Not shopping around for financial products can cost you tens of thousands of dollars over a lifetime. It's just pathetic how often this happens.
A recent survey commissioned by the website LowestRates.ca tells the story. Of the 2,002 people who participated, 63 per cent said they use price comparison websites to book hotels and another 60 per cent said they compared and booked flights online. Just 45 per cent said they did lots of research when getting credit cards and 47 per cent heavily researched car insurance.
Sixty per cent said they did a lot of research before getting a mortgage, but the number dropped to 42 per cent when renewing a mortgage. Just over 20 per cent said they renewed a mortgage with zero research. Overall, millennials were somewhat more likely to do extensive research for a financial purchase than boomers or Gen Xers.
Useful online tools for comparing all kinds of financial products are as close as the search box on your Internet browser. Why don't more people try them? One reason is behavioural – the delayed gratification of making a sound financial decision is less compelling than the more immediate rush of taking the bargain flight you find online.
Another reason is simple intimidation. People feel overwhelmed by the immensity and complexity of the financial world and capitulate by accepting the interest rates and products being offered with token comparison shopping at best.
The intimidation factor is rooted in our national character. In the United States, companies built by technology entrepreneurs dominate the corporate scene. In Canada, close to one-third of the value of the S&P/TSX composite index is accounted for by banks and insurance companies that have in many cases been around for roughly as long as the country itself.
The same six banks have branches at street corners across the country, both uptown and downtown. Their downtown branches and offices either look like Greek temples, or skyscrapers that dominate the skyline. Inside, their offices are designed to project wealth and power.
Our banks and investment firms deserve respect for what they've built, but we overdo it in some cases. Nearly two decades of experience as an investing and personal finance guy have shown me that a financial giant of any type will rarely offer you the best rate or deal. Their offerings may suffice for your needs, but that's a decision you should only make after checking the competition.
Let's look at a few websites that will do for your finances what travel sites have done for your vacations – help you make better decisions that save money:
- For mortgages: RateSpy provides a thorough of comparison of rates and basic terms for mortgages offered by banks, credit unions and monoline mortgage lenders. Also try LowestRates.ca, RateHub.ca and RateSupermarket.ca.
- Bank accounts: The federal Financial Consumer Agency of Canada offers an account selector tool that can help you find the right chequing or savings account.
- For savings accounts and term deposits: Cannex is a definitive source of information on these products, but the latter three mortgage sites mentioned just above are also worth a look.
- For credit cards: Try RewardsCanada for comparisons of cards with customer loyalty programs offering travel miles or points. Also check out GreedyRates.ca, and the guide we produced a few months ago for people who plan to bail on Aeroplan as a result of the divorce with Air Canada coming up in 2020.
- For robo-advisers: Check out our Globe and Mail robo-adviser guide.
- For online brokers: Try the Globe and Mail online brokerage ranking, now coming up to its 19 year, and SparxTrading’s broker comparisons and reviews.
- For comparing multiple home and car insurance: Try Kanetix.ca and InsuranceHotline.com.
Like banks and investment firms, rate comparison websites are a business. They make money by connecting visitors to the site with firms providing mortgages, credit cards and such. Presentation of the information you get by doing a search may be arranged to promote particular firms and exclude others.
So be an active comparison shopper. Just as you might check Expedia, Kayak, Travelocity and Trivago, so should you consult a few different rate comparison websites. Talk to your bank or investment firm, then get a second, third and fourth opinion. Show your finances the same respect you show your trip to Disney World.