ING Direct feeling the heat
ING Direct raised their short term interest rates on savings from 1.05% to 1.2% on December 15th. While this is not a huge difference, it is interesting to note in light of the fact that there have been no underlying rate changes coming from the Bank of Canada.
My guess is that the competition, such as Ally (offering 2.00% on basic savings) is starting to encroach on their business. It is a trivial matter to setup an electronic funds transfer link to move short-term money to the highest savings account.
The other reason is that I suspect ING Direct is losing cash deposits from people that are starting to feel “comfortable” again in investing in other financial products, such as the stock market, gold, or real estate. The difference between 1.2% and 1.05% should make little difference to people.
I’ve personally allocated my own capital elsewhere. There are just too many superior alternatives to cash. This will change in 2010 – look out for headlines that start saying “cash is trash” and equivalent. Once you start seeing those sorts of headlines, it’ll probably be a good time to bunker down with a high bank account balance; 1.2% is better than a negative 25% return elsewhere.