I expect more financial products to roll out in the near future, hopefully including high interest savings accounts and GICs with rates to challenge the likes of Ally, Canadian Tire Bank, and Presidents Choice Financial. In the meantime, they have issued their own Mastercard and you can read about it here. More details are at Wal-Mart's site here.
This week Wal-Mart received final approval to offer retail banking services in Canada. Their official launch is on June 15, and they've been tight lipped about it so far. I'm hoping that we will see something like the convenient online access provided by Ally along with savings rates to match. Maybe this will finally light a fire under the likes of ING Direct and PC Financial whose rates have been very sadly lacking of late.
Also in recent news, credit unions have been given the green light to go national, leaving their provincial borders behind if they so choose. If they do elect to do this, they will have to adopt CDIC insurance, and its $100K limit. I hope that the online Manitoba credit unions such as Achieva, MAXA, and Outlook don't go national as we already have access to them for deposits, and their insurance is unlimited.
There's a "new" financial player in the high interest savings account game these days. Perhaps you've seen their ads on tv, one of which has a man taking a toy truck away from a boy and giving him a cardboard cutout of one instead. Many of us can relate to this as we've watched the interest rates on our savings accounts head downward even as the Bank of Canada rate has held steady. Ally promises to be different, but we'll have to see. They are currently offering 2% on their high interest savings accounts, which is almost double the rate offered by the likes of ING Direct. Triple the now pathetic 0.65% offered by Altamira Cashperformer, now owned by the National Bank of Canada.
Ally appears to operate much like ING Direct, with electronic linked access to your regular bank account. They promise no fees. They also claim that interest is compounded daily. They are CDIC insured up to the usual $100K. Ally is currently a product of ResMor Trust, so if you already have financial deposits with ResMor, you may want to pay attention to the fact that the insurance limit refers to all of your ResMor holdings. You can read more about them here.
I think they deserve our business as many of the other players now are paying rates close to the "big banks" that they like to mock in their ads. When it comes to your savings, you really should pay attention and shop around.
TD Canada Trust have just introduced their "Simply Save" program. This program is a lot like Scotiabank's "Bank The Rest" program, which is really designed to just trigger more overdraft protection service fees on their poorest customers. You can read my previous blog entry on that if you like. In a nutshell, every time you use your atm card, be it for cash withdrawal or debit purchases, you can designate an amount of money to be transferred into a savings account. So it is just an automatic way to transfer money out of your chequing account and into a restrictive savings account with high fees. Such a savings account typically allows one free withdrawal per month, with a $10 fee for any subsequent withdrawals. So be careful if you have such a savings account, read the fine print.
For a limited time (to July 24, 2009), if you sign up for this program, TD will give you $10 (up to a maximum of $200) over the next year, for every $100 you manage to transfer to yourself. If you set up the plan to transfer the plan maximum of $5 every time you use your card, then it will take 20 transactions to save $100. So that's 20 transactions for the bank to give you a free $10, or in other words, the bank will pay you 50 cents every time you use your card for the next year. That's pretty darn sweet. So essentially if you shuffle $2K to yourself using 400 transactions next year, the bank gives you $200. To put it in perspective, you'd have to have a $10,000 GIC at 2% for a year to make $200. It's like the bank is setting aside 10 grand for you.
Don't forget to pull your savings out once a month and transfer them to some CDIC insured bank such as Canadian Tire Financial Services who will actually pay you some decent interest on the money. This will minimize the opportunity cost of your $2K used in the scheme.
If you're a car owner, I'd like you to take a look at your liability coverage on your insurance policy. Is it only a paltry $500K, or is it $1 million or hopefully higher? A lot of car owners just blindly keep renewing their policies year after year without considering how much actual liability coverage they have. In my opinion, $1 million is no longer enough and you should really be taking it up to $2 million, which will cost you around $20 per year more than the $1 million level. This is even more important if you occasionally drive into the USA, since our dollar has fallen to about the 80 cent level.
In a recent column in the Globe and Mail, AvnerMandelman points out that we're likely in deflationary times. In normal times of inflation, money slowly loses its value as it gets diluted. If you're in a negative monetary position ie. carrying debt, inflation will slowly make the debt less and less significant while your wages likely rise as well. During deflation, the opposite occurs. Your debt becomes more and more significant as your wages likely sit flat or possibly decline. On top of all that, the stuff you bought with the borrowed money is likely to be dropping in value too, faster than just the usual depreciation. I'm a big proponent of retiring your personal debt quickly, but in times of deflation I can't emphasize this enough.
We're now coming into the Christmas gift-giving season, and gift cards tend to be very popular. Stores love them since they get cash in advance, and overall the full value purchased on them tends not to be completely redeemed. They get lost, set aside and forgotten, or damaged leaving behind stored value that simply never gets spent. Due to there being no simple way to tell how much money is left on them, they get set aside. Always keep the last register receipt with your gift card, else it's like having store specific cash that has all the ink faded off except for the serial numbers. Some stores do have websites that let you check the money remaining on the card, but who wants to have to go running to the web to find out that there's $0.50 left on a card?
Next year, 2009, is not looking very good for retail, so store closings and bankruptcies are likely to be quite common. Don't be left holding useless gift cards, and I also don't recommend giving gift cards that are likely to become worthless. Assume that any gift card is not going to be redeemed in one fell swoop, and that your "giftee" is going to take six months or more to spend it down. In light of this, only buy gift cards from solid businesses that are highly likely to be around through 2009.
I'm a software developer, NOT a financial advisor. These are just my own opinions/rants/musings on certain financial topics and should not be taken in any way as actual financial advice.
I can be reached at jim dot somerville at gmail dot com.