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A surprise bank has taken the lead in lowering rates for savers.

Most banks are leaving their savings rates untouched while we wait for the Bank of Canada to lower rates. The central bank passed on a chance to lower rates Wednesday, which means the next opportunities will be April 10 and June 5.

The online bank Tangerine isn’t waiting around. Last November, it sliced the not-especially great 1 per cent rate on its savings account down to 0.8 per cent and then down to 0.7 per cent a couple of weeks later.

Tangerine began life in 1997 as ING Direct, a Dutch-owned disruptor that led the way in making high savings rates accessible in Canada. Bank of Nova Scotia BNS-T bought ING in 2012, renamed it Tangerine and began a continuing renovation that keeps de-emphasizing high rates.

Tangerine has 2.3 million clients and its deposit base is huge – sixth largest in Canada, behind the Big Five banks. If you’re a customer who emphasizes high rates on savings, it’s time for a rethink.

Tangerine’s mission today is providing a glossy, streamlined way to bank on a mobile phone or computer, including no-fee chequing, attractive credit cards, mortgages and a small selection of investments that includes mutual funds and guaranteed investment certificates.

“We are the original challenger bank in Canada,” Jeff Snowden, senior vice-president of retail banking at Tangerine Bank, said in an interview this week. “And, we want to be an everyday bank to Canadians to meet their financial needs both short term and long term.”

At a time when a few alternative banks offer savings rates of 4 per cent, the dip below 1 per cent for the Tangerine savings account makes a statement. But the bank still recognizes the power of a high rate to get a potential new client’s attention, or retain a restless client. New clients get a 5.75 per cent rate for five months, and existing clients can still call in to haggle over a better rate.

Mr. Snowden said Tangerine wants to reward clients for loyalty shown in other ways than simply having a high balance. “We value depth of relationships, and we will reward that depth and loyalty by providing higher rates,” he said.

Tangerine has to feel reassured in cutting its savings rate by the fact that it ranked No. 1 for the 12th straight year in the J.D. Power 2023 Canada Retail Banking Satisfaction Study. There’s actually very little separating most banks in the study, but Tangerine is an exception in being first by a strong margin.

But the pullback on rates is a nervy move in a time when many people are racking up the best risk-free returns they’ve seen in their lifetime. In a world of permanent uncertainty, savings backed by deposit insurance are a rare sure thing. It’s borderline personal finance negligence to settle for 0.7 per cent on savings right now.

EQ, Koho, Neo and Wealthsimple are among the alternative financial players with accounts that offer rates of 2.5 to 4 or 5 per cent and a least some ability to pay bills, send-e-transfers and pay for purchases using a prepaid credit card. Just load up the card using the bank’s app or website and use it for payment wherever credit cards are accepted.

Tangerine’s position in the banking spectrum is closer to traditional banks than their upstart competitors. Digital banks don’t do chequing, but Tangerine gives you a book of 50 cheques for free. After that, you pay $50.

Some context for gauging how low 0.7 per cent is for savings: As of early this week, Royal Bank of Canada offered 1.7 per cent on its e-savings account and Scotiabank offered a base of 1.3 per cent on its Momentum Savings Account, with potential enhancements that can get you above 2 per cent.

Even with lower rates, Tangerine’s doing fine in attracting new clients. Mr. Snowden said the net customer growth rate in the first quarter of the current fiscal year was up 30 per cent over the same period of the previous year.

Tangerine’s website and app are a pleasure to use, and no-fee chequing is a big win in a world where lots of big bank clients are paying $15 per month or more. But savings rates are important, too.

The Bank of Canada’s reluctance to lower its overnight rate means premium savings for a while longer. Make sure you get your share.

Are you a young Canadian with money on your mind? To set yourself up for success and steer clear of costly mistakes, listen to our award-winning Stress Test podcast.

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