Your personal finance to-do list for this week:
- Make sure you’re getting a decent rate on the savings you should be trying to build up.
- Set up an online account with Canada Revenue Agency.
- Look for savings in your cable TV and internet package.
The Pandemic Personal Finance Update is a weekly feature of practical, actionable ideas and tips to help people manage their finances through the difficult times ahead. If there’s anything you’d like to see covered, contact me at rcarrick@globeandmail.com. Let’s get started.
Consider emptying your big-bank savings account
The big banks have found a way to save money in these troubled times – by slashing the interest rate on savings accounts to near zero. I have said in previous columns that building a cash reserve is a top financial priority as a pandemic-driven recession takes hold. But the big banks are not a great place to do it right now, even if you value the safety suggested by their size and scale.
There are several alternative banks that offered interest rates around 2 per cent as recently as Monday and are members of the Canada Deposit Insurance Corp., which was discussed in last week’s pandemic update. Short recap: Your money in a CDIC-protected bank is safe if you’re within coverage limits.
Here’s a sample of big-bank posted savings rates as of Monday:
- BMO Premium Rate Savings: 0.01 per cent;
- CIBC eAdvantage Savings Account: 0.3 per cent;
- Scotiabank MomentumPlus Savings: 0.15 per cent, with premium interest of between 0.5 and 1.1 per cent paid if you don’t withdraw money for up to 360 days;
- RBC High Interest eSavings: 0.05 per cent;
- Simplii Financial: 0.5 per cent for this CIBC division;
- Tangerine: 0.4 per cent for this division of Scotiabank;
- TD High Interest Savings Account: Zero on balances up to $4,999.99; 0.1 per cent for higher balances.
Now for a two-step plan to find a better alternative. First, use the Canadian High Interest Savings Bank Accounts website (highinterestsavings.ca/chart) to find a decent rate and then cross-reference the names with the list of CDIC members (cdic.ca).
You will find several online banks on the high-interest savings website run by Manitoba-based credit unions that are not members of CDIC. They’re backed by a provincial credit-union deposit-insurance plan with an unlimited guarantee of all deposits. I will take a look at the deposit-insurance scheme in Manitoba in a future column.
There’s been some inconsistency in how big banks have reacted to the sharp decline in interest rates initiated by the Bank of Canada last month. Along with savings rates, the rate on variable-rate mortgages and lines of credit has fallen in recent weeks. Mortgage broker David Larock’s quick summary of how fixed rate mortgages compare today to pre-pandemic levels: “They are considerably higher (about 0.50 per cent),” he said Monday by e-mail.
Mr. Larock said mortgage rates are higher because lenders are building in a premium to reflect the increased level of risk in lending right now as a result of the pandemic’s effect on the economy.
Open an online account with Canada Revenue Agency
You can apply for the new Canada Emergency Response Benefit through the CRA, either by phone (1-800-959-2019 or 1-800-959-2041) or its MyAccount website. Conducting any sort of financial business during the pandemic has become an ordeal of waiting.
The CERB is for people who stopped working as a result of COVID-19. Stay with me even if you’re not in this group. Having access to MyAccount is basic personal finance at any time because it helps you manage your latest income-tax filing, see what benefits and tax credits you’re entitled to receive and track your contribution room for registered retirement savings plans and tax-free savings accounts. You can also track correspondence with the CRA.
You need a security code from the CRA to get full functionality from MyAccount, but a CRA spokesman said people can apply for the CERB without waiting for it. The code can be sent by mail – it should arrive within 10 business days – or you can call 1-800-959-8281.
Assess your cable TV and internet package
If you’re doing your physical distancing at home with a spouse and children and have a basic internet package, check your bill for overage charges. Unlimited plans cost more, but you may find there’s savings over the next few months because you have locked in a cost and aren’t subject to costly extra charges.
A reader offered this suggestion: If a premium sports channel is part of your cable TV, give some thought to cancelling it. Professional sports are shut down as a result of the pandemic.
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