Ally Canada (which was formerly General Motor’s financing division before the parent company went into bankruptcy proceedings) was a competitor in the Canadian high interest savings market. They had a fairly decent product a couple years ago where they offered 2% on a fully liquid savings account. They reduced that to 1.8% last year when they presumably received enough capital from their customers, but it still was in the top tier out of their competitors.
However, Ally was acquired by RBC late last year and now RBC announced they are closing down most of Ally’s accountholders and are encouraging you to open up an account with RBC.
I received in the mail a “special offer” from RBC to open an account with them for a 1-year GIC at 1.8% or redeemable GIC at 1.5%. I laughed as I dumped it into the paper shredder.
Somebody has been kind enough to maintain a site that has a compilation of various high interest savings banks that can be accessible by most Canadians. I’m generally not interested in going through the paperwork hurdles for the privilege to accumulate a less-than-inflation rate of interest. Unfortunately the new economic reality in this extended low-interest rate environment is forcing people to find cash alternatives in the marketplace to find low-risk yield. There are not a lot of opportunities left in this space anymore.
I even notice my standby US-dollar short-term ETF, the 1-3 year iShares bond fund (NYSE: SHY) is giving out a paltry 40 basis points of yield. At least in Canada the floor is 1% – the Canadian ETF equivalent is (TSX: XSB) and they give out 1.48% albeit at some interest rate risk – their average term of maturity is 2.80 years.