I’ve been researching different high interest savings account options after emptying the majority of our savings account to use as a downpayment on our new house. I need to build my savings account back up again.
Do We Still Call It A High Interest Savings Account?
Even though the interest rates are pretty low all across Canada, there is still a significant spread between different banks and financial institutions when comparing high interest savings accounts . I wasn’t thrilled with the paltry interest rate I was getting from the savings account at my bank so I checked out some different options to see what else was available here in Canada.
An additional 1% interest rate on $5,000 means an extra $50 in your pocket each year (before tax). I don’t mind spending a little bit of time in order to save money. I’ve already compared the best chequing account options in Canada.
Here’s what I discovered for the best high interest savings account in Canada (updated February 19th, 2013):
High Interest Savings Account Comparison
|Bank / Account Name||Rate %||Min. Balance||Transaction Fees|
|Manulife Advantage Account||1.55||None||$1.25 per debit|
|Canadian Tire High Interest Savings||1.5||None||none|
|CIBC eAdvantage Savings||1.5*||$5,000||$5 per debit|
|ING Direct Investment Savings||1.35||None||None|
|PC Financial Interest Plus||1.35||$1,000||None|
|RBC High Interest eSavings||1.2||None||One free debit|
|BMO Smart Saver||1.2||None||One free debit|
|Scotia Power Savings||1.2||$5,000||$5 per debit|
|TD High Interest Savings||1.1||$5,000||$5 per debit|
*promotional offer ends March 28th, 2013
Best of the Big Banks
The big banks leave something to be desired when it comes to high interest savings accounts, which explains the rise of online high interest savings account options like PC Financial and ING Direct.
On the surface, the RBC High Interest eSavings Account appears to be a really competitive option with no minimum balance and no monthly fees, but when I dug a bit deeper there are still plenty of fees and restrictions on this account.
Although you can still pay bills online, there is a $5 fee for every assisted transaction, and a $5 fee for any money transfers outside of your RBC accounts. You are allowed one cash withdrawal per billing cycle.
Several smaller banks and credit unions also offer competitive rates on high interest savings accounts. AcceleRate and Achieva lead the way, paying 2% each. Steinbach Credit Union and Outlook Financial each pay 1.95% interest, while Canadian Direct and Peoples Trust both pay 1.9% interest.
The Best High Interest Savings Account option
At a quick glance it appears that the Manulife Advantage Account is the best option for earning the highest interest rate in the country. But even though you’re earning a guaranteed return, at 1.55% you’re barely keeping up with inflation.
Ally Financial used to pay 1.8% interest on its savings account. However, Ally was recently purchased by RBC, who then immediately shut down Ally’s high interest savings account option as of February 15th, 2013. Existing Ally accounts will be closed on April 30th, 2013, and clients will presumably be offered to move to the RBC High Interest eSavings account.
I decided to go with the ING Direct Investment Savings Account. ING Direct has a competitive interest rate of 1.35%, and they pay you a bonus of $25 just for opening an account with them and making an initial $100 deposit.
With ING Direct, a $1,000 balance would grow to $1,067 over 3 years when you include the $25 deposit. Not only do you get a bonus for signing up with ING Direct, you can also earn $25 for every new account your friends or family open with ING Direct. Simply pass along your orange key code to your friends and family for the chance to earn up to $2,000.
If you’d like to sign up for the ING Direct Savings Account and receive a $25 bonus, please use my orange key code:
Are you happy with the interest rate on your current savings account? Would you consider switching to a high interest savings account?