Canadians looking to park their cash in a safe place while earning a bit of interest will soon have one less option.
Ally’s high-interest savings account will be closed on April 30 as part of Royal Bank of Canada’s takeover and consolidation of Ally Financial Inc.’s Canadian deposit and auto-finance business.
Ally customers were informed Tuesday about the move, and saw their previous 1.8-per-cent rate plunge to 1.2 per cent – the same rate offered on RBC’s High Interest eSavings account.
As part of the changes, RBC is offering Ally customers the option of purchasing a one-year, locked-in guaranteed investment certificate (GIC) rate at 1.8 per cent, or a cashable GIC at 1.5 per cent, said RBC spokeswoman Kerry Gaetano. “The offers are being made right now because we are converting the business.”
Should Ally customers choose not to take the GIC route, their cash will either be electronically transferred back to their external account, which was used to fund the Ally account, or mailed to them by cheque.
Ally, which launched its virtual bank in 2009 with an attractive 2-per-cent rate for its high interest savings account without requiring a minimum deposit, had competed aggressively against other online banks. For example, Canadian Tire’s virtual bank now offers a 1.7-per-cent rate, while ING Bank of Canada has a 1.35-per-cent offer.
The move by RBC comes after it closed the deal on Feb. 1 to acquire Ally’s Canadian deposit business, ResMor Trust Co., and auto finance business, Ally Credit Canada Ltd.
Ally Financial was General Motor’s Co.’s financial arm until it was taken over by the U.S. government during the 2008 financial crisis. It has been selling off assets to repay the government for a $17.2-billion (U.S.) bailout.
Ally’s Canadian operations focused mainly an auto lending, with a smaller business in online savings accounts and tax-free savings accounts. Before RBC purchased the operations in October, Ally had about $4.1-billion (Canadian) in assets. The Ally assets will produce about $120-million in net income in the first year for RBC.
The RBC transaction follows on the heels of last year’s move by rival Bank of Nova Scotia to buy the Canadian operations of ING Groep NV for $3.1-billion. Scotiabank said there would be no change for the ING Bank customers except a new name down the road.
As Ally customers now wonder what to do, ING Bank is trying to woo them and other new customers with a $50-bonus and a 2.5-per-cent interest rate on a 90-day RRSP GIC. On Tuesday, ING tweeted: “Looking for a new ally? ING Direct is a great way forward for your hard-earned savings.”