The tax-free savings account (TFSA) is not strictly a savings account in the traditional sense. Your TFSA account can hold a variety of investment assets including cash (savings), GICs, stocks, bonds, ETFs, mutual funds, etc.
There are many reasons why you may choose to keep your TFSA funds in a savings account, for example, if you are saving for a vacation or down payment on a home. In these two scenarios, you want to avoid the ups and downs of the stock markets and protect your balance since you will need access to funds within a few months to years.
To get the most out of your TFSA when using a savings account, it’s in your best interest to park your funds in a ‘high-interest rate account’ that offers returns that at the very least is up to (or close to) the inflation rate.
One of the best tax-free savings accounts rates available in Canada right now is:
- EQ Bank: 1.25%*
You can also check out the best general high-interest savings accounts in Canada.
The Best High-Interest Rate TFSA Accounts in Canada
A comparison of TFSA savings accounts interest rates shows that the best rates are currently being offered by online-only banks and credit unions. The difference in rates between online banks vs. Big banks can be significant.
For example, as of October 1, 2021, I can see TFSA savings rates as high as 1.25%* (offered by online banks) compared to as low as 0.05% (offered by a Big 5 bank).
In addition to great rates, other perks to look for in a great TFSA savings account include:
- Zero monthly fees
- No minimum balance
- No restrictions on transactions including transfers and withdrawals
1. EQ Bank TFSA Savings Account
EQ Bank is the direct banking arm of Equitable Bank. It offers a hybrid (savings+chequing) account known as the EQ Bank Savings Plus Account and options to invest your money using a TFSA or RRSP.
EQ Bank’s TFSA has one of the best rates you will find in Canada at 1.25%*. It’s not promotional so you won’t have to keep moving your money around. Also, this account has no fees, no minimum balance, and it’s quite easy to sign up.
Customers can also utilize the high-interest GICs offered on the platform as well as joint savings accounts. Your account is eligible for CDIC insurance up to $100,000.
If you are looking for a consistently great savings rate for your money, an EQ Bank TFSA is worth checking out.
You can read our EQ Bank TFSA review or open an account using the link below.
Sign up for an EQ Bank TFSA Savings Account.
2. Motive Financial TFSA
Motive Financial is a division of the Canadian Western Bank which is a member of CDIC.
The Motive Financial TFSA Savings Account offers a rate of 1.25% on your savings plus no minimum balance, free and unlimited transactions.
Read my Motive Financial Review for more details.
3. Implicitly Financial TFSA
Implicitly Financial is an online bank and is owned by Entegra Credit Union. Its TFSA Savings Account offers a 1.10% rate that grows tax-free and is 100% insured by the Deposit Guarantee Corporation of Manitoba.
It also has no monthly fees and you can conduct one free withdrawal per month. Additional withdrawals cost $1.
Learn about Implicitly Financial.
4. Tangerine TFSA Savings Account
Tangerine is one of the most popular online-only banks in Canada. Its TFSA savings account earns a rate of 0.10%. New account holders may earn a promotional 2.00% for the first 5 months before the 0.10% regular rate kicks in if they meet the eligibility criteria.
Tangerine deposit accounts do not have a monthly fee and you get free access to an automatic savings plan, no minimum balances, and CDIC insurance up to $100,000. It also offers a chequing account that gives you free access to 3,500 ATMs in Canada and 44,000 worldwide.
You can read our detailed Tangerine Bank Review.
5. Motusbank TFSA Savings Account
motusbank is the online-only banking arm of Meridian Credit Union, one of the largest credit unions in Canada. Their TFSA savings account offers a high tax-free interest rate of 1.10%.
There is no monthly fee, no minimum balance requirement, unlimited transactions, no-fee access to over 3,700 ATMs across Canada, and your deposits are insured by the Canada Deposit Insurance Corporation (CDIC) up to $100,000.
Check out our detailed motusbank review for more information about its offerings.
6. Canadian Tire Bank TFSA
Canadian Tire Bank offers a TFSA savings rate of 1.25%.
This account has no monthly fees, no minimum balance, and no lock-in periods. Your deposits in this bank are eligible for CDIC insurance.
Learn about Canadian Tire Bank.
7. Hubert Financial TFSA
Hubert Financial is an online bank owned by Sunova Credit Union. Its TFSA Savings Account offers a 1.00% interest rate that is 100% guaranteed by the Deposit Guarantee Corporation of Manitoba.
The account has no monthly service fees and no minimum balance. Interest earned on your fund is calculated daily and paid out on a monthly basis.
Learn more about Hubert Financial.
8. Alterna Bank TFSA
Alterna Bank is a digital bank owned by Alterna Savings and Credit Union. Their TFSA eSavings Account offers a 0.90% rate. There are no minimum balance requirements, no fees, unlimited transactions, and your deposits are insured by CDIC.
Read my Alterna Review.
What is a TFSA?
The tax-free savings account was introduced by the Federal Government in 2009 and can be used to save and invest for various purposes, including for retirement.
The TFSA is popular because it gives Canadians an opportunity to invest and grow their wealth without having to pay taxes on the returns earned.
Each year, Canadians get an additional TFSA contribution limit that adds to their existing contribution room. For 2021, the contribution limit is $6,000. if you have been eligible to contribute to a TFSA since its inception, your total contribution room as of 2021 is $75,500.
TFSA Contribution Room
You can confirm how much room you have left by checking your CRA MyAccount or using one of the many TFSA calculators available online.
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Benefits of the Best TFSA Savings Accounts in Canada
Contrary to what the name suggests, a TFSA account can actually hold a variety of investments (similar to RRSPs) of which savings is just one.
Some of the benefits offered by a TFSA savings account include:
- You can withdraw funds and re-contribute them at a later date without losing the contribution room.
- The interest income earned on your account is not taxable.
- Income generated from a TFSA does not affect income-tested benefits such as the Old Age Security pension and GIS. So, if your TFSA income puts you in a higher tax bracket when you are retired, your pensions are not clawed back.
- Your unused TFSA contribution room carries over from year to year, so you can easily contribute whenever you have the funds.
While a savings account generally offers lower returns, you may choose to put your funds inside TFSA savings account if you are saving towards a short-term goal, for your emergency funds, or if you need to protect your money against stock market/investment risks.
TFSA Savings Account FAQs
The best TFSA savings rate I could find in Canada as of this writing is the one offered by EQ Bank (matched by a few online banks). Given the economic climate, TFSA rates have been changing at a fast rate and are generally trending down. That said, you will find that online banks, in general, offer a better rate than big banks.
All investments have risks and you can lose money. If your investment timeframe is short or you are risk-averse, there are investments that carry a lower risk of loss. These include savings accounts, GICs, Treasury Bills, and other money market instruments. On the flip side, these low-risk investments offer a lower return in exchange for relative safety.
You can open as many TFSA accounts as you want as long as you don’t exceed your TFSA contribution room. The TFSA annual limit for 2020 and 2021 is $6,000 for each year. You can carry forward unused TFSA contribution room to future years.
A TFSA account gives you the opportunity to invest and save money without paying interest on your account earnings. Your money grows tax-free for life.
If you are looking for the best regular (non-TFSA) savings rate in Canada, our pick is the EQ Bank Savings Plus Account.