In the two previous posts, was possible to see how they treat us, how they work, their technology and “online” services, but it’s useless if the product doesn’t make sense if the savings are not good, or the prices are too high.
Today we will see how Saving accounts work.
Background – Understanding the Canadian Market
Really important information: Canada is a multicultural country, and some banks here have to provide the customers needs sometimes considering operations without interests like some religions preaches. Interesting, no?! But it’s just a detail, the important information is: Here are really multicultural, it’s possible to find details!
Basic Interest Rate: 0.500% Historic series always between 0.5 and 1, with the exception in 2008 crisis with 2.5%. U.S.A. and Gran Britain same rate; Brazil 14.25 and China 4.35.
Inflation: 1.5%, oscillating between higher and lower values.
Pretty stable, with low interest/inflation rates, and with a Prime Minister that didn’t show results in the economy yet, but is working hard in partnership in countries worldwide, what suggests future growth.
What is interest in Investments in Canada?
The shortest answer possible is Founds with more risk. China funds is a great example because it’s possible to get until 23% in 3 years! Again, with risk.
The basic Saving Accounts return between 0.5% year to 1,75% semester. Larger amounts of money can affect positively other products as Credit cards, Account Fee, Transactions (Extra). In general, if have some “Savings” product within more than CAD 5,000, can help in don’t spend with this.
Among the banks CIBC and President’s Choice give the highest rates for standard application, other banks just according to the gradual amount of money. RBC, for example, has 1% (y) of rate to more than CAD 50,000 in investments, and until CAD 5,500 only 0.025%.
Last but not least, Tangerine and TD pay interests in the chequing accounts.
For the Brazilian readers: The economy is getting better now and the interest rate still 14%, doesn’t make sense send money to Canada to keep it in Saving Accounts (other investment can apply). It’s possible to wait for better exchange rates or have it gradually to dissolve the risk, paying attention to the exchange rate before any transaction. Even the lowest interest rate in Brazil still much higher than anyone in Canada. More risk, but now in a growing curve.
Really important advice: In Canada, all the time people use the debit card, the machine ask about CHQ or SAV accounts. NEVER, I mean NEVER use the SAV, because the average cost of only one transaction is about CAD 5.00.
Funds and Stocks are better options, without doubts! It’s possible to check the performance of banks that work with more transparency as Tangerine, PC Financial, RBC, but some others are not so friendly to show this information as TD, Scotiabank, etc. But for investments in this kind of products, the better option is to call to a Broker, and it’s possible to find investments in China Funds with 23% in two years, this international with more risk have a better return.
The most common deposit to stop paying the monthly fee (for who is not student) is about CAD 5,000 in saving accounts.
I have been talking about the “wallet” and here it becomes really interesting, because it’s more than an app, it’s a service. However, the main provider of the best Wallet, RBC, charges monthly fee anyway, and even talking to the account manager about other banks, there is no negotiation to remove this fee.
If you are looking to a retirement, college/university, house and etc, all the banks, with no exception, provide plans.
“The Contest” – Which one is the best?
It depends on how much you have, how much is to saving, how much you spend in the day by day if you have:
- Standard, liquid. If the purpose is to keep easy to get in the CHEQUING account, the recommendation is to keep it on CIBC or PC Financial
- More than CAD 30,000 or for more than 6 months, the recommendation is found a fund higher than 2%, it’s possible, but not always available in all banks, but in brokers. Takes time, need to diversify, knowledge and time are required to management.
The best rates to Saving Accounts are in CIBC and PC Financial, but this information can change anytime, on the other hand, both don’t have savings in Chequing Account like Tangerine and TD offer!
Generally, if you have no student account, but can keep more than CAD 5,000 in the saving account, most banks will offer a discount on the monthly fee.
Saving accounts have no competitive interest rate if compared with Funds, but interesting according to the Canadian economy. That is why depends on the amount of money and time to keep in investments to have a good answer.