banks complained to the government and so ING was no longer able to issue cheques for their savings accounts, nor could they say why…they had to walk lightly in the Big Bank-Government Cartel. (These personalized cheques made it too easy to legally link at your Big bank, their accounts to ING, making it too easy for everyone to tranfer their money out. It also made ING account a too good account…ie the first savings accounts with free cheques attached to them…no we have to squash that before Canadians get use to it)
Yet another online institution offering high rates:
Canadian Direct Financial
https://www.canadiandirectfinancial.com/Personal/
2% interest on savings accounts
3% interest on TFSA
They’re a division of the Canadian Western Bank, CDIC insured, and offer online banking, as well as access to the “Exchange Network” of ATMs. (National Bank, Alterna, ING, and HSBC are all members – you can use their ATMs)
Yet hardly anybody has heard of them.
I’ve been an Ally customer for approximately 4 months.
During that period, my place of employment has attempted to direct deposit my paychecks into Ally, but the deposits were rejected. I then tried to e-check deposit my paychecks….which Ally held for 12 days EACH time before depositing. In the mean time, I had checked and double checked and triple checked that the account information that was being used was correct. Each time I called Ally I was subjected to yammerings about account numbers that I’ve confirmed and hold times I find excessive, given the fact that it’s a salary check for the same amount every two weeks. But, I figured it would all be fine when the direct deposit issue was fixed.
After five attempts, my accounting department said “Good news, your deposit has been accepted!” and I was so happy. But on deposit day, my money wasn’t in my account. My pay stub said “This is not a check” and Ally said “We don’t know where your money is…but it may take us 24 to 48 (business) hours to research it” On a Friday that means I won’t hear from Ally until Tuesday, and if they DO find it, I’m sure they’ll come up with a reason to hold it for another 12 days.
The worst part…while speaking with a customer service supervisor (almost as useless as a customer service representative, but with a more authoritative sounding title) she indicated that there was no way to further expedite my resolution, as it was a newly opened issue. WTF? I’ve been calling over and over for months about the same issue. Maybe it’s a bit different than the last eight calls, but it still boils down to the same. little. nugget. My direct deposit isn’t being deposited and Ally won’t give me my money.
The fee-less accounts, the interest, the convenience, the friendly customer service, the e-check deposit…it all sounds fantastic, but BEWARE. You’ll continuously call with the same issues. You’ll wait weeks for access to your own money and there is no direct line to the resolution center…leaving you at the mercy of friendly, but relatively helpless customer service reps (and supervisors).
I’ll be posting this review on every available site for each waking hour that my funds remain missing in some Ally limbo. At the earliest availability I’ll be removing my money and marching it straight toward the teller of a better bank…if there is such a thing.
Wish me luck.
I have heard stories about the resolution problems at Ally and I am not too crazy about the fact that GMAC is behind them. But now that ING has been bought by Scotiabank I am waiting to see what will happen going forward. Will Scotiabank keep most of the ING principles i.e. on-line banking, higher interest rates for deposits, lower interest rates for borrowing, etc? I like some of the alternatives that were presented in this forum so there is no reason why the big chartered banks should monopolize the deposit market. if Scotiabank wanted access to the ING customer database they have it but ING customers did not use the big chartered banks for a reason. If they don’t keep a reasonable facsimile of ING all the former clients will migrate to the alternatives mentioned above. I would like to mention that I have funds at Manulife Bank. You can’t just open an account there but you need a financial planner. Manulife is a well financed life insurance company. The best thing about a life insurance bank is that your deposits are private and not open to probate if by chance you pass on without a will.
Interesting that Manulife Bank would not be mentionned.
They have a High Interest Account, now paying 1.65%, just down in the last week from 1.75% where it had been for a long time. Like many of the other banks mentionned above a link to your main bank account simplifies by allowing electronic banking transfers.
It is a full service account, with no charges for transfers or cheque processing and full use of debit ($0.50) or AMB ($1.25) They are part of the Exchange Network, giving access to over 2400 ABM’s in Canada to avoid additional “convenience fees”
They also have a Business Account, now paying 1.4%, down from 1.5% where it sat a long time. Service Fees are higher. IE: $1.50/ cheque.
PS: Established in 1993, Manulife Bank of Canada (Manulife Bank) is a Schedule l federally chartered bank and a wholly-owned subsidiary of Manulife Financial, one of Canada’s leading financial institutions. With over $20 billion in assets. (from website)