Whatever product a big bank offers, there’s an alternative bank with a better deal.
Operating online and through apps rather than branches allows alternative banks, a.k.a. challenger banks, to pay more interest on savings products and charge zero fees for accounts that might cost $10 to $20 per month or more at a big bank. But better deals aren’t enough on their own. Before you hand money over to an alternative bank, you need to able to trust it.
A reader of this newsletter recently asked: “How do you assess the safety of an alternative/online bank?” Let’s look at some steps:
1.) See if the bank is a member of Canada Deposit Insurance Corp., the federal government agency that insures combined principal and interest to a maximum of $100,000 per eligible account.
2.) If your financial institution is not a CDIC member, check to see if it’s part of a provincial credit union deposit insurance plan. A few years ago, I took a look at the safety level of deposits held with online banks operated by Manitoba-based credit unions. Here’s a list of provincial deposit insurers, with links that will help you investigate the coverage they offer. There are significant differences between provinces.
3.) Do a thorough Google search, including reviews and posts on forums like Reddit. Look for media coverage, and for comments about app quality and levels of customer service. If you find social media influencers talking about a bank, check to see if the post was sponsored by that same bank.
4.) Check out the discussions on HighInterestSavings.ca and the personal finance forum on RedFlagDeals.
Finally, try a test run with a challenger bank on your phone or computer. Most have savings accounts with zero fees, which means you can add, say, $50 to an account to see how it works. Try transferring money to and from your main bank, paying bills and sending e-transfers. Give a challenger bank the opportunity to earn your trust.
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Rob’s personal finance reading list
The Canada Revenue Agency has yet to announce the 2025 contribution limit for tax-free savings accounts, but it appears set to remain at $7,000. Total contribution room since the 2009 launch of TFSAs would rise to $102,000.
A real estate reality check for investors
An investing blogger looks at how much real estate exposure you should have in your portfolio. The discussion revolves around real estate investment trusts, or REITs, which offer a convenient way to get diversified exposure to various types of real estate.
The flip side of the great wealth transfer
A story about the embarrassing money secrets some boomers are keeping from their millennial and Gen Z kids. Perspective on the narrative of boomers pouring wealth into the hands of their kids.
Warning labels for bank products?
You know those detailed labels on food and drugs explaining what’s in them and potential side effects? The authors of this article propose we do similar for financial products sold by banks. The goal: Improved disclosure of costs and suitability.
Podcast fans
Subscribe to Stress Test on Apple podcasts or Spotify.
Ask Rob
Q: I enjoyed your article, “A fresh take on a retirement income-generating machine that almost no one likes.” I think that having a payout annuity in a registered retirement income fund as insurance against longevity risk makes sense. However, I cannot find any issuers of self-directed RRIFs that permit adding an annuity in the plan. Can you provide a list of some issuers that permit annuities in their self-directed registered plans?
A: Annuities are insurance products, which means they must be purchased directly from an insurance company or agent.
Do you have a question for me? Send it my way. Sorry I can’t answer every one personally. Questions and answers are edited for length and clarity.
Tools and guides
How to dispute a credit card transaction – a step-by-step guide.
In the social sphere
Social Media: A look at stereotypes about how women spend money.
Watch: How to create a budget you can stick to, by Ellyce Fullmore, author of Keeping Finance Personal
Money-Free Zone: I once heard a bartender say something just right about soul artist Curtis Mayfield. A customer remarked to him how good the Mayfield song being played was and he replied, “Anything by Curtis.” There are many great Mayfield albums – Super Fly, Roots, Curtis and Curtis/Live, for example. But his work with the Impressions is also worthwhile, and maybe a bit more fun. Here’s an example of an upbeat, feel-good song called Stay Close to Me from the Impressions album This Is My Country. From the same album, a hooky heartbreaker called Gone Away.
More PF from The Globe
– What are TD customers to make of the bank’s costly ethical lapse?
– Interest rates have further to fall, but fixed mortgage rates are already nearing their bottom
– ‘Nothing to fall back on’: Money mistakes young people make and how to avoid them
– In Canada, I miss the art of haggling over prices
– Loyalty programs now offer more flexibility but that’s not always better
