Interest rates in Canada are about as low as they’ve ever been—which is great for borrowers, not so much for savers. If you want to find a bank account that pays decent interest income, you really have to scour the market. That’s where our guide to the best high-interest savings accounts in Canada comes in.
We’ve narrowed down the best HISAs on offer, looking at interest rates (regular and promotional), fees and other factors, such as minimum balances or transaction limits. And, if you have any questions about HISAs, how they work, or why you should have one, keep reading because we’ve got you covered on that, too.
Best High-Interest Savings Accounts in 2020
High Interest Savings Account Everyday Interest Rate Promotional Interest Rate Apply Savings Plus Account
1.50%* N/A Visit Site Tangerine Savings
0.10% 2.10%* Visit Site CIBC eAdvantage® Savings Account
0.20% 2.50% Visit Site
Savings Plus Account
Although not as well known in Canada, EQ Bank is a trustworthy place to stash your cash. EQ Bank is brought to you by Equitable Bank, which has been around since 1970 and currently has approximately $33 billion in total assets under management. When it comes to high-interest savings accounts, the Savings Plus Account is a great no-strings-attached choice. The everyday interest rate is 1.50%* – one of the highest non-promotional rates available in Canada.
There is no minimum balance requirement, no monthly fees, and free transactions (including bill payments, Interac e-Transfers®, and transfers to other EQ accounts).
The only restriction, if you can even call it that, is that the account cannot exceed a balance of $200,000. However, since most bank accounts in Canada are only insured up to $100,000 by the Canada Deposit Insurance Corporation, it’s advisable to keep individual bank account balances below six figures anyway.
*Interest is calculated daily on the total closing balance and paid monthly. Rates are per annum and subject to change without notice.
Tangerine Savings Account
Tangerine (formerly ING) was one of the first banks in Canada to provide clients with competitive perks such as no fees or service charges, and no minimum balance required. Tangerine also lets clients set up an automatic savings program and doesn’t lock in the money—you are free to move it around as you please.
The current regular interest rate with Tangerine is 0.10%. But new clients who open their first Tangerine Savings Account will earn a special interest rate of 2.10%* for the first five months on your first Savings Account. Plus, you could earn $150*. This offer also applies to Tangerine Tax-Free Savings Accounts, RSP Savings Accounts, RIF and US$ Savings Accounts.
It’s just about the best rate around for short-term savings, which makes this account a good option for those who plan to use their funds within six months. Since the interest reverts to 0.10% after five months, however, you may want to consider a higher-paying provider for savings you plan to keep on hand longer than that.
CIBC eAdvantage® Savings Account
CIBC is one of the “Big Five” banks in Canada, and it has a bunch of savings accounts to suit your situation. One of the best is the CIBC eAdvantage® Savings Account, which offers an incredible bonus rate when you open your first account. How it works: the base rate is 0.20%, but new account holders will get a “top-up” of 2.30% for the first 120 days.
There are no monthly account fees, no minimum balance, and you can transfer funds between CIBC personal accounts at any time. It’s a great option if you want to earn a high-interest rate on every dollar that you save.
What is a High-Interest Savings Account?
HISAs are bank accounts that pay superior rates of interest compared to a traditional savings or chequing account.
This higher rate of interest earnings allows your savings to grow and compound more quickly, but still provides you easy access to the funds—as opposed to fixed-income investments such as GICs, which are locked-in for a given period.
HISA vs. Savings Account
While each HISA is slightly different (and depends on the terms set by the financial institution offering the account), most pay interest rates that are at least a percentage point or two above a basic savings account—and tend to more closely match the rate of inflation. This higher rate of interest protects the purchasing power of your savings since prices for most goods and services usually increase over time.
But inflation is not the only factor that can erode money held in a traditional savings account (many of which currently pay a measly 0.01% interest). The monthly account and/or transaction fees attached to most basic savings or chequing accounts can also cut into your hard-earned savings. HISAs, on the other hand, usually have low or no fees, keeping more money in your pocket.
Who is a HISA Best For?
HISAs are excellent savings vehicles for anyone who has short-term savings or money that they might need to dip into at a moment’s notice, such as an emergency fund. These accounts can also be a good option for those who simply want to earn a decent amount of interest on the money they use for day-to-day transactions.
While it’s true that many types of investments, including GICs, bonds, stocks and ETFs, can earn greater average annual returns than what you’d get in interest from a HISA—these investments can’t always be easily cashed. And, even if you can access the money, you might have to pay an early withdrawal fee or sell at a loss.
Deposits in a HISA, on the other hand, are guaranteed (up to $100,000) by the CDIC, can often be withdrawn (or used to pay bills or for other transactions) for free, and still pay far more interest than other types of bank accounts.
Perhaps then it’s not surprising that the majority of Canadians prefer HISAs as a savings vehicle. It’s easy to see why: here’s a practical example of how much a HISA could earn you. Say you’ve got a $10,000 emergency fund. You’re wary to invest the money, since you never know when you’ll need that cash and you don’t want to risk selling right after the market tanks (as was the case earlier this year when COVID-19 first broke out in Canada). So, you put the $10,000 in a HISA.
Here’s how much you’d earn in interest over the years in the HISA (assuming 2.0% annual interest, compounded monthly), as compared to a basic savings account that pays 0.01%.
Balance in HISA (2.0% interest) Balance in regular savings account (0.01% interest) Difference in interest income Starting amount $10,000.00 $10,000.00 - After 1 year $10,201.84 $10,001.00 $200.84 After 5 years $11,050.79 $10,005.00 $1,045.79 After 10 years $12,211.99 $10,010.00 $2,201.99 After 20 years $14,913.28 $10,020.02 $4,893.26 After 30 years $18,212.09 $10,030.04 $8,182.05
How to Choose a HISA
While you’ll want a competitive rate, the percentage of interest paid is not the only factor you should be looking at when comparing HISAs. Here are a few tips for selecting the right HISA for you:
- Determine the average annual interest. If you are wooed by a HISA’s promotional rate, make sure you know what the rate will be after the promotional period is over, and how much interest that works out to for the year as a whole. That way you can be sure you’re comparing apples with apples when deciding between accounts. To get a breakdown, take a look at our chart below that details the difference in earnings on short-term promotional interest rates and longer-term base interest rates.
- Think about your savings time-horizon. If you’re saving for a short-term goal and plan to withdraw your money in the next few months, a high promotional interest rate will give your balance the biggest boost, as illustrated in the chart below. If, on the other hand, you’re saving for the long term, a high base interest rate will be your best option.
- Check minimum balance requirements. Some HISAs require a minimum balance in the account to avoid service fees; or to earn the HISA’s higher rate of interest. You don’t want to lose out because you didn’t check the fine print.
- Consider your transaction needs. If you’re fairly certain you will leave your savings in the account, untouched, for a prolonged period, then unlimited free transactions won’t be important to you. If, on the other hand, you plan to use the money as an alternative to a chequing account, but with better interest, find out if there are restrictions or additional fees attached to the transactions you expect to make.
- Digital vs. bricks-and-mortar options. Most people don’t visit their local branch anymore to do banking. However, some people still prefer to bank with institutions that have an established ATM network, as opposed to doing all their transactions online. Be aware that Canada’s best online-only banks usually offer the best interest rates, due in part to lower overhead costs.
Comparing Earnings Accrued with Promotional vs. Base Rate on $25,000
2.5% Up To 5 Months, 0.25% Base Rate 2.0% Base Rate After 1 month $52.08 $41.67 After 2 months $104.28 $83.40 After 3 months $156.58 $125.21 After 4 months $208.99 $167.08 After 5 months $261.50 $209.03 After 6 months $266.76 $251.04 After 9 months $282.56 $377.51 After 12 months $298.36 $504.61
The Last Word: Are High-Interest Savings Account Worth It?
While the low interest-rate environment may have taken the shine off of HISAs for some, they are still a good place to park money that you plan to use within the next year, or that you’re not sure when you’ll spend.
Even 2.0% interest is a good return when the inflation rate is in the red, as was the case for the month of April 2020 when Canada’s inflation rate was -0.2%.
Bottom line: when it comes to saving vs. investing, a high-interest savings account is the way to go.