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Beyond the rate: avoiding NSF charges and managing chequing and savings account cash flow

Reflection of a toonie

Most chequing accounts pay little to no interest. Savings accounts can pay much higher interest, but don’t have the features that chequing accounts do. How do you maximize the features and convenience in your day-to-day banking without sacrificing earned interest?

You can choose a savings account that pays the highest interest possible, but to get the most out of your hard-earned money, you need to manage your both accounts: specifically, the cash flow between the chequing and savings accounts.

Who needs a chequing account?

One approach is to forgo a chequing account. Is having separate chequing and savings accounts an antiquated concept that banks perpetuate simply because they can? At EQ Bank, there is no chequing account — only a savings account (the EQ Bank Savings Plus Account) that provides some features more traditionally associated with chequing accounts, such as free bill payments and unlimited Interac e-Transfers®. You can also do pre-authorized debits and make external transfers to other bank accounts. However, EQ Bank does not offer a debit card, ATM/ABM access, or cheques, at least not yet.

Free internal transfers

At Motive Financial, its Cha Cha Chequing Account also offers free and unlimited Interac e-Transfers but is a more fully-featured chequing account. At Motive Financial and most other financial institutions, you can make unlimited and often instant transfers between chequing and savings accounts at the same bank. That way you can keep as much money as possible in your savings account, and only move cash to the chequing account when you need to, for example, write a cheque. But it can be a hassle to do these transfers even if it’s just a few more clicks. And you can get hit with NSF charges if you don’t keep enough money in your chequing account and forget about an outstanding, uncashed cheque. This requires careful management. While Motive Financial charges no chequing account monthly fee, there are other financial institutions that make you keep a minimum balance in your chequing account in order to waive the monthly or transaction fees — requiring even more management and lost interest.

Overdraft and coverdraft

If you don’t want to manage the cash flow between your chequing and savings accounts, here are 2 ways to make sure you’re automatically covered. The first is overdraft protection, which is essentially a line of credit attached to your chequing account. If you make a debit or withdrawal transaction from your chequing account that is more than the cash in the account, the bank automatically loans you the difference. Overdraft protection can have a monthly fee on top of the interest it charges you until you pay back the loan. Overdraft protection is offered at Alterna Bank, but Alterna also has something slightly different that you can set up with a 1-time phone call: coverdraft protection. Coverdraft protection is not a loan, but uses the savings account to back the chequing account. If you make a debit or withdrawal transaction from your chequing account that is more than the cash in the account, it will automatically “sweep” the difference from your savings account (presuming that you have enough cash in the savings account), preventing you from being hit with an NSF charge.

Financial institution features can make it easier for you to manage chequing account cash flow, whether that’s doing away with a chequing account altogether; offering a convenient no-fee chequing account with free and unlimited transfers to and from a savings account; or preventing you from getting hit with accidental NSF charges. This can be more important and potentially save you more money than an account with a higher rate!

Got more tips to share? Join the discussion about paying bills from a savings account that prompted this article!

Savers Roundup August 2019: when promotional rates change mid-way; first no-forex fee Amex; debt forgiven at Chase Canada

Summer interest rate leaders

Since a couple of interest rate drops at AcceleRate Financial and Achieva Financial last month, there have been no changes on our savings account comparison chart. The savings account interest rate leader Motive Financial has kept its rate at 2.80% since November 2018, and the TFSA leader motusbank has kept its rate at 2.50% since it launched in March of this year.

There have been a handful of GIC rate decreases on our GIC comparison chart in August, including at Tangerine Bank, which has secured its place at the bottom with Simplii Financial after starting to become competitive at the end of last year. Hubert Financial, Oaken Financial, and Peoples Trust offer the current top 3 rates for 1-year (up to 2.60%) through 5-year rates (up to 3.10%). For the first time in a while, it’s slim pickings for promotional GIC rates; the only one of note is a 15-month 3.00% GIC from Peoples Trust.

What happens when the base rate in a promotion drops?

Most savings account promotion terms are worded such that you get a fixed promotional rate that is added on top of a variable base rate. Recently, the Manulife Bank Advantage Savings Account base rate dropped from 1.50% to 1.25%, which meant that if you signed up for the recent 3.25% promotional rate, that rate would have also dropped by 0.25%. Has this happened to you before, and did you know the total promotional rate was subject to change?

Our promotions page lists a few similar such offers whose base rates have not yet changed (fingers crossed), but are by no means guaranteed. This includes 3.00% for 150 days on new Meridian Credit Union Good to Grow High Interest Savings Accounts opened by August 25, 2019, and the latest round of targeted Tangerine existing client offers: 2.75% on new deposits (to regular savings, TFSA, RSP, and USD accounts) between August 7, 2019 and January 31, 2020.

The first Canadian Amex card with no forex fee?

On August 1, the long-anticipated changes to the Scotiabank Gold American Express credit card came into effect, for better or for worse. It now has a higher annual fee than before ($120 instead of $99) but no foreign currency exchange fee and 5 Scotia Rewards points per dollar spent at grocery stores, restaurants, and entertainment. This is the first Canadian American Express credit card to waive the 2.50% foreign currency exchange transaction fee — at least in recent memory — and Canadians who make a meaningful amount of purchases in foreign currencies now have quite a few credit card options in the space. If the USA is your primary foreign spending destination and you have lots of US dollars on hand, you can also consider a US-dollar credit card to avoid the currency conversion altogether.

Plenty of summer reading and cash back offers

Savers Roundup July 2019: rate decreases at Manitoba credit unions; short-term promos; online interface screenshots

Steady or dropping rates

Central bank interest rate news in Canada and the US in July have been about keeping rates steady or perhaps even decreasing them (in the case of the US). Over at Achieva Financial and AcceleRate Financial, they’ve both decreased their regular savings and TFSA interest rates from 2.40% to 2.30%.

On our comparison chart, MAXA Financial remains at 2.45%, while Implicity Financial and Outlook Financial remain at 2.40%, at least for now. The Manitoba credit unions especially have a history of keeping their rates roughly in sync. Will more drops follow?

The regular savings account interest rate leader is still Motive Financial at 2.80%, and the TFSA leader is motusbank at 2.50%.

How to get up to 3.00% in the short term

As per our GIC chart, you’ll need to lock your money in for at least 4 years if you want to get at least a 3.00% annual return outside of a promotion.

motusbank’s 18-month GIC promo for non-registered accounts has decreased from 3.00% to 2.75%, or from 3.10% to 2.85% for the TFSA and RRSP versions.

However, EQ Bank has a current promotion for a 3.00% 3-month GIC. At National Bank, you can get 2.75% in a High Interest Savings Account until September 5, 2019, and if you’re a Simplii Financial customer, you might have received a targeted promo of between 2.50% to 3.00% on new deposits between July 1 and October 31, 2019. Check our promotions page for several more new deposit and new account promotions.

Financial institution online interface screenshots

New on HighInterestSavings.ca are image galleries of financial institution online interface screenshots! Beyond rates, fees, and general features, a key consideration for many people when choosing a new bank or credit union is the usability of its online interface, including account balance listings, sending Interac eTransfers, and more. We’ve started with website screenshots of EQ Bank, Hubert Financial, Motive Financial, and Tangerine Bank. Are there any particular screens that you would like to see? Or are you able to contribute some screenshots from the financial institutions you bank with? Let us know!

In other personal finance news…

Savers Roundup June 2019: More online bank options; Manulife’s All-in Banking Package; 2.75% on USD savings

More nationally available Manitoban credit unions

Credit unions based in Manitoba routinely offer some of the highest savings account interest rates on our chart. Several more Manitoban credit unions have become nationally available with online account opening processes. Access Credit Union, Fusion Credit Union, Niverville Credit Union, and Rosenort Credit Union were recently highlighted in our forum, with competitive savings account interest rates (including up to 2.85% in a TFSA) and GICs (up to 3.20% for a 5-year term). Please share your experiences and questions!

Bridgewater Bank, Hubert Financial, and Peoples Trust rate decreases

Although we haven’t seen many interest rate decreases lately, a couple of notable ones include Bridgewater Bank decreasing its regular savings account interest rate from 2.50% to 2.35% and Hubert Financial decreasing its regular savings account and TFSA interest rates from 2.35% to 2.25%. In Hubert Financial’s case, this followed a drop from 2.50% to 2.35% in April. The chart leaders are unchanged: Motive Financial has a 2.80% regular savings account, while motusbank has a 2.50% TFSA.

Last month, Peoples Trust dropped its GIC rates; current GIC chart leaders are Oaken Financial for 1-4 year terms and Ideal Savings for a 5-year term.

Manulife’s new All-In Banking Package

Following the launch of its 3.25% for 6 months savings account promo (which is still available), Manulife has a new account type, which is actually several combined offerings: a chequing account, savings account, credit card, and travel insurance, as well as 1 year of free Amazon Prime. It has a $10 monthly fee, which is waived every month that you increase your balance by at least $100. Will this become a real competitor for day-to-day banking, and will we start to see better reviews of Manulife Bank?

Tangerine Bank’s latest targeted promotion includes US dollar savings accounts

A new detail in Tangerine’s continuous targeted promotions is that its latest offer of 2.75% for new deposits (until November 30, 2019) includes USD funds. If you’re a current customer, check the “Insights” tab in your online account to see if you have received the offer. If you’re not a current customer, their “2.75% for the first 6 months” offer also covers US dollar savings accounts.

More promotions

More news and discussions

Savers Roundup May 2019: Bank of Canada’s flat interest rate outlook; 3.25% Manulife promo; up to 2.65% for business savings

Bank of Canada rates on hold; Hubert Financial and Ideal Savings decrease rates

Last month, the Bank of Canada left the key interest rate at 1.75%, and they also removed their previous language about the possibility of rate hikes later in the year.

On the savings account end, there have been a few recent interest rate drops to both regular savings and TFSA accounts: Ideal Savings (from 2.50% to 2.40%), Hubert Financial (from 2.50% to 2.35%), and Meridian Credit Union (from 1.40% to 1.30%). Meridian Credit Union now provides 24-72 hours notice of rate changes via e-mail and on their website, although we no longer list Meridian Credit Union on our main comparison chart.

Motive Financial is the current leader on our chart for regular savings accounts at 2.80%, while motusbank is the TFSA leader at 2.50%.

Steinbach Credit Union offers some of the highest savings account rates (2.55% to 2.85% depending on your balance) and its TFSA sits at 2.80%, although interest is paid annually and calculated on the minimum monthly balance.

GIC rates are flat

Last month saw nearly across-the-board GIC rate decreases. This seems to have settled a bit, with even a few small increases, such as at Oaken Financial. Either Peoples Trust or Oaken Financial hold the top spot for the 1- through 5-year GIC rates on our GIC chart, and Peoples Trust has a 15-month GIC promo at a 3.10% interest rate.

HSBC and Manulife promos for ~6 months

Of the current high interest savings promotions, the most frequently discussed ones are:
HSBC High Rate Savings Account: 2.40% to 3.00% on new deposits between April 15 and September 3, 2019 and
Manulife Advantage Account: 3.25% for 6 months in new accounts.

Business savings accounts options: up to 2.65%

Meridian Credit Union has a business savings account promo (2.65% for 4 months). that compares well against the alternatives. Outside of a promotion, Oaken Financial might be your best option in a normal rate at 2.30%, since it offers the same rate for personal and business accounts. Or, get an account at a discount brokerage and look at the Investment Savings Account options, which should give you better rates than the standard business savings accounts offered at the big banks.

Much more news!