Canadians may be quick to do comparative pricing when it comes to shopping for cars, appliances, clothes, electronics and many other products and services but when it comes to shopping around for the best interest rates they don’t seem to have the same level of diligence.
A new study by Equality Bank shows that Canadians are passive savers. They say they want to save more but aren’t given their lack of awareness about how to get the best rate and what their current rate is.
The study found that 45 per cent of Canadians don’t even know the interest rate they are getting on their savings account. More than three-quarters of them have shopped around for the best deals on their telecommunication devices and services but only 38 per cent have shopped around for a better rate on their savings account.
“The study confirms what we have been seeing in the marketplace for some time but we were surprised to see the degree to which Canadians have a tendency to stick with the bank they’re used to and the inertia they have about to trying to get better rates on their savings,” Dan Dickinson, vice-president and chief digital officer with Equitable Bank, said in an interview. “If you’re going to park your money somewhere why not try to get the most from it that you can.”
The study found that technology-savvy millennials aged 18 to 34 were most likely to shop around for a savings account as well as search for a better salary while women were more likely than men to not know their savings rates.
People in higher income brackets are more likely to know their savings rate versus those in lower brackets. Sixty per cent of people making more than $100,000 a year know their rate compared to 43 per cent of those making less than $40,000.
Many of the country’s secondary banks can offer customers higher interest rates and lower fees but many people simply don’t know where to go to find out about them.
“Smaller secondary financial institutions including banks, credit unions and now firms like PC Financial have smaller infrastructure and costs and therefore can offer higher rates, lower fees and other benefits that many of the big banks might not be able to.” says Dickinson.
“Often people don’t know where to go to find out what their options are.”
Web sites like ratehub.ca and lowestrates.ca allow consumers to compare rates and features on savings accounts, Guaranteed Investment Certificates (GICs), mortgages, car loans, credit cards, insurance policies and loans.
In some cases they will rate the best providers on the market in these areas and highlight special types of accounts for youth and seniors and account features such as the number of transfers, withdrawals and interact-e transfers, sign-up incentives and even promotional interest rates.
These type of aggregator websites (aggregator refers to a web site or computer software that aggregates a specific type of information from multiple online sources) are a lot more common in Europe but a lot of people here just are not aware of them, Dickinson says.
“People could be getting and saving more if they just looked around at the options available,” he says.
“A lot of people have inertia when it comes to their relationship with their bank but a difference of a percentage point or two can make quite a difference at the end of a year. Why not get the most out of your money that you can?”
Talbot Boggs is a Toronto-based business communications professional who has worked with national news organizations, magazines and corporations in the finance, retail, manufacturing and other industrial sectors.