Virtual banks scramble for Ally’s savings business

Canadian Tire is well known as a place to shop for everything from hockey sticks to auto parts, but more consumers may be flocking to the retailer for online banking too.

As Royal Bank of Canada gets ready to shut down the popular Ally high-interest savings accounts by April 30 following its acquisition of the Canadian arm of Ally Financial Inc., many customers will be searching for alternative lenders offering better rates than those from the conventional big banks.

The financial services arm of Canadian Tire Corp. now offers a 1.70 per cent rate – down from 1.80 per cent last October – for its high-interest account without requiring a minimum deposit.

"We are getting a lot more business," one Canadian Tire Financial Services customer representative said on Wednesday. "We have been non-stop today opening new accounts [from Ally customers]. A lot of them are coming back because they used to be with us. Others are new customers."

RBC closed its deal to buy the Canadian Ally unit on Feb. 1. Ally customers were informed by the bank on Tuesday that the rate on their high interest savings accounts had plunged from 1.80 per cent to 1.20 per cent – the same rate offered by its RBC high interest e-savings account.

Ally clients were also told their accounts would be closed and their monies returned to them if they did not move their money into a one-year RBC guaranteed investment certificate (GIC) offering a cashable 1.50-per-cent rate or a non-cashable 1.80-per-cent rate.

The move by RBC has left the door open for other virtual banks to compete for the Ally business. "We do plan to reach out to Ally customers," and are looking at possible new promotions that they and existing ING customer can benefit from, said Andrew Zimakas, chief marketing officer with ING Bank of Canada.

ING Bank, which was purchased last year by Bank of Nova Scotia, is currently trying to woo Ally and other clients with a $50 bonus for new customers opening an account. ING customers can also get a 90-day GIC at 2.50 per cent for RRSP and tax-free savings accounts.

ING Bank currently offers a 1.35-per-cent rate on its high interest savings account. Similarly, Loblaw Cos. Ltd.'s financial services arm also offers the same rate on its high interest accounts, but consumers must have balance of more than $1,000.

Since Feb. 1, however, Loblaw's President's Choice Financial bank has been offering a promotion whereby consumers putting new money into an account will get a 2-per-cent rate until May 30. Consumers can open an account by visiting one of its kiosks located in some Loblaw stores.

Manitoba has several credit unions with branchless banks that also offer attractive rates. Some will allow an electronic transfer from one's regular banking institutions, while others may require other means of transferring money, such as cheques or through automatic teller machines.

Achieva Financial, the online bank division of Cambrian Credit Union; MAXA Financial, a unit of Westoba Credit Union Ltd.; and AcceleRate Financial, the virtual division of Crosstown Civic Credit Union, currently all have a 2-per-cent rate on their accounts.

Outlook Financial, a division of Assiniboine Credit Union, and Hubert, the online bank launched by Sunova Credit Union, respectively offer a 1.95-per cent and 1.85-per-cent rate. Deposits with these Manitoba institutions are 100 per cent guaranteed by the Deposit Guarantee Corp. of Manitoba.

Consumers can also get a high interest savings account at Vancouver-based People's Trust with a 1.90-per-cent rate, while Calgary-based Bridgewater Bank, a subsidiary of Alberta Motor Association, is offering 1.85 per cent for savings accounts.