Rising interest rates: how are savers affected?
The Bank of Canada raised its key interest rate on January 17, 2018 by 0.25%. It now sits at 1.25%.
10 years ago, the key interest rate was being lowered from 4.25% to 4.00%, down from its latest peak a few months earlier at 4.75%. The rate bottomed out at 0.50% in July 2015.
What does this all mean for savers? The key interest rate is now up 0.75% from the 2015 low, but our savings account comparison chart history shows that savings account interest savings are roughly where they were in 2015; where they’ve increased, such as with AcceleRate Financial, it’s been by a paltry 0.10%.
Will we see more savings account interest rate increases this year, especially with the key interest rate widely expected to increase again?
What we do know is that many mortgage rates increased in advance of the January 17, 2018 announcement, and GIC rates have increased across the board as well. The highest 5-year GIC rate is, at the time of this writing, 3.15% at Oaken Financial. We’d already seen a round of increases in December, when the highest advertised 5-year GIC was 3.00%.
It’s TFSA season again
It’s 2018, which means that if you turn 18 years of age or older this year, you have an additional TFSA contribution room of $5,500. If you were 18 in 2009 (when the TFSA was introduced) and have never contributed to a TFSA, you should have $57,500 of contribution room now.
Some common TFSA discussions are popping up again on our discussion forum, such as:
- Whether to prioritize TFSA or RRSP contributions
- What to put in your TFSA, remembering that it doesn’t necessarily have to be a “savings account”
Tangerine’s early 2018 net new deposits promo
Tangerine Bank has been running a targeted, quarterly net new deposits promo since 2015. Throughout 2017, the parameters around start date and a range of rate offers (different per person) were predictable. For January 2018, however, they changed up a few things:
- The promo started a day earlier than usual
- The rate period is for 5 months (until May 31) instead of 3 months
- Everybody who received the offer got the same 2.50% rate
- You have to activate the offer
It’s still a targeted offer, though, so if you have not already received an e-mail about it, be sure to log in to your Tangerine account and look under the “Insights” tab to see if you’ve received the offer. (And if you have received the offer, be sure to click the “Activate” button.)
The Tangerine offer overlaps with a couple of previously reported net new deposit promos: 3.00% at Simplii Financial until February 28, 2018 and 2.50% at Ideal Savings until April 30, 2018.
If you’re not yet a Tangerine customer, there is a separate promo if you open a chequing and savings account: you’ll get 2.40% in the savings account for 6 months.
More rate updates and promos
Last month, Alterna Savings increased its TFSA savings account interest rate from 1.90% to 2.05%. At the time, they did not indicate that this was a promo rate. However, they have since posted (thanks to some Twitter pressure) that the 2.05% rate is only good until March 31, 2018, at which point it is scheduled to decrease to 1.95%. 1.95% is still near the top of our comparison chart. Nevertheless, this serves as a good reminder that not only are regular savings account rates always subject to change, but you should be extra careful with TFSA contributions, since your funds are “stickier” inside a TFSA due to the contribution room rules and transfer fees.
Another promo, this time from CIBC: they have a net new deposits promo offering a 2.30% interest rate on regular savings, TFSA, and RRSP savings accounts between October 16, 2017 and March 31, 2018. Note that for the regular savings account, the balance must be over $5,000 for the promo to apply.
No more Amazon.ca Visa (and Marriott Visa), officially
The Amazon.ca Visa, best known for not charging a 2.5% foreign currency exchange fee, was closed to new applications in April 30, 2017. Existing accounts remained open… until now. As of March 15, 2018, all existing Amazon Visa and Marriott Visa (which also waived the foreign currency exchange fee) cards will be completely cancelled.
Current alternative cards that either don’t charge the foreign currency exchange fee or that provide an additional rebate on such purchases include:
- Rogers Platinum Mastercard
- Fido Mastercard
- Home Trust Preferred Visa
- HSBC Premier World Elite Mastercard (but you need to be an HSBC Premier member)
- Meridian Visa Platinum Travel Rewards and Meridian Visa Infinite Travel Rewards (but you need to be Meridian Credit Union member)