A few years back, ING Direct was pretty much the only game in town, offering online savings accounts with much higher interest rates than anyone else. Today, Canadians have such an array of choices available that ING Direct is not the de facto or the best option anymore. Here are some of the recent (and not-so-recent) developments in high-interest savings accounts:
ING Direct is not the leader anymore
Despite what its commercials claim (“ING Direct offers the highest interest rates of any of the major banks…”), ING Direct is now a laggard in the field. Online savings accounts offered by competitors such as E*Trade (Cash Optimizer account offers 4.15%), Achieva Financial (Daily Savings Account offers 4.1%), PC Financial (Interest Plus pays 4% if you maintain a balance of more than $1,000), etc. sport a much higher interest rate than ING’s regular rate of 3.5%. When the Bank of Canada hikes interest rates, ING Direct is also a lot slower in increasing the interest rate on its savings account. For instance, the Bank of Canada raised interest rates on but ING Direct is still offering the old interest rate. Even Royal Bank was quick to match the BOC hike with its eSavings account now paying an interest of 3.75%.
Promotional rates
Online banks are taking a leaf from car dealers and furniture retailers and offering promotional interest rates (Hurry! Sale ends August 31st!). Typically, if you open a new account you are initially offered much higher interest, which will revert to the regular rate at the end of the promotional period. For instance, HSBC Direct is paying 5.0% until October 10, 2007 on new accounts opened between July 10 and October 10. ING Direct is even running a “Summer Savings Sale”, in which new money deposited into an existing savings account will attract a higher rate for a limited time. Presumably, this is done to prevent existing customers from bolting to the competition.
More Choice in US Dollar Savings Accounts
E*Trade’s Cash Optimizer is now a strong competitor in US Dollar Savings Accounts offering a rate of 4.75%, which is better than ING Direct’s 3.5%. I have personally tried the US Dollar Cash Optimizer account and it works smoothly. ICICI Bank offers a USD account that pays 5% but customer service problems were reported in the press last year and I haven’t personally parked money with them.
