The Best High-Interest Savings Accounts in Canada

Chances are you use a chequing account for your day-to-day spending. But if you are looking to save up for your school, retirement, or that big day, savings accounts are important financial tools that can help you save up. Savings accounts work differently than other types of bank accounts and are designed with saving in mind. These accounts typically waive the monthly fees so you can build up savings without the bank taking a chunk each month, but in return, often have restrictive policies on what you can do with your money in the account, and typically charge fees on transactions using the account. This means savings accounts work best as a place you put your money away until you need it.  

Below, you will find a rate comparison table so you can compare the best savings accounts in Canada. 

There are a lot of high-interest savings accounts available to Canadians, but some are strategic places to save your money, and others are not efficient places for your money. Here are some things you should consider when looking for a high-interest savings account 

• Interest Rate: banks talk about High-Interest savings accounts, yet some do not qualify what they mean by high interest. In our list of high-interest bank accounts that are offered, the interest ranged from anywhere from 0.05% to 2% for some promotional rates. We recommend looking for savings accounts that offer more interest, as interest determines how much you will earn by keeping your money in a Savings account. Remember, since inflation sits at around 2%, your money is becoming less valuable if it sits in an account with less than 2% interest. 
• Withdrawals and Transfers: Withdrawals mean taking money out of an account, and transfers refer to moving money between accounts. While some online banks do not limit the number of withdrawals and transfers, some make money by requiring fees per withdrawal and transaction. While savings accounts are designed with storing your money for longer periods of time, the last thing you want is to be hit over the head with charges when you need to access your rainy-day fund. 
• Accessibility: Some savings accounts put restrictions on the money you save on them as well, so knowing what a bank offers for its savings accounts are very important. 
• Fees: While monthly fees are generally waived in favour of charging fees on withdrawals and transfers, some banks will hide fees or require a certain amount of money in your account to be exempt. Others will have significant fees on transactions between other banks or accounts.  

Chances are you have a bank account already with one of Canada’s bigger banks, so you might be wondering if that bank offers a high-interest savings account. Most of the bigger banks in fact do offer high-interest savings account, but the bad news is that these accounts pale in comparison to those offered by online banks. While these banks may offer nice bonuses for existing customers, including unlimited transactions to other accounts in your name with the same bank, these banks often charge more for transactions and are more restrictive. Overall, we recommend using an online bank for high-interest savings accounts, however, there may be advantages to opening a HISA with a more familiar bank.

Interest rates are payments that the borrowers pay to a lender above the amount lent, at a particular rate. For example, in terms of a mortgage, interest is paid by the homebuyer to the mortgage lender on the amount borrowed to buy the house. However, in the situation of savings accounts, you are the lender – the bank uses the cash you put into a savings account for giving other loans, and pays a little interest back, so you see a positive return on your deposits in a savings account. Most regular savings accounts offer very little in terms of interest rates, but more and more high-interest savings accounts are becoming accessible for Canadians.  

Savings accounts will typically not generate significant returns on your savings and do not replace the financial benefit of maintaining a diverse investment portfolio, for example. However, there are many benefits of opening a high-interest savings account. The main one is high-interest savings accounts help keep your money from being devalued by deflation. Another important benefit to think about is the fact that savings accounts are automatically insured up to $100,000, so you do not need to worry about losing the money you put in a savings account.  

Interest on savings accounts is generally calculated daily and charged monthly. This means every day the amount that grows interest increases, meaning each month, you earn more and more interest. We looked throughout Canadian online banks to find you the highest interest in Canada.  

In addition to high-interest savings accounts, there are many other savings account types available to Canadians to help them achieve their financial goals.  

Tax Free savings account (TFSA) 

Most savings accounts that accrue interest are subject to being taxed, which can take a big chunk out from your earnings from interest. A Tax-Free Savings account is just that: an account that allows people to contribute and withdraw their money without having to pay taxes on it. In exchange, the Canadian government places a limit on how much money you can deposit in a TSFA per year.  

Registered Education Savings Plan (RESP) 

Are you thinking about setting up a college fund for the youngster with potential in your life? This is the account for that. 20% of your contributions to an RESP (up to $2500) is matched by the Canadian Education Savings Grant. The money withdrawn from an RESP is taxable income for the beneficiary, but students usually maintain a low-enough income that this does not impact the beneficiary that much.  

Since you can hold cash and investments in an RESP, you can diversify the account to suit your needs.  

Registered Retirement Savings Plan (RRSP)  

Likewise, are you thinking forward to retirement? A registered retirement savings plan is a government-registered account that helps Canadians gear up for retirement. An RRSP allows you to defer paying taxes until retirement and allows you to earn interest along the way.  

You can put any amount up to the contribution limit into the account yearly, which usually is 18% of your earned income the previous year.  

Youth  

Youth accounts tend to be opened by adults for children in their life, to help build for that child’s future, and teach kids about the financial world.  

U.S. Savings Accounts  

If you are a snowbird, or travel to the US often for business purposes, having an account in US dollars makes sense. You can skip the currency exchange with a US Savings account from most major banks.   

Hybrid Savings Account 

Hybrid accounts combined savings and chequing accounts, to provide a little bit of the best of both worlds: high-interest rates on held funds with more transactions that chequing accounts offer, like debits, bill payments, withdrawals and e-Transfers.  

Which Canadian bank has the best high-interest savings account?

If there was a single answer to this question, I would not have written this article! Banks offer accounts with different fees and restrictions, so there are different banks that will appeal to different kinds of people. EQ Bank’s Savings Plus Account was our most favoured account, due to its generally high-interest rate and lack of fees on withdrawals and E-transfers. 

What’s the importance of having a savings account?

Savings accounts are accounts with saving money in mind. They offer higher interest rates than the minimum interest you might get with a checking account, and often forgo monthly fees. Savings accounts are ideal for saving your money.   

Are high-interest savings accounts safe? 

Generally, high-interest accounts are safe places to store money. In a savings account, your first $100,000 is insured by the Canadian Deposit Insurance Corporation (CDIC), and accounts offered by credit unions are often insured by provincial insurers.    

What are the pros and cons of high-interest savings accounts?  

The main pro is the interest rate, which lets your savings build up with time. Just like most other savings accounts, another pro is the lack of monthly fees. The main cons are the added restrictions and fees, with withdrawals and transfers often have added fees. However, this usually is not too big of a dealbreaker, as savings accounts are supposed to be a place to save money, and you can always go for a chequing account for your day-to-day spending.   

High-interest savings account vs. traditional savings account: What’s the difference? 

The higher-than-average interest rate of a HISA is what differentiates it from traditional savings accounts. Both will generally offer some form of interest and no monthly fees but may have fees for withdrawals.   

Are high-interest savings accounts taxable? 

Taxes are paid on savings accounts earnings, unless the account is in a registered tax shelter, like a tax-free-savings account. Come tax season, your financial institution will send you a T5 that specifies the amount of income made from the interest on your deposits, and you will need to declare the full amount on your tax return.  

Do I pay any fees for withdrawing from a HISA?  

Different high-interest saving accounts will have different fees for transactions, so it is important that you read the fine print of the different HISA’s you are considering. Usually, HISA’s are meant to let interest accrue on your money, so the trade-off is that many banks offering High-interest savings accounts charge additional fees on withdrawals.  However, all banks will have different fees.   

Interest rates vs. Inflation: What’s the relationship?  

Inflation is the measure of how the prices of goods and services rise, and how a currency’s purchasing power decreases over time. Every currency undergoes inflation, but too much or too little inflation has negative impacts on the economy. The Bank of Canada aims to keep the inflation rate around two percent every year. 

Interest rates and Inflation are inherently connected. If the inflation rate is higher than the Bank of Canada’s target, they may adjust the inflation rate accordingly. The Bank of Canada writes on their website: “Higher interest rates encourage saving and discourage borrowing and, in turn, spending. In response, companies increase their prices more slowly or even lower them to encourage demand. This reduces inflation.” 

You can read more about how inflation works in Canada here.   

Are there any savings accounts for seniors? Are there any savings accounts for students?

Yes, some banks and credit unions offer specialized accounts for seniors and students alike. However, often, these accounts generally tend to be chequing accounts – students and seniors are some of the least likely people to need to save money. However, you can open youth savings accounts to prepare your kids for post-secondary and open RRSP accounts to save up for your retirement.   

Does Opening a Savings Account Affect Your Credit?

Your credit score will only be impacted when opening a bank account if the bank performs a “hard inquiry” into your line of credit. This may happen when creating a chequing account, or adding features that involve credit like overdraft protection but should not need to happen when opening a savings account. However, in the case that your credit is affected, it should only be a minor impact and you would be able to recover in no time.   

Is a high-interest savings account worth it?

It depends. Savings accounts are great places to store money, as they offer insurance for the first $100,000, and the extra interest feels nice too. But considering any money made in your savings accounts is usually taxed, and an average inflation rate between 1-3% per year, you likely will not see any surplus income unless your interest rate is higher than the inflation rate and any taxes you pay. Anything above 2% interest is worth looking into, but if you are looking to put your money to work for retirement or your future, a high-interest savings account will likely not be enough.