A high-interest savings account is one that pays out a higher interest rate compared to conventional savings accounts. They typically come with higher transaction fees compared to checking accounts, but there are many high-interest savings accounts out there that don’t charge any monthly fees at all, thus helping consumers speed up their savings.
These accounts are available at most brick-and-mortar and online banks. You can even open an account like this at any financial institution, even one that you are not a client of.
There are numerous high-interest savings accounts available to Canadians, and in this article, we’ll list our top picks.
High-Interest Savings Account vs. Regular Savings Account
The biggest difference between a high-interest savings account and a regular savings account is the interest rate. The former typically offer 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 2.5% or more, compared to regular savings accounts that usually offer no more than a half percent on average.
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. 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.
Drawbacks of High-Interest Savings Account
In addition to the perks of a high-interest savings account, there are some drawbacks to consider.
Online only. Typically, a high-interest savings account is only available via online banks, and not with brick-and-mortar banks. If you’re not comfortable with online-only banking, then a high-interest savings account might be off the table for you.
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.
Is 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.
Best High-Interest Savings Accounts
We’ve rounded up the top high-interest savings accounts in Canada based on rates, fees, and the banks that offer them.
|Rate||Minimum Balance||Monthly Fee|
|OAKEN Financial Savings Account||1.5%||$0||$0|
|Tangerine Savings Account||0.10%||$0||$0|
|EQ Bank Savings Plus Account||1.25%||$0||$0|
|Laurentian Bank Digital High-Interest Savings Account||1.65%||$0||$0|
|MAXA Financial High-Interest Savings Account||1.60%||$0||$0|
OAKEN Financial Savings Account
Oaken Financial is an online bank that offers all its products and services mostly online, though there are a handful of physical offices in Canada, including in Toronto, Calgary, Vancouver, and Halifax.
Oaken Financial offers a high-interest savings account that offers a competitive rate of 1.5% at the present time. It also comes with zero monthly fees, no minimum balance requirements, and free unlimited transactions. You can access your money whenever you need it, and easily transfer your funds to an Oaken GIC to take your savings to the next level. Plus, your funds are insured by the CDIC, so your money will always be safe.
Tangerine Savings Account
Tangerine is one of the more well-known online banks in Canada. Formerly operating under the name ING DIRECT, Tangerine was eventually acquired by Scotiabank and became known as Tangerine in 2012, and offers a host of banking products to rival the average brick-and-mortar big bank. One of the bank’s more popular products is its high-interest savings account.
This account comes with an interest rate of 0.10%, which is not as high as some of the other savings accounts on this list. That said, the bank itself is highly regarded and offers a host of other banking products for consumers to take advantage of.
You can benefit from zero banking fees or service charges, no minimum balance requirements, and an Automatic Savings Program (ASP) to help you customize your savings goals. If you’re a new client, you can earn 2.15% on your deposited funds when you open your first savings account with Tangerine.
EQ Bank Savings Plus Account
EQ Bank is a trademark of Equitable Bank, which has been serving Canadians for approximately 50 years. The online bank offers a number of banking products, including its high-interest savings account, which offers an impressive 1.25% interest rate on funds deposited. There are also no monthly fees, free transactions, free bill payments, free Interac e-transfers, and no minimum balance requirements.
You also have the option to set up savings goals and track your savings progress thanks to the financial tools they offer and send international money transfers on the cheap thanks to EQ Bank’s partnership with Wise. And you’ll know exactly what exchange rate you’re getting in real-time for full transparency.
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.
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 rates 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.
How to Choose a High-Interest Savings Account
Now that you’ve determined that a high-interest savings account suits your wealth-building strategy, how do you pick the best one for you? Here are some factors to consider.
Transactions limits. How many times per day or per month are you allowed to withdraw funds from your savings account? Depending on how you plan to use that money, this is an important consideration to make.
Fees. Bank accounts often come with an array of fees, whether it’s for monthly maintenance, transfers, withdrawals, or for having less than the minimum account balance. These fees can really add up, so consider accounts that have minimum fees attached to them.
Interest rate. Obviously, the higher the interest rate, the better, as it will help you earn more money in a shorter period of time for every dollar you have deposited.
Promotions. Look for accounts that offer promotional rates. Some financial institutions may offer a very high-interest rate for a few months when you first open an account, which can be a nice way to get a head start on your savings.
Do you need to be an existing client? Some high-interest savings accounts are only available to existing clients of the bank, while others do not require you to be a client.
If you’re looking for a risk-free way to grow your money without the need for massive capital to invest, then a high-interest savings account may be a great way to start. Consider any one of the above-mentioned accounts to help you earn a decent interest rate on your deposited funds without the pesky monthly fees that are often typical of the average savings account.