Shopping around pays off in long run

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Winnipeg might be known as a wholesale city but a new study suggests frugality doesn't extend to banking products and that could be costing consumers many thousands of dollars.

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Hey there, time traveller!
This article was published 21/11/2014 (2931 days ago), so information in it may no longer be current.

Winnipeg might be known as a wholesale city but a new study suggests frugality doesn’t extend to banking products and that could be costing consumers many thousands of dollars.

According to the Oaken Financial Retirement Readiness Poll, 82 per cent of respondents in Manitoba and Saskatchewan believe switching to a different bank or credit union is too much of a hassle. That’s the highest percentage in the country and seven per cent higher than the national average of 75 per cent.

“If folks think (switching) is a hassle, they’re less likely to act and they’re more likely to be stuck with a rate that’s worse if they’re not shopping around and finding alternatives,” said Benjy Katchen, vice-president of deposits at Toronto-based Home Trust, a leading independent trust company.

To drive the point home, he put it in terms everybody could understand.

“If you buy everything at the same grocery store all the time, you’ll never know if there’s a better deal at another store.”

Nationally, the study found 54 per cent of Canadians are unsure if their financial institution, whether a bank, credit union or a trust company, was giving them the best deal.

“They think it’s a pain to shop around. There are lots of alternatives out there and it’s worth it in this low interest environment to shop around. It could mean finding double the interest rate on a GIC (guaranteed investment certificate),” he said.

Independent websites, such as cannex.com or ratesupermarket.ca, can help people figure out where the best deals are, he said. For those wanting to do old-school research, he recommended checking out the deposit-rate tables in the weekend newspaper.

Finding a better rate, even by as little as one or two per cent, might not seem like much, but if you compound that interest over 20 or 30 years, it could mean the difference between a retirement filled with lots of travel and just scraping by, he said.

Perhaps the worst thing you can do is pick your financial institution based on its offer of a free tablet or smart phone.

“They usually come with a catch in the eight to 10 lines of fine print,” Katchen said.

For example, that could include opening an account and paying a service fee for a minimum number of months. At the end of that period, those fees could add up to more than the tablet was worth, he said.

People shouldn’t be afraid of having accounts at a number of financial institutions, he said.

“Twenty years ago, you couldn’t move money around electronically like you can today with the click of a button. You don’t have to have all of your banking at one place anymore. You can shop around for the best rate. It’s all about financial literacy,” he said.

The survey, which questioned 1,006 Canadians over the age of 55, was conducted by Ipsos Reid between Sept. 18 and 23, 2014.

geoff.kirbyson@freepress.mb.ca

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