A High Interest Savings account is a great way to have someplace to stash your money so it can be readily accessible. These days, their rates are pretty much the same as GIC’s so might as well keep them here to avoid a penalty if you withdraw a GIC too early.
Some people keep loads of money in their chequing account or “savings” account at the bank so they feel good when they withdraw money from the ATM and it tells you your large balance. The savings accounts at the bank offers what, 0.3%?? AND they make you have a minimum balance and ‘ding’ you for using too many transactions. These are not savings accounts. You want a real one that gives you some substance.
The rates varied- last year they were pretty good, at 3%, now with the recession going down they range from 0.8% to 2% if you’re lucky. The ones with higher rates are usually online, so you’d better be comfortable doing internet banking (which without a doubt, I’m sure you are because you are generation Y)! I think the way that these financial agencies give such high rates is because there is less “administration cost” with internet banking. If you notice, the “big banks” HSBC and RBC have lower interest rates.
I personally use Manulife Bank, it doesn’t give the best interest rate currently (it used to!), but I’ve had it since 2003 and don’t want to bother changing it. I like how you can do a preauthorized transfer from your regular bank chequing account to this. If I separate it, I’ll be less inclined to dip my grubby fingers in it when I need cash for my frivolous purchases (like my addiction to traveling).
One great thing is that you can open up a TFSA and keep your high interest saving account in that… to avoid that 100% tax at your marginal rate (which is, by the way, the downside to having too much money in your high interest savings account). So with the TFSA, you CAN have your cake and eat it too. =)
Here are some High Interest Savings Accounts and their current rates in the Canadian market (dated December 10, 2009):
- Manulife Bank: 1% The ATM withdrawals aren’t free, but internet banking is. I do a transfer from my chequing account each paycheck to my savings account
- ING Direct 1.05% Personally I’m a big fan of ING direct, I bought one of their GIC’s when it was 3%. Their rates are quite competive, and everything is free (even ATM withdrawls). Besides, I like their snazzy ad campaigns- good marketing. ALSO they are giving you $25 for being referred (minimum $100 deposit), the referee gets $25 and you get $25 so EVERYONE benefits. It’s a WIN WIN situation! Click here for the “orange key” to get you your $25 Enter 33530953S1 when they ask for the orange key (and more if you refer on to your friends and family, for a total of $2000!). They just ask for a cheque to set up your account. It was really easy. Sent my cheque, got my account and I’m a happy camper.
- HSBC: 0.65% They charge you $1 for internet banking, bill payments, but if you withdraw from an HSBC or BMO ATM it’s free.
- PC Financial: 1% if you have more than $1000 invested
0.5% if you have less than $1000 invested
PC financial gives you bonus anniversary rates (though they are quite small) and you get PC points (free groceries!)
- RBC: 0.75% They ding you on ATM transactions and the fineprint seems to say they’ll charge you $5 for paying your bills online with the account. HMM… money going in is free, but money coming out is going to cost you. Guess you’ll definitely save that way!
- Canadian Tire: 1.20% HEY, not bad! Their rates are quite competitive. And it seems completely free! No minimum balance and no monthly fees. Though I’m not sure if they charge you to do withdrawals. Just a quick update as of September 20, 2010: Canadian Tire has a promotion going on right now whereby you get extra interest paid out (total of 3.5% with a TFSA HISA, and 2.5% with a regular HISA) to you for 90 days. After 90 days, it goes back to its regular rates.
- Ally A whopping 2%! There is no minimum balance “Open with as little as $1” (they claim), daily compounded interest, and “no fees whatsoever” I think Ally is the newcomer on the block.
Maybe I’ll start a trend! =)
One trend I really wish I could start is for Canada to have the same rates as Australia – the Canadian economy will have to pick up before we can get our rates there.
Every high interest savings account company (HISA) above is backed by the government, so your money is insured. You can rest assured.
Which HISA (they should use that term more often- it’s catchy!) do you use?
Actually, I’ve never actually seen the term HISA being used. Maybe I’ll start a trend! =)
Either way, having a high interest savings account is a must. Shop around and get one open!