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You've got snail mail

Canada Post wants to lend you a hand with your finances

Srivindhya Kolluru, Jodi Anderson & Sabrina Dotsch
October 17, 2022

Good morning. Buy Now, Pay Later (BNPL) options made it easier for us to stomach the cost of a Sephora haul (how much for three products?!). But it has clear downsides too, like encouraging you to pay more than you can actually afford and potentially causing you to fall behind on monthly payments, putting you at financial risk.

Now, with the average rent in Canada topping $2,000 a month, some companies want to help you pay rent through BNPL. What could go wrong? 🤐

In this edition:📨 A loan with a side of stamps💰 It's guaranteed

— Vindhya Kolluru, Editor

That's a whole lotta red. * Market data as of 9:00 pm ET Sunday, October 16.

PERSONAL FINANCE

Mail, stamps, returns and…loans? Canada Post doubles down on the micro-banking industry

Credit: Yulia Matvienko / Unsplash

In some news almost as surprising as Selena Gomez and Hailey Bieber posing for photos together at the Academy Museum Gala, Canada Post now offers loans. If you are also confused by this apparent pivot of the national mail service entering micro-banking, you are not alone.

What happened: On top of offering money transfer services and pre-paid reloadable credit cards, the Crown corporation has teamed up with TD Bank to provide loans to Canadians under the new MyMoney program. The program offers loans from $1,000 to $30,000 under variable or fixed interest rates and repayment periods ranging from 1-7 years. For those who have bad credit scores or are new to the country, MyMoney provides access to capital to those who might not have been eligible for a traditional loan from a bank.

Borrowers need to be either a Canadian citizen or permanent resident, have at least $1,000 in annual income and have reported no recent bankruptcies, among other criteria.

Some context: Interest rates can vary greatly depending on where you get your loan from. The Big Five Banks are offering personal loans with an interest rate of 5.45%. (What the Big Five charge fluctuates based on the prime rate, which is based on the overnight rate the Bank Of Canada sets.) Credit cards are also a popular choice for y’know credit, the average Canadian carries $21,000 in consumer debt, with most credit cards charging 19-25% interest. Payday loans, often used by people who need money quickly, are notorious for their exorbitant fees often exceeding 400%.

Meanwhile, MyMoney lands somewhere in the middle, offering loans with an annual interest of 9.78-19.98% depending on the terms. Those who are interested can apply for a MyMoney loan through Canada Post's website or phone number.

Why now: With rising interest rates, Canadians are feeling the pinch nearly every day, with 55% reporting their income can’t keep up with inflation. Alternative funding sources are expected to expand as people look for creative solutions to keep up with the cost-of-living increases.

The bottom line: When evaluating where to get a loan, you should consider all your options and financial needs when shopping around to try and find the lowest rate available.

— Sabrina Dotsch

On our radar

An annual study by law firm Osler, Hoskin & Harcourt LLP found that more women filled board seats at 677 Canadian public companies in 2021 compared to 2020. Women held 23.4% of over 5,000 board seats in 2021, representing a 2.2% increase from 2020. We love to see it.
There's nothing fishy about a kickass woman founder: Through her plant-based seafood company, Save Da Sea Foods, Aki Kaltenbach is on a mission to create products that are not only friendly to our planet but healthy for you. Get to know Kaltenbach in this Victoria Tech Journal profile.
Who needs Sweetgreen in Canada when you have Mandy's Salads? With nine aesthetic locations in Toronto and Montreal, Rebecca and Mandy Wolfe have set out to create the 'Starbucks of salads' with their gourmet salad bar restaurant.

THE 411

What are Guaranteed Investment Certificates — and is now a good time to invest in them?

Credit: Pawel Czerwinski / Unsplash

With rising interest rates also comes rising rates on other investing tools that banks and financial institutions offer such as Guaranteed Investment Certificates (GICs), whose rates of return have risen from 1.5-4% or even as high as 5% over the last year. Investors are becoming interested in GICs again as a way to protect their hard-earned cash against market volatility while locking in guaranteed returns.

But first, what is a GIC? According to the Canadian Bankers Association, a GIC is a type of investment where you (the investor) agrees to ‘lend’ your money to a bank or financial institution for a set term (period of time) in exchange for a guaranteed return.

The operating word here is guaranteed: where your principal investment (the original amount of moolah you invested) and the interest (the money you will earn) are guaranteed at the end making GICs a very safe way to invest. GICs differ from investing your money into stocks, bonds, or index funds because your money isn’t as vulnerable to the ups and downs (volatility) of the stock market.
And even better, the Canadian Deposit Insurance Corporation (CDIC) insures your GIC to provide an extra layer of security in case the bank you lend your money to goes bankrupt.

What else do I need to know? Typically, GIC terms range between 1 and 5 years, but a GIC can be as short as 30 days or as long as 10 years. Typically the longer the term, the higher the interest rate on a GIC however Jessica Moorhouse recommends a term of 5 years or less because the CDIC does not insure GICs longer than that.

GICs usually provide a higher interest rate compared to a savings account but you commit your money over a set term and your funds are not accessible until maturity (unless you want to pay a penalty). Cashable or non-redeemable GICs options allow you to withdraw your money with no penalty but typically come with lower rates.

The FOMO clause: There are a number of options when considering GIC rates, the most common being a fixed rate. It provides a predetermined interest that is locked in the day you ‘lend’ your money. This guarantees the interest rate over the term of the GIC but you may miss out if the rates rise over your term.

Is now a good time to invest in GICs? With inflation eating away at the buying power of your money and recession on the minds of many, GICs may be a more secure way to guarantee returns and take advantage of rising interest rates. But according to Ratehub, GICs may not a great option if you need to access your money freely or are looking to be more risk-averse over a longer-term strategy.

The bottom line: GICs are offered at many banks and institutions across the country and their rates and minimum deposits vary, so it’s best to shop around to find the right term and rate for you. Rates can also vary depending on the type of account the GIC is invested in (i.e. registered vs. non-registered) which may also have varying tax implications that you will want to keep in mind.

Tell us: Have you ever made any kind of investment? 🤑

For example, through a GIC!

— Jodi Anderson

Overheard

“We will always be looking at economically viable LNG projects.” — Finance Minister Chrystia Freeland told reporters in Washington, D.C. on Friday.

Freeland also said LNG, or liquefied natural gas, is a crucial transition fuel, referring to the transition from fossil fuels to clean energy. Her comments come less than a month after news broke that Canada's first LNG export terminal is about 70% complete.(The project is expected to drive $23 billion in public revenue for B.C.)