Thinking about earning tangible returns on funds in your savings account? You should take a look at high-interest savings accounts. Savers have not been getting a lot back in returns on their savings accounts for the better part of a decade. This has largely been due to a low-interest-rate environment in which the Bank of Canada’s (BoC) benchmark rate has remained at historically low levels together with inflation.
Recent hikes in rates by the BoC have not translated into higher savings rates being offered by the “Big” banks, and you can still find rates as low as a measly 0.01% on what is supposed to be a savings account earning you some income. The downside to the ridiculous rates is that you are earning negative real returns (i.e. losing buying power) after inflation is taken into consideration.
Savings accounts are generally not the place to park your funds if you want to generate significant returns on it and realize some capital growth. However, if you have funds that are meant for short-term projects (such as a vacation, wedding, tuition, or home down payment) which you do not want to be exposed to the vagaries of the stock market, a high interest savings account (HISA) can serve as a low-risk option to safeguard your money.
A high-interest savings account can help you earn some interest while keeping pace with inflation. However, in order to outpace inflation today, you should be looking at interest rates that are close to the inflation rate or higher.
One of the best HISA rates in Canada from a non-credit union bank is:
- EQ Bank: 1.25% standard rate (2.30% on TFSA and RRSP)
Table of Contents
Top High-Interest Savings Accounts in 2021
Here are the best high-interest savings accounts available in Canada as of today. Before choosing a bank to save with, take a look at their small-print including:
- Are there any restrictions on transactions allowed per month? Any lock-in periods?
- Are any fees charged on withdrawals or transfers?
- Is the offered rate a promotional or introductory rate, or is it an ongoing non-promotional rate?
- Is there a minimum balance requirement?
- Are automatic transfers possible? Can you conduct a mobile cheque deposit?
- How accessible is your savings account?
1. EQ Bank Savings Plus Account (1.25% to 2.30%)
EQ Bank is the online-only banking arm of Equitable Bank. Its high-interest savings account (HISA) is known as the “EQ Bank Savings Plus Account” and currently offers one of the highest non-promotional savings rates in Canada at 1.25%. Non-promo rates mean you won’t start earning less on your savings after a few months.
This account has no monthly fee, offers unlimited transactions, free electronic fund transfers, no minimum balance, free mobile cheque deposits, free bill payments, and unlimited free Interac e-Transfers per month.
The interest rate is calculated daily on your closing balance and paid monthly. The maximum balance you can hold in your account is $200,000.
EQ Bank also recently introduced TFSA and RSP accounts with high interest rates and if you are looking to save money inside these registered accounts, EQ Bank offers a top-rate of 2.30%*!
Visit:
- EQ Bank General Savings to earn a non-promotional rate of 1.25%
- EQ Bank TFSA Savings
- EQ Bank RRSP Savings
2. Motive Financial Savings
Motive Financial is a division of the Canadian Western Bank which is a member of CDIC. Its HISA is known as “Motive Savvy Savings” and currently offers 1.25% on account balances up to $1,000,000. Its basic savings account (Motive Savings) offers a 0.75% rate on up to $5 million.
The account comes with 2 free withdrawals (costs $5 each after), no monthly fees and no minimum balance requirements.
Learn more: Motive Financial Review
3. Wealthsimple Cash
Wealthsimple is better known as a robo-advisor for the management of your investment portfolio. Their HISA is called “Wealthsimple Cash” and offers an interest rate of 0.75%. There are no monthly fees and no minimum account size.
A Wealthsimple Cash account comes with many perks and features, including the ability to send money instantly to the friends and family members on your phone contact list.
Learn more: Wealthsimple Cash Review
4. Tangerine Savings Account
Tangerine is a subsidiary of Scotiabank and was formerly known as ING Direct. Its HISA is referred to as the “Tangerine Savings Account” and currently offers a 0.10% interest rate.
New clients can qualify for a promotional rate of 2.10% for 5 months when they open a chequing account at the same time. However, the interest rate falls to 0.10% following the initial 5 months.
This savings account has no monthly fees or accounts minimum, no lock-in periods or service charges, and an automatic savings plan. In addition to the HISA, Tangerine also offers a TFSA and RRSP savings plan that offer similar rates.
Learn more: Tangerine Bank Review.
5. Wealth One Bank of Canada HISA
WealthOne Bank of Canada is a relatively new bank and a member of CDIC. Its HISA is known by the same name and currently pays 1.50%. The bank also offers TFSA and RRSP savings accounts.
There are no monthly fees, no minimum balance requirements, and you have access to their automatic savings program (ASP).
Learn more: Wealth One Bank of Canada Review
6. Motusbank Savings
motusbank is the newest digital bank in town and a subsidiary of Meridian Credit Union, the most popular credit union in Ontario and the third-largest in Canada. It offers a high-interest savings account, no-fee chequing, competitive mortgage rates, investment accounts, and more.
motusbank’s general savings account offers a 1.00% non-promotional interest rate. There’s a $1.25 fee per Interac e-Transfer.
Learn more: Motusbank review
7. Alterna Bank HISA
Alterna Bank and Alterna Savings are together known as the Alterna Financial Group. Their HISA is known by the same name and currently offers a non-promotional rate of 1.10%.
There is no minimum balance requirement, unlimited free bill payments, and free unlimited Interac e-Transfers per month. The maximum balance for new customers is $250,000 and they are also available in Quebec.
Learn more: Alterna Bank review
8. Oaken Financial Savings Account
Oaken Financial is Home Trust’s direct banking arm. Their HISA is known as “Oaken Savings Account” and currently offers a rate of 1.15%. They also offer TFSA and RRSP savings accounts.
The Oaken savings account has no monthly fees and no minimum balance.
Learn more: Oaken Financial
Credit Unions
Some of the credit unions in Canada also offer great rates. Check their small print for details on how the rates work and whether there are fees for transactions.
9. Ideal Savings: offers 1.01% HISA
10. Maxa Savings: 1.10% HISA
11. AcceleRate Financial: offers 1.20% on their HISA
12. Achieva Financial: offers 1.20% on their HISA
13. Implicitly Financial: offers a 1.10% HISA
14. Outlook Financial: offers a 1.10% HISA
15. Hubert Financial: offers 1.00% on their HISA
What is a High-Interest Savings Account?
Simply put, a high-interest savings account (HISA) pays a higher rate on your money than you would get from a regular savings account. The interest rate is calculated on your daily closing balance and paid out monthly.
HISAs are also known as a high yield savings account.
They are a great place to put the money you don’t need right away, but that you need access to on short notice, such as your emergency fund.
There are different types of HISAs including:
- Tax-Free Savings (TFSA) HISA
- Registered Retirement Savings Plan HISA
- Registered Retirement Income Fund HISA, and
- US Dollar Savings HISA
High Interest Savings Account vs. Traditional Savings Account
When people hear “high-interest savings accounts” or “HISA,” they often wonder what differences (if any) is between them and traditional savings account at their bank.
For starters, a HISA pays a higher interest rate than is offered on regular “savings.” For example, compare a 0.05% rate on a savings account at a major bank while 0.35% is offered on a HISA at the same bank.
There may be limits on the frequency at which you can make withdrawals from a HISA. The reasoning behind this is simple – the bank lends some of the deposits they hold to borrowers in order to generate income. The longer your deposit sits in your HISA, the more it earns for the bank. If you are ‘in’ and ‘out’ of your account too frequently, then your money is not earning as much for the bank and they are unable to justify paying you higher rates.
That being said, the majority of online-only banks which offer great HISA rates do not have limits on the number of withdrawals you can make from your HISA per month.
There may be fees associated with some transactions conducted in a HISA if you exceed your monthly quota. These may include when you exceed a certain number of withdrawals, money transfers, or when you request a paper statement. The bank may also require you to maintain a minimum balance in order to earn the HISA rate. Again, most online-only banks waive these fees, except for free Interac transfers which often have a limit.
Essentially, a high-interest savings account is not designed to conduct day to day transactions.
Advantages of a High-Interest Savings Account
1. Higher Returns: As already mentioned, you will earn better returns with a HISA than with a traditional savings account.
2. Safe and Guaranteed: Your money is generally safe in a HISA. If the financial institution is a member of the Canada Deposit Insurance Corporation (CDIC), then your funds are insured up to $100,000 per customer if the bank should go bankrupt. Deposits at credit unions are insured provincially and usually cover the customer’s full deposit, even those exceeding $100,000.
3. Flexible: Compared to a Guaranteed Investment Certificate (GIC) which may lock in your funds from 6 months to 5 years or even longer, most HISA’s are readily accessible and penalty-free if you need your money. As such, a HISA can be a good option for holding emergency funds.
4. Bonuses: Some banks will offer you cash bonuses when you sign up. They may also offer promotional rates that come up now and then.
Disadvantages of a High-Interest Savings Account
A savings account will not double your money overnight, but that’s not necessarily a bad thing. They are less risky than many other investment assets and your expected return is supposed to reflect your assumed investment risk.
The main downside to savings accounts and other fixed-income assets, in general, is taxes. The tax on interest income is at your marginal tax rate which can result in a significant chunk of your earnings going to the taxman if you are in a high-tax bracket. Interest income is taxed less favourably compared to dividends or capital gains.
To avoid paying taxes on your HISA returns, an option is to utilize a TFSA Savings Account.
Are High-Interest Savings Accounts Taxable?
High-interest savings accounts are not tax-free unless when held inside a TFSA. The interest earned is included in your taxable income at the end of the year and taxed at your marginal tax rate.
Your bank will send you an investment income slip or T5 showing how much interest you earned for the year.
Are High-Interest Savings Accounts Safe?
All the online banks listed above are members of the Canada Deposit Insurance Corporation (CDIC). What this means is that your deposits in regular savings, HISA and chequing accounts are insured up to $100,000 should the bank become insolvent.
The credit unions are also insured by their provincial deposit insurers, such as the Deposit Guarantee Corporation of Manitoba which guarantees 100% of deposits held by Manitoba’s credit unions and Caisses Populaires.
You do not need to reside within Manitoba to take advantage of this benefit.
High Interest Savings Account FAQs
EQ Bank offers one of the highest interest savings account rates in Canada. While its rates are also subject to change at any time, I find that they are more consistent and don’t fluctuate every few weeks like some other banks. Also, EQ Bank’s interest rates are non-promotional.
If you go with a big bank paying 0.05%, you can expect to end the year with approximately 50 cents in interest using a “simple interest” calculation and you will have $1,000.50. Assuming your funds are saved at an online bank offering 1.50%, you will earn $15 for a total of $1,015. Your $15 return is not a lot, however, it is 30x what you’d earn at the 0.05% rate. If you use daily compounding interest, you earn a little more over time. THat said, the current low rates don’t make much of a difference.
Online banks have lower overhead and are able to pass on the savings in operational costs to their customers in the form of higher savings interest rates.
If you don’t need access to your funds for a while, you can consider investing in GICs, stocks, bonds, or ETFs. Note that some of these investments are higher-risk and you can lose your capital.
Related Posts:
- EQ Bank Review: Earn High Interest Rate On Your Savings
- Tangerine Bank Review: Make Your Money Work For You
- Top GICs in Canada for 2021
- Best No-Fee Cash Back Cards in Canada
- 15 Best Budgeting and Personal Finance Apps Canada
Savings rates continue to trend down in Canada. What strategies are you using to maximize your returns?
Very thorough post. I had been curious about what current savings account rates are. They’re marginally better than I expected 🙂
@Curious Frugal: I think we will see more hikes in the rates in the coming months (if Trump’s trade war doesn’t first dampen economic growth). On the flip side, loan rates will rise even more.
What about Hubert Financial? 2.50% non-promotional rate.
Hubert Financial is on the list.
Hello,
I need to open 2 high interest saving account.
One for my emergency and one for my future condo that I plan to buy in 2 years
I choose Alterna but I can’t choose the 2nd.
Any recommandation? I live in Quebec so I can’t choose EQ bank unfortunately.
Thank you
@Mady: Based on the current rates as of today, I would look at any of the financial institutions listed above that have a presence in Quebec, such as Wealthsimple, Tangerine, credit unions, etc.
Helpful review but there’s an error for Motive Financial. Their HISA only offers 2 free withdrawals per month. Otherwise they charge $5 each withdrawal.
Any more details on the “up to $200” for the Tangerine account, how do i ensure i get the full $200 for opening a checking account but also the $50 for a saving account?
@Alan: I believe you can only claim one of the offers. Once you become an account holder, any new account you open does not qualify for a bonus.
Great article, you mentioned one of the downsides of a high interest savings account is that you are taxed on the interest earned. Which of the online banks offers the highest return for a TFSA?
Here is a list of high-interest TFSA’s in Canada:
https://www.savvynewcanadians.com/best-tfsa-savings-accounts-rates-canada/
Thanks very much, I have been going back and forth on what is the better option. TFSA or a High Interest Savings account. Very hard to pick the better choice…
Hello,
Is there a way to secure your money over CDIC limit, other than opening multiple accounts with different institutios?
@Syed: Opening multiple accounts with different banks is one way. Also, different categories of deposits are individually covered even if they are with the same bank. For example, general savings, tfsa savings, chequing, etc.
Hi there,
I was just wondering for the Tangerine savings account is the $50 for signing up still active? I can’t see mention of it on their website is all.
Thanks for an informative article!
Stuart
@Stuart: The $50 promo is currently paused. However, you get 2.75% interest rate for 6 months.
What about Achieva Financial? It is currently offering a rate of 2.4%.
I have a surplus on my credit card (I always over pay each month) 2000$.
The best rate I could get was 2% ,locked in for 1 year. That is like 40 $ only.
I will skip a movie with popcorn and save 40 $ .
SOMEONE said buy gold. Any thoughts ?
@Bob: Gold is an alternative investment and I have written about them here:
https://www.savvynewcanadians.com/alternative-investments/
That being said, there are many factors to take into consideration when deciding on whether you want to put your money in a HISA, mutual fund, ETF, stocks, etc. What’s your overall investment portfolio like? Your investment time horizon? Risk tolerance? Are you likely to need the funds soon?
Hey Enoch, If saving all my money in BMO bank’s builder saving account reasonable?
@Jean: I checked and their current offer is not too bad. However, you will need to read the terms and conditions very well. The standard base rate is 0.20%, however, if you contribute a specified minimum every month, a bonus rate applies.
Is there a difference between how these banks compound their interest, and does that make a significant difference? For example, looks like Motive is compounded annually vs. others are monthly.
@Samuel: Monthly compounding will give you a bit more money than annual compounding. The significance of the extra amount will depend on the disparity in the interest rates and how large your principal is.
great information you’ve got there keep up the great work!
Hi Enoch what is your opinion about DUCA Credit Union? They are currently running a promotional rate of 2.5% p.a on a new HISA upto March 31st, 2020. How safe would our funds be with a credit union as opposed to a CDIC insured FI?
Have a great Easter.
@Manish: Provincial credit unions are members of a provincial deposit insurance corporation that guarantees deposits up to an amount. In the case of DUCA, eligible deposits in non-registered accounts are insured up to $250,000 through FSRA.
Thanks!
This taught me a lot as I’m looking for an accessible money making product for a term of 5 years to want access. After seeing the volatility as a result of the pandemic I’m wondering if the old style of investing still applies or a healthy way is going to emerge.
Hi Enoch,
Ii stumbled on your blog while researching information on how to turn my TFSA into an investment with better returns and no tax on gains. I bank with RBC. The little money sits there and does not earn any interest gain. I was thinking of linking my TFSA account to mutual funds and investing there.
I must commend you for this great blog that i am sharing with all my networks especially people from The Cameroons. What you are providing here is that typical life saving, and life changing financial education which is not offered in classrooms. Thank you very much brother.
Also, if you can add whatsapp among your share icons. your shared icons that would be great.
@Agendia: Glad to hear you fund the blog useful and thanks for sharing it with friends! I will look into adding the WhatsApp sharing button.
Cheers!
EQ Bank has a limit of 200k, Laurentian and B2B have a limit of 500K or the interest goes to nothing. Tangerine usually caps the offers at 500k so the only viable bank paying interest seems to be Motive Financial with the Savvy Savings account at 2.05%. They had a million limit but recently eliminated that and they now pay that rate up to 5 million. So I think Motive probably outshines them all because it is a pretty steady rate. They were at 2.8 for years before finally dropping to 2.05%. I guess the only real question here is how much money are you willing to risk depositing at a bank that falls outside of the big 5.
@Frank: I would consider EQ Bank, Tangerine and Motive Financial to be very competitive depending on your needs. For example, if you are a bank client who prefers to have all your accounts in one place, Tangerine shines as they essentially offer a full suite of banking products e.g. credit cards, investments, mortgages, chequing, etc. If your goal is a non-promotional interest rate that doesn’t bounce all over the place, EQ Bank and Motive Financial definitely shine in that area.
As of July 2020, EQ Bank offers a Joint Savings Plus Account. This makes the account even more appealing.
Thank you Enoch. I like that this is updated from time to time. Thank you for taking time to do this.
@FunlayoB: You are welcome – appreciate your feedback!
Wealthsimple send to be continuously screwing is over and lowering the interest rate on their account over time.
When I first opened my account, they were touting a 2.5% interest rate, which is amazing, so I put basically all my savings into this account.
Then, only a few months later, COVID started and I got an email saying the rate was dropping to 1.5%, then 0.9%, and now it’s only 0.75% which is a far cry from the 2.5%, the entire reason why I signed up for the account. Not to mention the badass looking metal debit card WHICH I HAVE NEVER RECEIVED IN ALMOST A YEAR OF HAVING THIS SAVING.
Give me my interest rate back and I want my damn debit card.
@Tony: Interest rates have trended down for all financial institutions this year and this seems to be a theme of the COVID-19 era. Wealthsimple is not alone in this regard as it is a reflection of lower interest rates across the board.
Hi Enoch. In regard to Tangerine, it will not extend the advertised 2.1% promotional interest to existing customers. It is only for new customers.
@Al: Yes, the offer from Tangerine is only for new clients.
What about PeopleTrust? 1.3% on saving (no promo just their regular rate).
I think Tangerine has gotten worse over the years – once top rates now at bottom 0.1% – promos are only for new customers or for new deposit.
I agree with Wealthsimple – once great rate now just average.
Bottom line I“m moving away from Tangerine & Wealthsimple after being a long time customer
It is a financial dereliction of duty not to mention the dividend yield offered by these banks on both common and preferred shares. Even the paltry dividend paid by EQ bank is better than most of these savings deposits rates. Landlord or tenant? Dividends(around 4.5 to 5%)compared to those inflation losing returns?