GIC rates have generally been trending up all year, and especially over the past 2 months. We even had a week of daily increases in September! Among the top 10 financial institutions in our GIC comparison chart (based on their 5-year GIC rates), the average increase over the past 2 months was 0.26% for 1-year GICs, 0.28% for 2-year GICs, 0.33% for 3-year GICs, 0.33% for 4-year GICs, and 0.34% for 5-year GICs. The current rate leaders on our chart are:
- 1 year: 4.00% (Haventree Bank)
- 2 years: 4.25% (Oaken Financial, WealthONE)
- 3 years: 4.40% (WealthONE)
- 4 years: 4.45% (WealthONE)
- 5 years: 4.50% (Oaken Financial, WealthONE)
Savings account interest rates on the other hand, have barely moved this year, although Hubert Financial recently increased its savings account and TFSA interest rate from 2.30% to 2.50%, and WealthONE increased its TFSA interest rate from 2.60% to 3.00%. EQ Bank even increased its base savings account interest rate from 1.00% to 1.50%; it has kept its 2.75% rate with an eligible direct deposit.
Is an increase coming to the Bank of Canada’s key interest rate? The Bank of Canada aims for inflation of between 1% and 3%, and inflation has been at or above 3.00% for several months this year. At its September meeting, the Bank of Canada said inflation risks had increased, although it still decided to keep the policy rate at 2.25%. There has also been a change with our neighbours to the south. On September 16, the US Federal Reserve increased its key interest rate by 0.25%, bringing its target range to 3.75%-4.00%. This was the first increase in over 3 years. Inflation in the US has also remained above target, and the Federal Reserve pointed to elevated inflation when announcing the increase.
CDIC coverage at fintechs: a new CDIC page
The CDIC has released a new page explaining how it protects your money at fintechs.
According to the CDIC, there are different ways a fintech can hold customer deposits. Your money may be placed at a CDIC-member institution directly in your name, or it may be held in trust with you identified as the beneficiary. In these situations, eligible deposits can qualify for CDIC protection. However, if customer money is pooled into an account held only in the fintech’s name and individual customers are not identified as beneficiaries, customers would not each receive their own $100,000 of coverage.
What should you look for to determine whether you’re covered?
The CDIC recommends asking three main questions: Is my money held by a CDIC member? How is my money placed at that institution? And how much of my money is actually protected? Don’t assume that an account is covered simply because the fintech works with a CDIC-member bank. Check the specific account and how your deposits are being held.
What happens if something fails?
If the CDIC-member institution holding your money fails, eligible deposits held in trust can be protected by the CDIC for up to $100,000 per beneficiary, provided the required trust information has been properly recorded.
If the fintech itself fails, the CDIC does not handle the failure. However, the CDIC explains that money properly held in trust stays at the member institution where it was deposited rather than becoming part of the fintech’s own funds. Recovering or accessing that money would then be handled through the fintech’s bankruptcy and liquidation process rather than through the CDIC.
Wise’s foray into everyday banking
Wise is known for its multi-currency and international money transfer features, and has been expanding its offerings into day-to-day banking. It announced in May that customers could opt in to receive interest, with current rates of 2.22% on CAD balances and 3.14% on USD balances. Now it is branding its account as an interest-paying chequing account with no monthly fees or minimum balance.
This hybrid chequing account allows you to send and receive free Interac e-Transfers. It also provides a Canadian institution number, transit number, and account number so that you can receive direct deposits and EFT transfers, including payroll deposits. You can also use the account information to set up direct debits such as for rent and utilities. Wise has a prepaid Visa for everyday purchases. You can withdraw up to $100 via a Canadian ATM without incurring fees from Wise, although it does not reimburse any fees charged by the ATM provider.
There are some key limitations: traditional Canadian bill payments are not supported, and initiating an EFT from Wise (pulling from or pushing to an external bank account) will incur fees. Initiating the EFT from the external bank account is free. Customers can only have a single Wise chequing account, but you can separate your balances into features called Jars. There are no joint accounts, but there is a Wise-specific feature called Groups that multiple people can contribute to and spend from.
Wise itself is not a CDIC member, but eligible deposits are held in trust with a CDIC-member institution, and the customer is specifically designated as the beneficiary.
Some of our forum members have suggested that we add Wise to our savings account comparison chart, although it has received mixed reviews regarding customer support and account opening requirements.
Improvements at Simplii Financial
Simplii Financial recently updated its branding but it has hinted that material (and potentially good) changes are coming. To quote its news release this week:
With the introduction of the Simplii Account™ and folders, piloting this month, Canadian consumers will be able to do more than ever within a single account. Folders can be created in seconds via the new mobile app and will streamline bill payments and spending, savings goals, and planned expenses. Customers will be able to automatically distribute their pay cheque across the folders, helping turn financial intentions into an organized plan without having to open or manage multiple accounts.
To help customers keep their accounts in good standing, new payment backup will automatically cover eligible transactions and reduce the potential for insufficient funds events. In addition, higher base interest rates will allow customers to earn money from the first dollar in their savings folders. Additional features will roll out over the coming months, including folder sharing with trusted individuals to simplify household expenses, daily spending allowance, and more.
A new no annual fee, no-FX fee credit card
Our list of credit cards with no foreign currency exchange transaction fees has a new addition: the Capital One Quicksilver Mastercard, which comes in World and World Elite versions. It has no annual fee, and a cash back rewards structure of 3% back at grocery stores, gas stations, and EV charging stations; and 1% back everywhere else. Its current sign-up promo also offers double the cash back for the first year: 6% back at grocery stores, gas stations, and EV charging stations; and 2% back everywhere else.
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