A savings account is a good place to park money you don’t need immediately. It can hold funds you need in the near future, whether you are planning to make a down payment on a home or saving towards a vacation or wedding.
While savings accounts have many advantages, there are also disadvantages to consider.
Below, I cover the pros, cons, and features of savings accounts in Canada.
Advantages of a Savings Account
Grow your money: While you can just as easily keep your money at home for easy access, it has no chance of growing in value under your pillow.
The best savings accounts in Canada pay interest which means you earn some income over time.
Low risk: Savings accounts are safe because your money is insured by Canada Deposit Insurance Corporation (CDIC) up to $100,000 per depositor and insured category.
No monthly fees: Canadian chequing accounts can be pricy at up to $30 per month. Most savings accounts do not charge a monthly fee.
Easy to access: Besides being free, savings accounts can easily be opened online. You can also transfer money from your savings to external banks you have linked to your account.
No lock-in periods: Unlike GICs (term deposits) that may be non-cashable or non-redeemable for a specific period of time, you can deposit or withdraw funds from a savings account at any time.
Low barrier to entry: Don’t have much money to save? Most savings accounts do not have a minimum balance requirement which means you can start saving with as little as $1.
Disadvantages of a Savings Account
Low interest rates: The interest rates offered by banks on savings accounts are abysmally low. And your best bet for a rate worth your time is with an online bank like the EQ Bank Savings Plus Account.
Variable rates: Banks can change the interest paid on savings at any time without prior warning. Fluctuating rates make it harder to budget as you can’t be certain how much income to expect.
Limited transactions: Check that your bank allows unlimited withdrawals from savings accounts. Sometimes, you can only make so many transfers before transaction fees apply.
Insurance coverage limit: CDIC protection is limited to $100,000 per insured category.
Minimum balance: Some big banks have a minimum balance you must maintain to earn interest in your savings account.
In-person support: As already noted, the best savings account rates are often from digital banks that don’t have physical branches. While you can conduct all transactions using online banking, some people prefer in-person banking.
Compare the Best Savings Accounts in Canada
|Features||EQ Bank||Neo Financial||KOHO|
|Other features||Mobile cheque deposits, RSP, TFSA, and GICs||Neo Mastercard||0.25% to 5% cash back; budgeting app, free early payroll, and credit building service|
High Interest Savings Accounts in Canada
Learn about some of the top high-interest savings account rates in Canada offered by digital banks.
1. EQ Bank Savings Plus Account
EQ Bank is the online banking subsidiary of Equitable Bank. It has over $7 billion in deposits, and customers enjoy CDIC guarantee protection.
The EQ Bank Savings Plus Account pays up to 250x more than other banks with its standard high-interest rate.
In addition, this no-fee hybrid account offers the best features of savings and chequing accounts, including:
- Unlimited free debits and bill payments
- Unlimited free Interac e-Transfers
- Free mobile cheque deposits
- No minimum balance requirement
EQ Bank Savings Plus Account
Monthly fee: $0
Free transactions: Unlimited debits, Interac e-Transfers, and bank-to-bank transfers.
Sign-up bonus: N/A
Interest earned on deposit: Up to 3.00%
On EQ Bank’s website
2. KOHO Earn Interest
KOHO combines many features you’d like to see in savings, chequing, and credit card accounts.
KOHO users get access to a free budgeting app and prepaid card (no credit check or impact) that pays up to 5% cash back on purchases. In addition, they earn interest on all balances.
Interac e-Transfers, bill payments, and POS transactions are free. Also, you get a $20 bonus when you sign up here (use our referral code CASHBACK) and make your first purchase using the KOHO prepaid Mastercard.
Best Prepaid Card in Canada
Monthly fee: $0
Free transactions: Unlimited debits and Interac e-Transfers.
Sign-up bonus: Earn $20 in cash back when you make a purchase within 30 days of registering.
Interest earned on deposit: Up to 2.00% interest rate.
On KOHO’s website
3. Neo Financial
Neo Financial is one of the nearest online banks in Canada.
Its Neo Money account offers competitive interest and no monthly fees. Clients also enjoy:
- Free bill payments and Interac e-Transfers
- No minimum balance
- Unlimited free transactions
Neo Money account deposits are held at Concentra Bank, a CDIC-member institution.
Neo Money Account
Monthly fee: $0
Free transactions: Unlimited debits, Interac e-Transfers, bill payments, and deposits.
Sign-up bonus: $20 welcome bonus.
Interest earned on deposit: 2.25% for spending account and 3.75% for HISA.
On Neo Financial’s website