Should You Bite on this 3.30% HISA Rate?

Laurentian bank high-interest savings accountSavings account rates are not usually our playground. But when a bank launches a savings rate that’s 43 basis points above the typical 5-year fixed mortgage rate, it’s worth a comment.

Laurentian Bank of Canada (LBC) is the party in question. It has a new eye-catching 3.30% high-interest savings account (HISA) rate with no regular fees or strings attached.

Here are four things worth knowing about it:

1) Deposit rates aren’t supposed to be higher than 5-year fixed mortgage rates

laurentian bank high interest savings accountMany lenders use deposit money to fund their mortgages. It’s hard to make money when you’re lending out at lower rates than you’re raising deposits at.

Compare LBC’s new 3.30% rate to its own 3.04% 5-year fixed mortgage rate. The numbers are backwards.

Of course, LBC likely doesn’t intend to fund prime mortgages with these HISA deposits. It’s mainly a loss leader to create a buzz and attract new customers. A marketing expense, if you will.

2) People can now more easily switch to banks like this

Open banking is a buzz phrase in the industry right now. What it means is that you can switch your business to another financial institution in minutes, as opposed to days.

This has huge ramifications for all financial providers, especially the Big 6 banks who (historically) haven’t been competitive on deposit rates.

Someone who banks at RBC, for example, and sees this attractive LBC deal, can create an LBC account online and move their money from RBC in a flash.

“Clients can easily link their account at another financial institution with their LBC Digital HISA, allowing transfer of funds between accounts,” said Hélène Soulard, AVP, Communications at Laurentian Bank Financial Group. You can link up to four other bank accounts to LBC.

Within 48 hours, accounts are linked and you can transfer your dough. “Inter-institution fund transfers are usually processed within one business day,” Soulard says. In our experience, the funds are typically visible in your account the same day.

3)  People can more easily switch away from banks like this

As fast as open banking lets people move money to a bank like LBC, they can move money away from it. Easy come, easy go!

transfer money between banksHigh-rate deposit takers like LBC, EQ Bank, Motive Financial, Oaken and MAXA Financial all know this. This ease of capital flight will increasingly force companies to compete harder for your dollars. Incidentally, it’ll also compress the profit they make on mortgages, which are partially funded by deposits (in case you felt like feeling sorry for banks).

One thing you can bet on is this: Canadians with tens or hundreds of thousands of dollars to park in cash will increasingly open multiple e-savings accounts. Whenever they have cash sitting idle, they’ll simply move money to the provider with the best deal at the time.

As for LBC and the staying power of its 3.30% offer:

  • Soulard said this: “While it’s true that the rate is subject to change at any time, we are committed to maintaining a competitive market rate for the foreseeable future.”
  • The bank’s executive vice president told personal finance pro Rob Carrick: “This is not meant as an introductory rate.”

But Carrick nonetheless called the 3.30% rate “a publicity stunt and not viable in the long term for a bank with shareholders to please.”

But he added, “If you’re comfortable moving money around to get the best return, there’s no reason not to exploit this exceptional rate for as long as it’s available.”

Our take: If you get six months out of LBC at this rate, consider yourself lucky.

4)  The investment limit is high

LBC, unlike some institutions (like EQ Bank with its $200,000 limit) doesn’t impose annoying restrictions on the amount you can deposit—that is, annoying if you have that much cash to park.

LBC lets you plop up to a million bucks in its 3.30% account. Albeit, that’s more than the Canada Deposit Insurance Corporation (CDIC) insures you for in the extremely unlikely event the bank fails.



9 Comments

  • B Fuchs says:

    WOW! We just recently stumbled across MOTIVE (ATB) and now LBC. This is getting exciting.

  • Karen says:

    Hi,

    I tried to sign up online to Laurention 3.3% savings. It’s only offered online. The form requires SIN number, which I’m remiss to supply electronically. I called to see if I can give it over the phone, or in-branch and the option is not offered. Surely this is not BEST Practise in the day of cyber security. Disappointed to say the least.

  • Jacksmack says:

    If you apply for any bank product online you’ll likely have to provide your SIN. This is nothing new. You either trust the company or you don’t. If Equifax can get hacked, anyone can get hacked. You’re never 100% safe on any website. Deal with it or don’t shop online and pay more.

  • Michel Chamberland says:

    I tried to open an account the 9 and 10 of February. Seems there is a problem with their web site. Apparently there was a discrepancy between my personal provided datas and the one on Equifax. The message was to contact Equifax to fix this. When I contacted Equifax, they wanted me to buy some of their services, which I don’t need, having already a free account with TransUnion, provided by Scotia Bank. So I will try again in a few days. Anyone succeeded opening an account with them?

  • RC says:

    I had the exact same issue Michel so I gave up and left my money at EQ Bank.

  • WILLIAM TAN says:

    I succeeded opening an a/c but the interest rate will drop to 2.80% in March 1, 2020. So, I want to cancel the a/c, have to wait 90 days otherwise a $25 charge applied. I don’t even have a Code to login my a/c that I’ve created Feb13. What the hack, lol….?

    • The Spy says:

      Alas, it was only a matter of time before 3.30% did the disappearing act.

      But great news: “The annual interest rate on deposits over $500,000 will remain unchanged.” Woo hoo.

  • Gary Hofstetter says:

    Same thing happened with Motive Financial and Equifax. Never had a problem getting credit cards recently until i tried opening an account with Motive and somehow Equifax has my name different then i have EVER used on an application etc.

  • Mike says:

    It is much too hard to verify your info and fix errors on your credit report. The government should step in and force Equifax and Transunion to make the process easier. So much economic activity depends on that data being correct, especially with the advent of open banking.

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