After coming back from Vacation in the US this week, I went into my local Bank Branch. I have an account there that is called a “US Dollar Daily Interest Savings account.” I am a very big fan of daily interest, paid monthly. That is like a credit card except that you get the interest benefit. I have had the account for several years but never had too much money in the account.
I have also never had an interest payment. But I figured that was because I never had much money in the account. Normally less than $200.00. I had not spent all of my American money while on vacation, and thought that I should but what I had left into my American Account so I didn’t take the hit on the exchange rate. The Canadian dollar is up since I left so I would not even get any wheres near the exchange that I had paid in the first place. If I could get daily interest as well, that would be a good move.
I asked the teller if she could tell me how much money I needed to but into the account to get interest, and what the interest rate was. I was expecting an answer in the $1000.00 minimum and less than 1%. The teller did some typing and some reading, then asked a supervisor to look at the information. They both did some reading, (you can’t see what they are reading) then looked at each other. I knew that couldn’t be good. Here is the answer I got.
“There is no minimum, but since interest rates are so low, there is NO interest paid out.” I was just a little surprised. I asked loud enough that others in the bank could hear me. “Is that not false advertising, to call it a daily interest account, and then not pay any interest??” Not surprisingly I got no further answers. I did put the money in the account, because sooner or later I will need American money again. That way I will not have pay the exchange the next time. But this situation demonstrates our misplaced trust in Canadian Banks. They will never tell you anything wrong, but they will never tell you anything that is better for you than for the bank.
If you are going to exchange money, you need to shop around. Everyone seems to be offering a different rate. What really surprised me, was while I was on vacation, I asked the Cashier at our hotel if they exchanged Canadian money. The answer was yes. They would only exchange $500.00 per day, but their exchange rate was much better than what I paid. Many tourist resorts are hurting for business, and so are offering better exchange rates. So before you use your local bank, check with where you are going, and see what their exchange policy, and rate is. Every dollar you save is yours.
The single most important fact when doing anything financial, is to shop around, and ask a lot of questions. The next is to learn as much as you can. It’s RRSP season again in Canada. Check out my other blog posts about RRSP and TFSAs. There is a big difference.