11 articles General

Savers Roundup March 2020: How low can rates go?

Money graph pointing down

Sub-2.00% savings accounts are soon to be the norm?

Only a couple of months ago, we were debating how long LBC Digital’s 3.30% savings account interest rate would last, and now we’ll be lucky to make it out of March if any of the financial institutions on our chart have a 2.00% savings account. On March 4, 2020, the Bank of Canada lowered its key interest rate by 0.50%, and less than 12 days later in an unscheduled rate decision, it lowered the rate by another 0.50%.

Most financial institutions have lowered their savings account interest rates, with the biggest drops from LBC Digital (from 2.80% to 2.25%) and Motive Financial (from 2.80% to 2.20%). Ideal Savings currently leads our chart at 2.31% for both the regular savings and TFSA accounts, but look for more changes on our chart in the coming days and weeks, if not by the time today is over. The Bank of Canada might still lower its rate further — consider that the US government just lowered its target rate for a third time in March. Some Canadian financial institutions haven’t even adjusted their rates after the first cut, and most of them haven’t yet reacted to the second cut.

The last time interest rates were this low, 1.75% was the top savings account interest rate (until EQ Bank launched), and Zag Bank was still a going concern.

Rare remaining higher rates

Targeted, limited-time higher rate offers, especially for net new deposits, started to become a hot topic of discussion on our site in 2013. 7 years later, this trend has continued. Tangerine Bank’s latest targeted new deposit promo (up to 3.00% for 4 months) started on March 2nd. Simplii Financial’s 2.80% offer ends on April 30, 2020, although someone has reported receiving an offer for 3.15%. DUCA Credit Union (Ontario only) has a 3.00% new deposit promo that recently got extended to June 30, 2020. All of these are listed on our promotions page. They also all appear to keep the total rate the same even if the base, non-promo rate drops. Be careful of other offers where the total rate can drop when the base, non-promo rate drops.

GIC rates have been dropping across the board, although not as deeply as savings accounts. This might be a good time to review whether you want to lock in any GIC rates before we see further rate drops. Oaken Financial and Wealth One Bank of Canada are at or near the top on our GIC chart for 1- through 5-year rates. The most recent round of Oaken Financial GIC rates decreases took effect on March 13, although they gave people 1 week of advance notice. EQ Bank is currently offering a 2.45% 3-month GIC, 2.45% being its previous savings account interest rate until it was decreased to 2.00%.

Good news: you might have uncashed cheques from the Government of Canada

The CRA online My Account area now has a section allowing you to see whether you have any uncashed cheques from the government. Be sure to switch to direct deposit in order to minimize your chance of future uncashed government cheques.

Changes to credit cards and more

Savers Roundup February 2020: 3.30% no more; calculating interest on minimum monthly balance; Wealthsimple Cash launch

LBC Digital rate couldn’t last: 3.30% no more

LBC Digital has announced that its savings account interest rate will decrease from 3.30% to 2.80% on March 1, 2020. This comes 3.5 months after its initial launch and drops it into a tie with Motive Financial at the top of our comparison chart.

Third place on the chart is EQ Bank, which recently increased its savings account interest rate from 2.30% to 2.45%. EQ Bank is no stranger to teaser rates, having implemented its first interest rate drop only 3 months after its launch in 2016. However, its rates have been relatively steady since then.

If you’re chasing a 3.00% interest rate, you might want to look into DUCA Credit Union (Ontario only), which currently has a new deposit promo of 3.00% between February 3 and May 30, 2020.

Higher rates but uncommon interest rate calculations

Most savings accounts calculate your interest on the daily closing balance and pay interest monthly. Access Credit Union and Steinbach Credit Union have savings account interest rates starting at 2.40%, and Rosenort Credit Union’s savings account interest rate starts at 2.60%. But all 3 accounts calculate your interest earned on the minimum monthly balance and pay out annually. Is this a deal breaker for you? Our quick Twitter poll said overwhelmingly that it is a deal breaker.

GIC specials on uncommon term lengths

For simplicity, we track 1- through 5-year GIC terms. There are currently plenty of GIC promos for non-standard GIC terms, including:

There are promos for more traditional terms too:

You can track them all on our promotions page.

All the news you can read

Cash back this month

Beyond the rate: Applying for overdraft protection at Tangerine Bank

Overdraft protection at Tangerine

If you’ve ever been hit with an NSF (non-sufficient funds) fee, you know that it’s costly and inconvenient. With overdraft or coverdraft protection, you can avoid such fees, often for free. Here’s how to set up overdraft protection at Tangerine Bank.

You get charged an NSF fee if there is a debit against your account (such as someone cashing a cheque you wrote) and you do not have enough money in your account to cover the debit. By default, your account is not allowed to be “overdrawn” — in other words, it cannot have a negative balance. Tangerine’s NSF fee is $40. Not only are you charged the fee, but your cheque bounces and you’ll have to re-do the transaction (such as issuing a new cheque) when you have enough money in your account again. You might also get charged another fee by the recipient to cover their inconvenience.

Overdraft protection allows your account to go into a negative balance (up to a certain limit). At Tangerine, you must apply to have this protection enabled. Overdraft protection at Tangerine is free if you do not use it at all, or when you use it, if you transfer enough money into the account by 9:00pm Pacific time / 12:00am Eastern time on the night that your account is overdrawn. Otherwise, it costs $5 in each month that you use it (no matter how many times you use it in a month), plus 19% annual interest until the overdraft amount is paid back. Tangerine will e-mail you whenever you’ve overdrawn your account.

Setting up overdraft protection at Tangerine Bank

First, in your online interface, click the “Overdraft” link on your chequing account:

Step 1: Click the Overdraft link

Then, click the “Apply” button:

Step 2: Click the Apply button

Then, agree to the terms:

Step 3: Agree to the terms

Finally, fill in the application form, which asks for your employment information as well as other personal information:

Step 4a: Enter your employment information

Step 4b: Enter more personal finance information

In some cases, you’re done and are approved immediately. Note that it does a credit bureau check and you might get denied.

How to avoid overdraft fees

If you have enough money in your Tangerine savings account, you can simply transfer the money instantly to the chequing account the same day that an overdraft occurs. Otherwise, if you have enough money elsewhere, consider sending yourself an Interac e-Transfer from another financial institution, since the money transfers close to instantly, allowing for what is usually less than a 30 minute delay between when you send the Interac e-Transfer and when you receive an e-mail or phone link to deposit the money. Many financial institutions offer free Interac e-Transfers on no-fee accounts, including Alterna Bank, EQ Bank, and Motive Financial. (Credit to forum user Adam1 for the idea!)

Not a client of Tangerine Bank? Other financial institutions offer similar overdraft features, including “coverdraft” from Alterna Bank, which triggers an automatic, internal transfer of money between your Alterna Bank accounts whenever one of them is overdrawn.

2019 Canadian personal income tax filing survey results

The results are in! For almost 3 weeks in April 2019, HighInterestSavings.ca ran an online survey of how 201 people file their personal income taxes in Canada.

Have you filed your taxes yet?

15% of respondents wait until the last week in April to file their taxes. 1.5% file in February, while another 1.5% file in May or June. Naturally, the bulk of people file in March (36%) or April (61%). You are average if you file on April 4, whereas the median is roughly the same on April 5.

Who files your taxes?

81% of respondents do their taxes themselves, and of that number, 68% of them believe their tax return is “simple”. 14% of respondents use a tax professional, and of them, 41% rate their tax return as “simple” while the other 59% rate their tax return as “complex”. If you have a family member who does your taxes for free, count yourself as the lucky 4%, or feel guilty that you’re not the 1/201 respondents who said they pay a family member.

How much do you pay to do your taxes?

48% of respondents pay nothing at all, either to someone else or for software. People who pay someone else average $275, although this drops to just under $100 for a self-rated “simple” return. If people pay for software, including donations, the average cost is $26.50.

Software: the Big 4

For those who do their own taxes, 8% of people either eschew software altogether or use only spreadsheets. For the 92% of people who do use software, the vast majority of them (92% of the 92%) use one of StudioTax, TurboTax, SimpleTax, or UFile. The full breakdown of software from our survey is as follows:

  • StudioTax: 27.7%
  • TurboTax: 25.2%
  • SimpleTax: 20.6%
  • UFile: 18.1%
  • GenuTax: 2.6%
  • H&R Block: 1.9%
  • FutureTax: 0.6%
  • myTaxExpress: 0.6%
  • ImpôtExpert: 0.6%
  • TaxFreeway: 0.6%
  • ProFile: 0.6%
  • TaxTron: 0.6%

What are some key features in personal income tax return software? 57% of respondents mentioned that ease of use is important, and to 44% of respondents, free or low cost is important. 15% say they use a given piece of software simply of habit, 5% mention NETFILE as a reason for their choice, and 4% cite security as a key feature.

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TransferWise vs OFX comparison: CAD to USD transfers

United Nations flags

At my job at a web development company, we frequently need to make currency exchange transfers to pay contractors and accept payments from international clients. This most often involves transfers in both directions between Canada (CAD) and the United States of America (USD), but sometimes between Canada and Europe (EUR) and between Canada and Australia (AUD) as well. At the beginning, we used our bank (RBC Royal Bank of Canada) but quickly discovered that we were losing a lot of money on currency exchange and wire transfer fees even after we were put in touch with their preferred rate currency exchange business solution. If you need to transfer currency internationally or even between 2 different currency accounts in Canada, it is a no-brainer to consider using a company or service other than your bank. We use a combination of TransferWise and OFX (formerly CanadianForex). What I’ve learned in using TransferWise and OFX can apply to both business and personal transactions.

TransferWise advertises that they provide you with the mid-market rate, which is true. But they charge you a percentage fee on top. OFX, on the other hand, gives you a rate worse than the mid-market rate (but still much better than you’d get at a bank), and charges a $15 flat fee for smaller transfer amounts (below $10,000 Canadian dollars) and no fees for amounts above $10,000 CAD. (September 16 update: OFX has given me this referral link that waives the $15 fee for new accounts.)

Generally, I have found OFX to be cheaper except for transfers of only a few hundred dollars, where the $15 flat fee is a larger percentage. In terms of pure dollars, OFX is the clear winner for me for larger transfers: for example, for a recent transfer of $23,000 USD to CAD, OFX provided a rate of 1.3109 and no fees, for a total amount received of $30,150.70 CAD. TransferWise provided a much better rate at 1.3159, but charged fees of $138.17 USD, for a total amount received of $30,083.88.

(It’s important to note, though, that when I first looked into OFX, I had to call them to get the preferred rate that’s currently on my account. This is probably not difficult to get from them, but it does require you to call them. On the other hand, TransferWise offers the same rate for everybody.)

But the story is not that simple once you dig into the details. First of all, you need to consider whether you’re sending money or receiving money.

If you’re receiving money, do you have a USD bank account in Canada or just a CAD account? It can be convenient to have a USD bank account in Canada to deposit cheques, receive wire transfers, transfer money to CAD at a time that’s right for you, or maybe not even transfer all of the money back to CAD if you need to then pay out some of that money in USD again (thus saving transfer costs x 2). But cheques are slow and require your time to receive and deposit them, and sometimes inconvenient for clients to produce (and mail to you!). If you receive a wire transfer, there is a fee to receive it ($17 at RBC), a fee for your client to send it, and sometimes an additional fee that gets charge in transit — for some transfers I notice that we’ve lost another $18.50 by the time it arrives in our account.

Having a US dollar account in the USA can save you and your clients money. But it also requires setup and additional management. TransferWise has a killer feature for receiving payments: the borderless account. The borderless account gives you account numbers within Australia, England, Europe, and the USA so that clients can send money to an account local to their country or within the EU. This is incredibly convenient and helps you receive the money much faster, with a much lower or no transaction cost for your clients. I have found the borderless account to be very useful and easy to set up. Although I still default to using OFX to transfer incoming money from USD to CAD, the convenience of TransferWise sometimes wins out.

For sending money (from a CAD account to contractors’ international accounts), OFX is the winner in my case, although TransferWise might soon become more competitive. The main issue is that TransferWise has more limited and costly options for getting the money to them. TransferWise is currently only a bill payment option for the Bank of Montreal, National Bank of Canada, Central 1 credit unions, and Tangerine Bank. TransferWise does not support pre-authorized debits for business accounts, whereas OFX does. This means that with OFX you can incur minimal or no additional fees (on top of their exchange rate spread) to send the money. TransferWise charges quite a meaningful additional fee for sending money using a debit card or a credit card. I actually found TransferWise’s fees for funding a payment with a credit card to be cheaper than with a debit card, but then I was hit with a surprise cash advance and interest fee on our Scotiabank credit card (which they later did a one-time refund for). TransferWise claims that the additional Scotiabank charges were the result of a mis-classification of the transaction on the part of Scotiabank that does not happen with all credit cards, although I have not verified this.

In general, I am quite pleased with both TransferWise and OFX. I can fully recommend them as being convenient, reliable, and much cheaper than using my bank for transfers between Canadian dollars and at least US dollars, Euros, and Australian dollars. There are several factors to consider beyond the rates and fees that TransferWise and OFX charge, thus it could be worth it for you to be a customer of both of them!