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Top Financial Products For Canadians

I’ve often written about financial products in the past, reviewing various offerings and comparing the competition.  However, I’ve never written a summary post of what I think are the best financial products out there for Canadians.

Mind you, I realize that everyone has different needs, but for me, low cost and high value are the keys to my wallet.

Best Free Banking

PC Financial – For the basic free chequing account, this is the best offering in Canada.  With no minimum balance, free cheques, free ATM withdrawals from PC and CIBC machines. I still have an account with them that I opened when they started their service.

Their closest competition is ING Thrive, here is my ING Thrive vs PC Financial post.

Best High End Banking

TD Select Service – After a review of high end chequing accounts a little while ago, I came to the conclusion that the TD Select Service account was the best bang for your buck.  The regular fee is $24.95/month, but can be avoided if you keep a $5,000 balance throughout the month.

What do you get?  Unlimited transactions, free cheques, no fees when withdrawing from non TD ATM’s (even outside Canada), free USD bank account with preferred currency exchange rates, safety deposit box, and the $120 fee waived for the TD Visa Infinite travel card.  If you count the benefits of the infinite VISA, the TD Select Service includes a comprehensive insurance coverage like trip cancellation/interruption, car rental collision (CDW), baggage delay, purchase assurance and extended warranty.  Or, if you were to choose the TD Gold Visa instead, it offers road side assistance for free along with 1% cash back.

Best Small Business Bank Account

After a review of small business bank accounts, it appeared that most small biz accounts had high fees and charges wherever they could fit them in.  However, there are a couple that stand out from which I chose my own small business account.   My favorite worked out to be BMO’s offering which offered no fees providing that the account maintains a balance of $4,000.  There is a new small business banking product offered by HSBC that promises to have no fees, but the lack of teller and ATM access (around these parts) is a big minus for me.

Best Cash Back Credit Card

If you’ve been reading this blog for a while, you’ll likely know that my favorite credit card for the past couple of years has been the  MBNA Smart Cash card.  This is my “go to” credit card in my wallet for the bulk of my spending.  Why do I like it so much?  They have no annual fee, offer 3% cash back on gas/groceries, 1% on everything else (with no tiers), and all the essential credit card insurances.  You can see my comparison of cash back cards here.

Best Rewards Credit Card

It’s tough to narrow down this category as there are numerous “types” of rewards out there such as travel, consumer loyalty points, roadside assistance, electronics, groceries etc.  However, there are only a couple of cards that offer the most value.  Most of the top contenders offer no fee, 1% return on your spending and a good selection of insurance.

For a free travel card, I prefer a rewards program that is able to be applied to multiple forms of travel. In this case, the Capital One Aspire Gold card offers 1% on your spending towards travel of your choice. The real competitive advantage of card is the included insurance package which is extremely generous for a free credit card. It features price protection, double theft/extended warranty insurance, baggage delay and car rental insurance.You can read how this card stacks up against other top rewards credit cards in Canada.

I don’t typically recommend fee based cards, but the Capital One World card is worth mentioning.  The World card has all the benefits of the Gold card, but with 2% return on your spending and added insurance of trip delay/interruption/cancellation which can be expensive to purchase separately. Although this is a paid card, I would probably choose this one over the Gold card due to the residual bonus points every year which almost pays for the annual fee. Another perk is that they offer $350 worth of travel as a sign up bonus.

Best Low Cost Discount Brokerage for Buy and Hold

I mentioned Questrade in Rob Carricks “best deals for investors” article, as it provides a low cost discount broker solution for Canadians.  Questrade offers trading accounts with no annual fee, no minimum balance, and $0.01/share trading ($4.95 min, $9.95 max), which is extremely competitive.  Check out my Questrade review, but make sure to check out the comments as well.  Some users have reported a few client service issues.

Otherwise,  most of the big banks now offer low cost trading with larger balances.  For example,  TD Waterhouse is known to have a great platform, but expensive unless you have over a $50k balance at which point the trade cost reduces to $9.99.  CIBC offers $6.95 trading for household assets above $100k.

Best Discount Brokerage for Traders

For frequent traders that need direct access to the market, Interactive Brokers provides low cost commissions.  For high volume traders however, note that IB does not have a ceiling on their commissions per trade.  The max commission is 0.05% of the trade value, but can add up if you are trading in high volumes.

However, if you’re the type to trade 100 or 200 shares at a time, trades will only be $1 or $2.  See my Interactive Brokers Review for more details.

Best High Interest Savings Account

I have high interest savings accounts with PC Financial and ING Direct, and both offer satisfactory services, but they do not typically stand out in terms of interest rates.  For a couple basis points, I do not typically switch banks as they are all pretty close.

Best Mutual Funds

In this case, when I say best, it means the lowest cost index mutual funds available.  In Canada, there are very limited “low cost” mutual funds so the TD e-Series is in a league of their own.  With MERS ranging from 0.31% to 0.48%, they are in the same price range as iShares index ETF’s, but with the advantage of purchasing in smaller increments without paying any commissions/fees.

Best Exchange Traded Funds

The past couple years has been good to ETF investors with a number of new products introduced to the market.  However, I like to stick to the popular ETFs that have higher trading volumes and low fees.  That leaves me with picks from Claymore, iShares and Vanguard.  Here is a simple low cost ETF portfolio that includes my favorites.

Back to you, what are some of your favorite financial products?







21 Comments, Comment or Ping

  1. 1. Sampson

    Nice summary post FT.

    Re: MBNA Cash back card – Have you ever calculated what your actual cash back amount is? (i.e. total rebate divided by total spent).

    Just curious because we’ve been using a tiered cash back Costco Amex for sometime and we usually get somewhere between 1.5-2% back. However, I know we don’t spend a tonne on gas, so I’m trying to weigh how good one of these cards that give different rates on different products would be for us.

  2. Good question Sampson. I think it depends on how much you spend on gas/groceries relative to other purchases. For example, the maximum on the card is $600 in gas groceries/mo which we max out pretty easily. But it’s also pretty normal for us to have a $1500 credit card bill (more or less) at the end of the month. So perhaps a 1.8-2% return every month?

  3. 3. Echo

    How about those supplementary cards like Air Miles and Aeroplan. Which do you prefer?

  4. @Echo, I like aeroplan for the executive seats (high return on spending), but I’m not a big fan of their fees and requirement to book months in advance. Air Miles can have a decent return if you choose the right reward. Otherwise, a lot of their rewards return less than 1% (not unless you shop specifically for the airmiles and get the bonus points). What are your thoughts?

  5. 5. DavidV

    I just opened an Ally account for my emergency fund. They are at 2% and PC financial is 1.5%. It worked out to $100 per year more for switching, which took a 58 cent stamp.

  6. 6. Aolis

    Best account for US funds?

  7. 7. Echo

    @FrugalTrader
    I loved Aeroplan when I used to fly a lot for business, but now I find it difficult to collect points since they don’t have very many sponsors.

    Air Miles is ok since I shop at Safeway regularly and can take advantage of bonus points on Rx and other specials. But the returns are definitely less than 1%. I redeem them for $20 gas certificates at Shell (175 Air Miles).

    I hear Shoppers Drug Mart has the best value for points.

    Supplementary cards are good for exactly that, to supplement the rewards from your main credit card. Might as well double-dip if you can, right?

  8. 8. Tara

    My parents live in BC and I have had accounts with Coast Capital Savings (credit union) back when they were Surrey Metro Savings. They have free unlimited transaction checking, high-interest savings (1.35%, way better than my American bank accounts), and instant transfers from savings to checking and vice versa. I tried PC for awhile, but I came back to Coast Capital even though I was living in Ontario.

    Their customer service has always been great. All of the CSRs at our local branch know my mom by name, so they don’t hold the checks I write on US bank accounts. And most banks hold them for 20-30 BUSINESS days! I also think their online banking is way more functional and prettier than the big banks or PC. You can rename accounts online and easily open new savings accounts or GICs. And you can pay bills from your savings account!

    Anyway, sorry if that sounded like an ad, but I’ve been with them for so long and I could never imagine going to a big bank after my short run in with CIBC. I believe in good customer service for the masses, not just the wealthy.

  9. 9. Sarlock

    I’ve been using the CIBC Aeroplan Infinite card the last two years and have accrued a lot of Aeroplan points. I am less than impressed, however, with the availability of a lot of flights through Aeroplan. If you want to fly between Canadian cities, it’s not too hard to find available flights, though sometimes you have to make more connections than you’d usually like, and you can often get a business class ticket for not a large Aeroplan point premium. Outside of that, however, I have a lot of difficulty finding flights that work for me and often end up buying them instead of using my points. The other frustration is all of the extra fees: I recently travelled with my family to Los Angeles on United and my “free” Aeroplan flight cost me, between taxes, baggage charges, forced upgrades to Economy Plus (since Economy was all booked up by people who paid for their tickets, grr) $1,600. So much for “free”!
    I just applied for the Capital One card and am looking forward to the flexibility that it will afford me. I will keep my Aeroplan Visa card to keep accruing some Aeroplan points for business flights when I can find one that works for me but will primarily focus on my Capital One card now.

  10. 10. bob

    As you note in your Cash Back Cards comparison, the Capital One Platinum beats all of the free Cash Back cards, depending on your spending patterns. It also has much better freebies (insurance, etc.).

  11. People’s Trust has a rate of 2.1% for a high interest savings account. That is where I am storing my cash for my home purchase.

  12. 12. Future Money-Bags

    I do all my banking with one bank, BMO.
    With a balance of $5k in my savings account, there are no monthly fees.
    Wuth a balance of $2k in checking, no fees again.
    free USD checking account.
    preferred usd/cdn xchange rate.
    1.35% savings account.
    1.75% tfsa savings account.
    no fee credit card. 1 airmile/$20 spent. Not great, but again with shell or safeway, can get better airmiles.
    no fee usd credit card. just spend $1000/year
    brokerage account… its too expensive, so I use questrade.

  13. 13. cannon_fodder

    Just thought I’d say my experience in going after the TD Select Service was the free safety deposit box is only the smallest they have available. And, there were none available at our relatively new branch (2 years old).

    Thus, if you want a free safety deposit box and all of the other perks, I’d suggest if a new branch opens up in your area you RUN to sign up for this account.

    And for discount brokerages, I’d also recommend if you are heavily into using margin, that IB has very low rates. You’d have to determine whether that makes up for the low commission rates that Questrade has because there is no maximum at IB.

  14. 14. Subversive

    Good article, FT. I’d be interested to see a comparison of business credit cards if you ever have a chance. We currently have a CIBC Bizline Visa because it has the lowest interest rate. However we recently paid it off and are no longer carrying a balance, so I’m thinking a points card may be a good idea for the business, since we run a lot of business expenses through our card each month. CIBC offers an Aeroplan one (since we do our business banking with CIBC, this is an attractive option since we can manage it all through one web site), but does anyone else have suggestions for rewards generating business credit cards?

  15. @subversive, that is a great idea, I will look into it.

  16. 16. Bob

    Future Money Bags,

    You keep over $7000 in low interest accounts in order to save a few dollars on fees?

    I’d work out some calcuations on whether that is actually worth it. You could be using that $7000 much more productively.

  17. 17. uptoolate

    I have used TD for a very long time. I have a Select Service account and don’t have a 5K minimum balance each month but have got TD to waive the monthly fee for years now. Also have a TD Elite Gold card which is 1% cash bank for which they also waive the annual fee for the primary and supplemental cards. I use TD e-series funds to accumulate funds and then when sufficient I move the money to index ETFs. Have used PC Financial for high interest savings for the kids but with rates so low am tending to put most of that money into equities as they have such a long time horizon anyway. I use TD Waterhouse for simplicity sake. I am not an active trader and there are no fees for RRSPs, TFSAs and RRSPs on the self-directed accounts.

    Thanks for the article. Always nice to see a breakdown like this. Take care.

  18. Great summary post, MDJ.

    I didn’t know about the TD Select Service, I’m a big fan of having fees waived for credit cards like the TD Infinite Visa, so might look into that (boyfriend actually always had over 5K in his bank account (it’s a male ego thing, I think- he just likes seeing his money there)) so I should look into whether he can get one of those TD infinite cards.

    I use Questrade and love it, as for the ETF’s- Claymore has a ETF product that you can have preauthorized deposits on (much like the TD E-series). I haven’t used it myself, as I use the TD Eseries for my RRSP.

    @Echo- I heard that the government (not sure if it’s just the BC gov’t) is stopping benefits like air miles or optimum points to be given on prescriptions :( This is coming to effect in July.

  19. I would not focus on fees alone on small business accounts. Branch experience varies wildly from branch to branch- BMO in downtown Toronto lost a lot of good staff to other banks in the last few years. Thus, in the abstract, they offer the lowest price but at a bad value where we conduct business (having used BMO, TD, CIBC, RBC and a credit union, I have a pretty good sense of value for my fees). A good account manager for a modest fee business bank account provides much higher value than a lower fee account where you are left to your own devices without much help. Most of my entrepreneurial colleagues will complain about lack of good customer service over high fees for business bank accounts (your belief about HSBC’s business account is bang on- its functionality is so limited, it will not appeal to most businesses). I cringe a little when you compare business needs with personal needs in banking since it is an apples and oranges comparison but otherwise a great post.

  20. 20. QEW

    I personally use Citi Dividend Platinum Select (Mastercard. I have one for US and other for Canada. US $ one provides me 5% cash back on gas, groceries and drugstores and 1% for rest. Whereas C$ one gives me 1% on all purchases. There is no annual fee on both of these cards. Best feature of these cards is 1 year extended warranty. Say I buy a laptop which comes with 1 year standard warranty. I automatically get one additional year for free. I am also covered for car rental insurance and finally if within 90 days of purchase if I find lower price of the same item I will get the refund up to $100.

  21. 21. Jeff

    Just received notice in the mail that TD is increasing the monthly fee for the Select Service account to $29.95. A whopping 20% increase!
    Going to need to re-evaluate.

    After looking at the RBC VIP plan, I think that’s a much better deal. Given that my wife and I have 3 chequing account between us, we’ll be paying TD $50+ a month. Would only be $23 at Royal.

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