There are many saving accounts available on the market, and choosing the best one can be a difficult task considering all the factors and choices you have to consider. Before we divulge into that, let’s explain what is a savings account.
What Is A Savings Account?
A savings account is a secure area where you can deposit your money while generating interest on your balance. Though it may earn interest like an investment, a savings account is more secure as it is insured by the Canadian Deposit Insurance Corporation (CDIC), meaning your money is protected (up to $100,000) in the event the bank collapses.
Difference Between A High-Interest And A Regular Savings Account
The biggest difference between a high-interest savings account and a regular savings account is the interest rate. The former typically offers much higher interest rates, allowing you to earn more money in interest compared to the latter. Generally speaking, high-interest savings accounts come with interest rates that are as high as 4.00% or more, compared to regular savings accounts that usually offer no more than a half percent on average.
Learn about Tax-Free Savings Account (TSFA).
How Does A High-Interest Savings Account Work?
A savings account is a way of growing money with cash that is just “sitting” around. When you open a savings account, the money you store in it is used by the banks to invest and lend to other people and businesses. In return for using your savings, the bank pays you interest. Of course, that doesn’t mean you can’t access your money whenever you want. Your money is always available to you and is also insured by the Canadian Deposit Insurance Corporation (CDIC) as mentioned above.
Check out how to make a budget when you’re in debt.
Benefits Of High-Interest Savings Accounts
Why put your money in a high-interest savings account over other types of accounts? Here are a few benefits to consider:
- Higher returns – A savings account is meant to help you save your money over the long run. Unlike a chequing account that is meant for daily transactions, a savings account is designed to help you grow your money by leaving it in there to earn interest over time. And with the higher interest rates offered with a high-interest savings account, your money can grow even faster with higher returns.
- Flexibility -There are other account types that allow you to earn a decent interest rate on your deposited funds, but they typically require you to lock in your money, which means you can’t withdraw the funds without incurring a penalty. Instead, a high-interest savings account offers much more flexibility, since you’re free to withdraw your funds at any time without penalty while earning a healthy interest rate on every dollar in your account.
- Perfect for emergencies – It’s always a good idea to have a financial cushion to fall back on and be able to access emergency funds for a rainy day such as being laid off before maternity leave. And when that day comes, the money you are saving and growing in a high-interest savings account can come in really handy when an unexpected expense arises.
- Shelter from taxes – If you choose a TFSA or RRSP savings account, the money you earn on interest within those accounts will either be tax-free or tax-sheltered. This is a great way to keep more money in your pocket come tax time.
- Security: Like a traditional savings account, most high-interest savings accounts are insured up to $100,000 by the CDIC.
Drawbacks of High-Interest Savings Accounts
In addition to the perks of a high-interest savings account, there are some drawbacks to consider.
- Taxes paid on interest – Unless the financial institution that you have your high-interest savings account with offers a TFSA, you’ll be subject to taxation on all gains earned through interest.
- Withdrawal limits – Depending on who you are banking with, you may be subject to withdrawal limits. Be sure to check with your specific bank to find out if any limits exist, and if so, what they are.
Factors To Consider When Choosing A High-Interest Savings Account in Canada
With all the high-interest savings accounts in Canada, how do you choose one that best meets your needs?
How Often Will You Use It?
A savings account is typically meant to store your money for long periods of time. Over time you may withdraw or deposit more money. However, in general, transactions, withdrawals, and transfers are typically limited with savings accounts. Depending on your own personal banking habits and needs, figure out how many withdrawals and transactions you need. Some banks offer a free transaction once a month while others require a fee.
Find out when paying a credit card annual fee is worth it.
How Easy Is The Accessibility?
Depending on if you choose an online or traditional savings account, your accessibility will range accordingly. For online savings accounts, you will likely be restricted to dealing with your money through electronic means. If you require access to an ABM or a teller, then a traditional savings account will suit you better.
Learn how to avoid NSF and overdraft fees.
Does The Interest Rate Beat Inflation?
When choosing a savings account whether through a traditional bank or an online financial institution be sure to choose a rate that is higher than the current Canadian inflation rate. Inflation affects your purchasing power, by matching your interest rate with the inflation rate your savings won’t lose its purchasing power.
Best High-Interest Online Savings Accounts In Canada
Listed are 5 of the best online high-interest savings accounts in Canada. All of the following savings accounts have no minimum balance or monthly fee.
Listed are 5 of the best online high-interest savings accounts in Canada. All of the following savings accounts have no minimum balance or monthly fee.
| Interest Rate | Monthly Fee | Extra Features | Insured | |
| Neo Everyday account | 0.1% | None | – Hybrid chequing and Savings Account. – Free Interac e-Transfer®. – No minimum balance required. – Earn cashback when you use your Neo Money™ card. | CDIC1 |
| Tangerine Savings Account | 0.70% | None | – Unlimited withdrawals, deposits and transactions. – RSP, TSFA, RIF and U.S savings account available. | CDIC |
| Wealthsimple Cash | 0.90% | None | – Unlimited withdrawals, deposits, transfers and transactions. – RRSP & TFSA available – Hybrid chequing and Savings Account | CIPF |
| Alterna Bank High eSavings Account | 1.5% | None | – Unlimited free Interac e-Transfer® and bill payments. – RRSP & TFSA available | CDIC |
| Oaken Savings Account | 1.5% | None | – Unlimited withdrawal, transfers. – ABMs available | CDIC |
| EQ Bank Savings Account Plus | Up to 4.00% | None | – Free Interac e-Transfer®, transactions, and bill payments. – TFSA, RSP and GICs available. | CDIC |
| MAXA Financial High-Interest Savings Account | 1.60% | None | – RRSPs, TFSAs, and RRIFs available. | DGCM |
| Laurentian Bank Digital High-Interest Savings Account | 1.5% | None | – Interac e-Transfers®, automatic withdrawals, pre-authorized debits and wire transfers available. | CDIC |
Neo Everyday Account
Neo Financial is a tech company in Canada that has been challenging the status quo by changing how Canadians traditionally bank. Through their Neo Everyday account, Canadians can now save, spend and earn rewards all from the same account. You’ll earn an interest rate of 0.1% on your balance without any annual or monthly fees. Interest is paid monthly and there are no minimum balance requirements. However, there is a cap of $200,000.
The Neo Everyday account is a hybrid between a high-interest savings account and a no-fee chequing account. You can use it to save money, pay bills, send Interac® e-transfers for free, and shop. The Neo Money™ card lets users shop in-store, make purchases, and earn cashback. It functions like a prepaid credit card that’s better than a debit card. Users can earn up to 3% cashback on gas and groceries and up to 1% everywhere else. The cashback earn rate is tiered, the higher your Everyday account balance, the higher your cashback rate.
Other perks include unlimited free transactions, CDIC deposit protection1 (up to $100,000), and easy funding. You can fund your account through e-transfer, direct deposit or by linking an external bank account to your Neo account.
Tangerine Savings Account
Tangerine is an online bank in Canada that was formerly known as ING Direct. They are a subsidiary of Scotiabank; a well-known multinational bank in Canada. They offer a number of products and services like GICs, mortgages, mutual funds, and different savings accounts. Their savings account has an interest rate of 0.70% and does not require a minimum balance or a service fee. They are also easily accessible even though they don’t have branches. You can gain access to your account online and through mobile banking as well as their automated banking machines (ABMs) on the Scotiabank network. They also have an Automatic Savings Program (ASP) to help you reach your financial goals.
Wealthsimple Cash
Wealthsimple is an online investment firm in Canada that was established in 2014. They manage investments through their Robo advisors and manage money to help their clients save. Now, they’ve launched Wealthsimple Cash, which is a hybrid of a chequing and savings account. This allows you to earn high interest on your money while having the freedom of a chequing account, which includes unlimited transactions with no fees. Wealthsimple also has TSFA and RRSP if you prefer to save using those accounts. Unlike the other online banks mentioned, Wealthsimple is not insured by the CDIC but by the Canadian Investor Protection Fund (CIPF) for up to 1 million.
Alterna Bank High eSavings Account
Alterna is a digital bank in Canada that is a wholly-owned subsidiary of Alterna Savings; a credit union in Ontario. They offer mortgages and high-interest savings accounts in Canada. You can earn 1.5% on your savings with Alterna, however, the cap balance is set at $250,000. Unlike traditional savings accounts, there is no fee or minimum balance and you have unlimited transactions and Interac e-Transfers®.
Oaken Savings Account
Oaken is a digital banking company that is powered by the Home Trust Company. They were first established in 2013 to provide a savings product that the customers could control. Hence, Oaken does not charge any fees or require a minimum balance. They also have unlimited withdrawals, transfers, and deposits. Their savings account also has one of the highest interest rates available (1.5%), along with Equitable Bank (2.00%). If you’re looking for different sorts of savings accounts, Oaken also offers high-interest TFSA and RRSP. They also offer GICs for those looking to invest.
EQ Bank’s Savings Plus Account
EQ Bank is an online subsidiary of Equitable Bank; one of Canada’s largest Schedule I Banks. They’ve been in business for over 40 years and are insured by the CDIC, making them a creditable financial institution. They currently offer a variety of high-interest savings accounts including the following:
- Savings Plus Account
- TFSA Savings Account
- RSP Savings Account
- Guaranteed Investment Certificates (GICs)
These accounts come with one of the highest rates of 4.00% (2.50% plus an additional 1.50% when you set up direct deposit for your paycheque). Unlike traditional savings accounts, EQ Bank’s Savings Plus Account, GICs and registered savings accounts come with no monthly fee and no minimum balance. Moreover, the EQ Bank’s Savings Plus Account also comes with free transfers, transactions, and bill payments. They also give you the ability to connect to your other bank accounts so you can automate bill payments and transfer funds more seamlessly.
MAXA Financial High-Interest Savings Account
MAXA Financial is a division of Manitoba-based Westoba Credit Union, so all deposits held with the bank are guaranteed by the Deposit Guarantee Corporation of Manitoba. MAXA’s high-interest savings accounts are available for savings accounts including RRSPs, TFSAs, and RRIFs. Currently, MAXA’s interest rate for its high-interest savings account stands at 1.60%, which is a pretty competitive rate.
Clients holding these accounts won’t have to be subject to any monthly fees, nor any minimum balance requirements. Plus, they come with MemberCards that can be used to withdraw cash at ATMs and make in-store purchases.
Laurentian Bank Digital High-Interest Savings Account
Laurentian Bank has been around for over a century and a half and has LBC Digital under its umbrella, which is the bank’s online banking arm. In addition to GICs and a no-fee chequing account, Laurentian Bank also offers a high-interest savings account that comes with a healthy rate of 1.65%.
There is no minimum balance required to maintain, nor are there any monthly fees to pay. There’s no need to sign up, as you can link your savings account with another bank. Otherwise, you can transfer funds from your LBC Digital Chequing Account if you so desire. Plus, all eligible deposits up to $100,000 are protected under the CDIC.
Loans Canada Lookout
LOOKING OUT FOR YOUR BEST INTEREST
Should Banks Be Doing More To Help Low-Income Canadians?
READ ARTICLEWhy Choose A High-Interest Savings Account With An Online Bank Over A Traditional Bank?
- High Interest: Digital banks save on costs that come with owning a physical location. As such, they are able to provide much higher interest rates than traditional banks that have branches.
- Low Fees: Typically require no fees compared to a regular savings account.
- Accessibility: A lot of traditional savings accounts have restrictions on the number of transactions, withdrawals, and deposits you can make. However, online savings accounts generally have few restrictions.
Why You Should Not Choose A High-Interest Savings Account With An Online Bank Over A Traditional Bank?
- No face-to-face contact. If you’re someone who likes the security that comes with human contact. A traditional brick-and-mortar bank will probably be best suited for you.
- Accessibility: Many online savings accounts only have electronic transactions. You won’t have access to ABMs or a local branch to access your money.
- Deposit Issues: If you want to deposit cash, you have to find an ABM or turn the cash into a cheque.
- Limited Products: Online banks typically have a limited range of products and services. So, if you want to get a TFSA or a chequing account along with your savings account you may have to go with two different providers.
- Slow Gains: Despite having higher interest rates than traditional savings accounts, your money is still going to grow very slowly in comparison to investing your money in other securities (bonds, stocks, mutual funds, etc).
Best High-Interest Savings Accounts With Big Banks In Canada
| Interest Rate | Cost | Min Balance | Extra Perks | CDIC Insured | |
| Scotiabank Momentum PLUS Savings Account | – Up to 2.70% (limited time offer) -0.05% base + premium period interest | No monthly fee | No minimum balance | – Unlimited self-service transfers – Automatic savings plan | Yes |
| TD High Interest Savings Account | – 0.05% | No monthly fee | $5,000+ | – Unlimited transactions – Automatic savings program | Yes |
| BMO Smart Builder Savings Account | – Up to 0.50% – 0.05% base interest + 0.45% bonus interest | No monthly fee | $200+ per month | – 1 free transfer out of account | Yes |
| CIBC eAdvantage Savings Account | – Up to 2.10% (limited time offer) – 0.10% base | No monthly fee | No minimum balance | – | Yes |
| RBC high-interest savings account | – 0.05% | No monthly fee | No minimum balance | – No minimum deposit required – 1 Free ABM cash withdrawal per month – Automated savings program | Yes |
TD High-Interest Savings Account In Canada
TD is one of the biggest and most well-known banks in Canada. It was founded over 65 years ago and since then has grown into a multinational financial institution. They have over 1,100 branches and serve over 10 million Canadians. They offer a range of products and services like credit cards, mortgages, insurance, GICs, savings accounts, and much more. Their high-interest savings account offers an interest rate of 0.05% if you have a balance of $5,000 or more. Anything less will result in an interest rate of 0%. This account does not charge a monthly fee, however, there are a few transactions fees you should note:
- $5.00/ per transaction
- $2.00/ per non-TD ABM transaction
- $3.00/ per U.S. or Mexico ABM transaction
- $5.00/ per ABM transaction in any other country
- $2.00/ per month for paper statement fee
These transaction fees can be waived if you maintain a monthly balance of $25,000. When you bank with TD, you also have access to mobile deposits, TD’s spending tracker app, automated savings programs, and more.
Scotiabank Momentum PLUS Savings Account
Scotiabank is one of the largest banks in Canada. They have a wide range of products and services like credit cards, loans, mortgages, insurance, investments, savings accounts, and more. Their high-interest savings account is called the Momentum Plus Savings account; a savings account to help you meet all your savings goals. This savings account tracks your earnings and rewards you with higher interest rates the longer you save. They pay you a regular interest of 0.05% monthly plus a Premium period interest if no debit transactions were made during the premium period. This premium interest is designed in a way that compels you to not touch your money unless you have no choice. The rise in interest is an advantageous reward that you can work toward. There is no monthly fee, however, there is a $5.00 charge for every debit transaction that is not a self-service transfer.
Learn how to transfer money from a credit card to a bank account.
BMO Smart Builder Savings Account
The Bank of Montreal (BMO) is a multinational financial institution that offers a number of financial products and services like credit cards, insurance, mortgages, lines of credit, savings accounts, and more. BMO’s Smart Builder Savings Account is a great account for those consumers who are looking for extra motivation to save. It’s designed in a way that compels you to continuously put money into your savings. If not, you lose out on a whole percent of earnings on interest. The BMO savings account has a base interest rate of 0.05% plus 0.45% if you deposit $200 or more every month. There is no monthly fee and you are granted 1 free transfer out of the account every month. However, if you require any more withdrawals, it will cost you $5 per withdrawal.
CIBC eAdvantage Savings Account
Like the other big banks, CIBC offers a wide variety of financial products and services like credit cards, mortgages, loans, insurance, investments, savings accounts, and more. Their eAdvantage savings account offers a 0.10% interest rate with no monthly fee. However, there is a 5$ charge for any transaction like debit purchases, withdrawals, bill payments, branch transfers, Interac e-Transfers®, and cheques.
RBC High-Interest eSavings Account
The Royal Bank of Canada (RBC) offers numerous financial products and services. Their High-Interest eSavings account allows you to earn 0.05% interest on every dollar, which is a fairly balanced rate in comparison to the other banks. No monthly fees or deposits are required in order for you to earn interest on your savings. You also have unlimited transfers between this account and your other accounts with RBC. They also offer an automated savings program called Save Matic, which can help regulate your savings so that you can reach your savings goals faster.
Loans Canada Lookout
LOOKING OUT FOR YOUR BEST INTEREST
Do Credit Card Companies Take Advantage Of Canadian Consumers?
READ ARTICLEIs Your Money Safe In A High-Interest Savings Account?
As with any other account, the money you have deposited in your high-interest savings account is safe as long as the financial institution that you have your account with is reputable. These accounts are typically eligible to be insured by the Canada Deposit Insurance Corporation (CDIC), so even if the bank you are with goes under, your money would be safe.
Plus, the interest rate with a high-interest savings account is fixed, so you are guaranteed to earn that amount of interest for that month on the funds you have deposited, which is much safer than playing your odds with stock investing.
Bottom Line
Whether you choose to go with an online or traditional savings account, having one, in general, is most important. Proactively working on building your savings is key to managing unexpected expenses and future financial crises. A savings account will not only help keep your money secure but will grow your money and help you meet your future financial goals. The list above will help you narrow your options and choose a savings account that best suits your needs.
The Neo Everyday account is provided by Peoples Bank of Canada.
® Trademark of Interac Inc. Used under license.
*Interest is calculated daily on the total closing balance and paid monthly. Rates are per annum and subject to change without notice.
1 The Neo Everyday account is provided by Peoples Bank of Canada, a CDIC member institution, and is eligible for CDIC deposit protection. Deposits held in Neo Everyday accounts are combined with eligible deposits held at Peoples Bank of Canada, for up to $100,000 of deposit protection, per category, per depositor. For more information about CDIC deposit insurance, please consult CDIC’s website cdic.ca.
