Saturday, September 19, 2009

Researching Ally's High Interest Savings Account

So I came across this post by Canadian Capitalist (CC), this is one of the Canadian financial blogs I follow, and because I love to get high interest on my savings I started doing my own research.

CC mentioned that Ally looked the most promising, but to me it seemed too good to be true. I couldn't believe that they would give you such a high Interest rate, 2% at the time of this writing, yet still charge you no service or monthly fees. I've had High Interest Savings Accounts (HISA) before with Achieva (my current account), Outlook Financial (lower interest than Achieva) and ICICI (didn't like it), and while they give you the highest interest around their service fees are also very high and restrictive.

Not being able to find anything other than "no monthly fees" on Ally's web site, I made a phone call and here's the list of answers I got from customer rep ("service advocate" as they call them). [Disclaimer: technically this is hearsay, since almost none of this is available in writing on Ally's web site, so don't call me a liar later if any of this changes]

  • Outbound wire transfers: N/A (you can't do outgoing wires)
  • Inbound wire transfers: FREE (but the sending financial institution will most likely charge you)
  • Interac Direct Payments: N/A (you don't get a bank/ATM/Interac card)
  • US/International/Domestic ATM Deposits, Withdrawals: N/A (ditto)
  • ATM Card Replacement: N/A (ditto)
  • Bill Payment (Online or Phone): N/A (you cannot pay bills from Ally's HISA)
  • Internal Transfer of Funds - Ally Account to Ally Account: FREE and instant
  • Direct Deposit (deposit of payroll or government cheques): N/A (you cannot make direct deposits from 3rd parties)
  • Official Cheques: N/A (you don't get cheques)
  • Stop Payment: N/A (no cheques = nothing to stop)
  • N.S.F. Charge: N/A (should be impossible since you can only withdraw using Ally's online or phone interface, and there's no cheques or ATM card)
  • Account Closing: FREE, money would have to be transferred via EFT to linked external account
  • Dormant Account (6 months): account balance (you'll be notified and account terminated 12 months later if no response given)
  • Transferring of TFSA to another financial institution: FREE (this one took the longest to find out, answer had to come from the top)

Well it looks like there really are no fees, but that's because it is a truly online-only, high interest savings account with no extras. No cheques, no ATM card, no way to overdraft your balance, thus no fees. The customer rep was great: very helpful, polite, spoke intelligible English and really tried to answer all my questions.

Few things he mentioned that I really liked:

  • The interest starts compounding on your deposit before it even gets to your account. So if you initiate an EFT your balance won't increase immediately, but Ally trusts you and will start compounding interest on that transfer as if it was already in your account
  • GICs are redeemable without a fee, you must, however, remove the full amount and the amount of earned interest you keep will be based on your GIC term

I must admit, it does look very promising, if they're for real. I was quite sceptical at first, but it seems they do have the right idea. [Disclaimer: This is not an endorsement, do your own due diligence and research]

I hope they will keep their promise and also introduce more financial services, like no-fee chequing account and RRSPs. Perhaps they will be a worthy competitor to President's Choice chequing accounts, now that Citizen Bank is gone.