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Household Finances For the aggressive saver, better interest rates are there for the taking

Decent interest rates on savings accounts are out there, but only for intrepid savers who hunt them down.

The Bank of Canada raised its benchmark interest rate by half a percentage point over the summer, the first uptick in seven years. Banks have barely reacted, but there's still a lot of potential to improve the returns you get from your savings. In today's marketplace, competition between banks drives rates more than what's happening in financial markets.

You have to seek out the best deals, though. Passive savers who takes what's offered by their bank get left behind. Tangerine, a big player in online savings accounts, increased the posted rate on its savings account in September by just 0.1 of a percentage point – to 1 per cent from 0.9. Among the bricks-and-mortar banks, rates on savings accounts are still at 0.75 per cent or less.

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Here are three ways aggressive savers can do better:

1.) Call your bank and try to negotiate better rates: Tangerine in particular does business this way.

2.) Move your money from bank to bank to take advantage of short-term teaser rates: A new online bank called Simplii Financial is offering a temporary teaser rate of 3 per cent on new deposits to savings accounts.

3.) Find a bank that offers top rates consistently, not temporarily: A growing number of independent online banks offer rates that will keep you close to or ahead of our 1.6-per-cent inflation rate.

One of the newer alternative banks is Wealth One Bank of Canada, which currently pays 2.5 per cent on its savings account. Wealth One opened in 2016 to serve the Chinese Canadian community and is now broadening its focus. The bank is a member of Canada Deposit Insurance Corp., which means eligible deposits are protected for up to $100,000.

Other CDIC-member online banks with comparatively high rates of interest include Motive Financial (its parent is CDIC-member Canadian Western Bank) at 1.5 per cent, Zag Bank at 1.65 per cent, Alterna Bank at 1.9 per cent and EQ Bank at 2.3 per cent. There are also some online banks run by Manitoba credit unions offering rates of up to 1.85 per cent. You get unlimited deposit insurance with these banks, but it's provided by provincial credit unions as opposed to the federally-backed CDIC.

A drawback of dealing with an alternative online bank with no physical presence was highlighted last week when EQ's website was down for parts of two days. Customers who wanted to transfer money out of their EQ accounts to pay bills or for other purposes were invited to call a customer service phone line that, to judge by comments on social media, was way overloaded.

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EQ sent a graciously-worded apology e-mail to clients afterward saying "this is not the customer experience we aspire to deliver." But let's be realistic – it's a risk when dealing with a virtual financial firm that technological problems may temporarily deny you access to your money. For that reason, keep some money in a second online bank as an emergency backstop.

New online banking player Simplii is part of Canadian Imperial Bank of Commerce and replaces President's Choice Financial, which was a partnership between CIBC and the Loblaw Cos. supermarket chain. Simplii offers no-fee daily banking, in addition to a savings account with a regular rate of 1 per cent and teaser rate of 3 per cent until Feb. 28.

If you have money to park for a few months, give Simplii a try. But don't expect an online banking experience that pushes any boundaries. The website looks bland from the outside, and the account setup process is slow. I tried to set up a Simplii account online last weekend and the bank seems to still be processing the request.

Tangerine's strategy for competing against the better deals at competitors is to offer temporary special rates to clients who meet qualifications that the bank is unwilling to share. "Tangerine is committed to providing our clients with great rates," it said in a e-mailed response to questions. "As examples, we may offer varied short-term rates to current clients or, we could offer a special limited-time rate to incent new clients to bank with us."

Discussions in online forums like Reddit and HighInterestSavings.ca suggest Tangerine has offered 90-day special rates of 1.6 to 2 per cent or a bit more, and that the special rates can be renewed. If you prefer to pass on this kind of hassle, remember the many other online banks with better rates you get automatically.

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