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Savers Roundup January 2021: TFSA and RRSP season in a low-rate environment

New year budgeting

What a difference a year makes for rates

Last January, we were talking about a 3.30% savings account at LBC Digital, and every financial institution on our savings account comparison chart had an interest rate of at least 2.00%, with the exception of Canadian Tire Bank. Today, Canadian Tire Bank leads our chart with a savings account interest rate of 1.80%, and most other rates are closer to 1.00%. Just last month, there were more rate decreases at LBC Digital and MAXA Financial, and Hubert Financial even decreased its rate twice in 7 days.

12 months ago, 5-year GIC rates were nearing 3.00%, and there was even a 1-year GIC promo at 3.00%. Today, we don’t even have a 5-year GIC at 2.00%. Although, you might not feel the impact of fluctuating rates as much if you’ve set up a GIC ladder.

But there is hope around rates, and not just for those who are in the market for a mortgage!

EQ Bank’s recently launched TFSA (and RRSP) offers the best rate around at 2.30%. They are also offering that rate for a TFSA or RRSP 3-month GIC. Even if you’re skeptical of how long the rate will last at 2.30%, EQ Bank doesn’t yet have any transfer-out fees.

Tangerine Bank continues to play the promo game, with January’s targeted new deposit promo offering 1.75% until May 31, 2021. Our promotions page features some other usual suspects such as Simplii Financial and CIBC, as well as a 1% transfer-in bonus from Meridian Credit Union for TFSA and RRSP funds.

Lots more personal finance news

Savers Roundup December 2020: Registered accounts at EQ Bank; tax planning; a box of chocolates!

Chocolate money

Canadian Tire Bank is still on top

We might end the year with Canadian Tire Bank still atop our savings account comparison chart with an interest rate of 1.80% — a rate that it has maintained since April 2020. It has led our chart since August 21, 2020 amidst consistent interest rate drops at all other financial institutions. Over just the past month, there have been decreases at Peoples Trust (from 1.35% to 1.30%), Outlook Financial (from 1.30% to 1.20%), AcceleRate Financial (from 1.30% to 1.20%), Implicity Financial (from 1.35% to 1.20%), and Ideal Savings (from 1.21% to 1.01%).

Canadian Tire Bank has, however, given up its lead for a TFSA to EQ Bank…

Registered accounts have arrived at EQ Bank

Just in time for the end of the year, EQ Bank has launched TFSA and RRSP savings accounts with a 2.30% interest rate. Both the TFSA and RRSP flavours currently have a 3-month GIC offer at 2.50%, which is higher than EQ Bank’s own 10-year GIC rate and all of the GIC rates on our comparison chart.

EQ’s splashy TFSA and RRSP rates are likely teaser / promo rates. In case you are planning your next move after a potential rate drop, for now their registered accounts don’t appear to have any transfer fees.

The TFSA December manoeuvre

The upcoming new year also comes with new TFSA contribution room for Canadian adults, and the 2021 limit will once again be $6,000. As always, if you’re looking to transfer existing funds, consider what we like to call the TFSA December manoeuvre, which involves withdrawing TFSA funds at the end of a calendar year to open up contribution room on January 1. That way you avoid the administrative hassle and potential fees of a direct TFSA transfer between financial institutions.

Personal finance is like a box of chocolates

Savers Roundup November 2020: Neo Financial’s high-interest account; reviewing international money transfer options; the value of a credit card point

International money transfer

Neo Financial’s 1.70% savings account is on the way?

Canadian fintech startup Neo Financial is advertising a 1.70%, CDIC-backed savings account. It appears to be a hybrid account where you can pay bills and send Interac e-Transfers, but not write cheques. Although applications appear to be open for Neo Financial’s credit card, the savings account is still awaiting general launch, but when it does, its interest rate would rank just behind Canadian Tire Bank on our comparison chart.

TFSA and RRSP accounts coming to EQ Bank

Speaking of hybrid accounts, EQ Bank is on the verge of expanding its ever-growing product offerings to include TFSA and RRSP accounts by the beginning of 2021.

A very small savings account interest rate increase

Continuing the 2020 trend, more steady savings account interest rate decreases have hit several of the financial institutions we track, including Wealth One Bank of Canada (from 1.60% to 1.50%), Hubert Financial (from 1.40% to 1.30%), Peoples Trust (from 1.50% to 1.35%), and Ideal Savings (from 1.31% to 1.21%). Bucking this trend, ever so slightly, was Implicity Financial, which increased its savings account interest rate last week from 1.30% to 1.35%.

The news isn’t any better with GICs, as there is only one 5-year GIC remaining on our chart with a 2.00% rate. Talka Credit Union (Ontario-only) is currently offering a 4-year 2.00% GIC and a 5-year 2.10% GIC.

Online options for sending money internationally

Are the Scotiabank and EQ Bank international money transfer options worth a look, given that they can both be done entirely online? One advertises no fees and the other claims to calculate the currency exchange using the mid-market rate. Those are two sides of the same coin — at the end of the day, no matter what they advertise you’re going to pay something to transfer money internationally. Our latest article breaks down the numbers of just how much money arrives in the destination account.

Promos and more reading

Scotiabank vs EQ Bank’s International Money Transfers

Scotia International Money Transfer

I recently signed up for the Scotiabank Ultimate Package Chequing Account (see also this review) and noticed that it offers free Scotia International Money Transfers. I decided to dig in and see whether this is a worthwhile benefit for anybody who needs to send money internationally, especially compared to EQ Bank’s similar service that was announced at the end of 2019.

Convenience

Both Scotiabank and EQ Bank allow you to complete the entire process online, with an interface that’s built-in to your existing online banking interface.

Here is the Scotiabank online banking interface:

Scotiabank: send money internationally

Here is the EQ Bank online banking interface:

EQ Bank: send money internationally

This is certainly more convenient than sending a wire transfer or money order. EQ Bank’s international money transfer service is actually through a partnership with TransferWise and thus you must also sign up for a TransferWise account. This takes a bit more setup, but might be worth it in the end.

In either case, the transfer direct debits your Canadian bank account and then deposits the money in the destination account within a few business days.

Here is the interface to add a new recipient through Scotiabank:

Scotiabank International Money Transfer: Add a new recipient

Scotiabank supports 18 destination countries. If you need to send money to a country that isn’t on their list, they suggest that you go through their partnership with Western Union, which would cost you a lot more in fees. Through its TransferWise partnership, EQ Bank supports 69 countries and regions (although that includes the volcanic island Jan Mayen, among other regions).

Fees

Whether through a spread on the exchange rate or a specific fee, every currency exchange or money transfer service makes money from you. And they’ll heavily advertise whichever route they’ve taken. In the end, you shouldn’t get distracted by this, because all that matters fee-wise is how much money reaches the destination.

Scotiabank does this through its exchange rate spread (which I calculated to be 2.0% for a CAD to USD transfer), while EQ Bank does this through fees. Note that if you don’t have a Scotiabank Ultimate Package chequing account, you end up also paying $1.99 per transfer (on top of the 2.0%).

I did some test CAD to USD transactions with Scotiabank and EQ Bank and compared the results against the mid-rate on XE.com, which was 0.76464 at the time. In other words, if you were to transfer $10,000 in Canadian dollars at the mid-rate, the recipient would get $7,646.64 in US dollars. Note that this is a baseline that you won’t actually get unless you find someone who wants to exchange exactly $7,646.64 USD in exchange for your $10,000 CAD.

For Scotiabank, I tested the amounts below. (Scotiabank allows you to transfer more than $9,500 CAD at a time, but EQ Bank’s limit is $9,500 per 24 hours, so I chose $9,500 for the highest amount.)

  • Send $100 CAD, receive $74.96 USD
  • Send $1,000 CAD, receive $749.60 USD
  • Send $9,500 CAD, receive $7,121.20 USD

Scotiabank International Money Transfer: Previewing the rate to send $1,000

This is a 2.0% spread no matter how much you transfer: (0.76464 [mid-rate] – 0.7496 [Scotiabank rate]) / 0.76464 [mid-rate]

For EQ Bank, I tested these amounts:

  • Send $100 CAD, receive $74.27 USD
  • Send $1,000 CAD, receive $758.01 USD
  • Send $9,500 CAD, receive $7,216.02 USD

EQ Bank International Money Transfer: Previewing the rate to send $1,000

EQ Bank becomes cheaper pretty quickly — I calculated that at $130 CAD and above, you’d pay less in fees with EQ Bank. For amounts lower than $130 CAD, Scotiabank is cheaper. This is because EQ Bank / TransferWise charges you a fee consisting of a base fee (up to $3.02) + a fixed 0.65% spread on top of the mid-rate. EQ Bank and TransferWise advertise heavily that they charge you the mid-rate, but this is just a clever way to break down the fee.

Interestingly, using EQ Bank is slightly cheaper than using TransferWise alone. When you use TransferWise outside of EQ Bank, it charges you an additional payment fee depending on how you choose to fund the transfer (with a bill payment vs direct debit, for example).

TransferWise charges an additional payment fee

When you do the transfer through EQ Bank, there is no such additional fee.

I did not test other currencies, but I would expect the comparison to be similar, with Scotiabank better only for very small transfers. If you have a Scotiabank chequing account that charges you an additional $1.99, then EQ Bank will always work out cheaper.

Business transfers?

Note that for my small business, I use OFX for all foreign currency exchange — I’ve gotten by far the best rates there for higher frequency and higher dollar amount transfers.

Savers Roundup October 2020: Promos for new and existing customers; answering newbie questions about transferring to online accounts

Percentage sign

Savings account rate drops almost everywhere

Over the past month, all but 2 of the financial institutions on our savings account comparison chart have decreased their savings account interest rates, including EQ Bank (from 1.70% to 1.50%), Motive Financial (from 1.75% to 1.55%), and Bridgewater Bank (from 1.75% to 1.55%). The ones that have remained unchanged? Canadian Tire Bank (still at 1.80% since April) and Wealth One Bank of Canada (at 1.60% since August, during the last widespread decreases; Update: decreased to 1.50% on October 16!).

It’s not much of a surprise that savings account interest rates have continued to drop since the Bank of Canada’s last key interest rate change to settle at 0.25% on March 27. Throughout the summer, the difference between the Bank of Canada’s interest rate and savings account interest rates has been higher than usual.

The drop in GIC rates might be slowing down, with a cluster of very similar rates at the top of our GIC comparison chart, the highest being 2.00% for a 5-year GIC at 5 financial institutions.

Promos for new and existing customers

If you are an existing Simplii Financial and/or Tangerine Bank customer, you might have received their latest targeted new deposit promos:

This time around there are also similar offers for new customers:

Manulife Bank has a promo rate of 2.15% for the first 4 months if you open an Advantage Account before October 31, 2020, which is valid for new and existing customers.

Save money by avoiding PayPal for purchases in foreign currencies

Making a USD purchase with PayPal? PayPal’s foreign currency exchange fee is getting even more outrageous, to a minimum of 4.0%. You can avoid this by not having PayPal do the conversion every time you make a purchase. Even better: don’t use PayPal and/or use a credit card that doesn’t charge you any currency conversion fee.

Newbie questions on transfer fees and introductory rate offers

Not sure about dealing with a mostly online bank or credit union? Wondering about how to get the money in and out, and associated fees? You’re not alone, and our forum members have been very helpful in answering a newbie’s questions!

Cash back offers

We’ve got some new or increased offers on our cash back site: