Interest rates in Canada are about as low as they’ve ever been—which is great for borrowers, not so much for savers. If you want to find a bank account that pays decent interest income, you really have to scour the market. That’s where our guide to the best high-interest savings accounts in Canada comes in.
We’ve narrowed down the best HISAs on offer, looking at interest rates, fees and other factors, such as minimum balances or transaction limits. And, if you have any questions about HISAs, how they work, or why you should have one, keep reading because we’ve got you covered on that, too.
Best High-Interest Savings Accounts in 2022
|High-Interest Savings Account||Everyday Interest Rate||Account Fees|
|EQ Bank’s Savings Plus Account||2.50%*||$0|
|KOHO||up to 1.50%||$0|
EQ Bank’s Savings Plus Account
Although not as well known in Canada, EQ Bank is a trustworthy place to stash your cash. EQ Bank is brought to you by Equitable Bank, which has been around since 1970 and currently has approximately $33 billion in total assets under management. When it comes to high-interest savings accounts, EQ Bank’s Savings Plus Account is a great no-strings-attached choice. The everyday interest rate is 2.50%* – one of the highest non-promotional rates available in Canada.
There is no minimum balance requirement, no monthly fees, and free transactions (including bill payments, Interac e-Transfers®, and transfers to other EQ Bank accounts). The only restriction, if you can even call it that, is that the account cannot exceed a balance of $200,000. However, since most bank accounts in Canada are only insured up to $100,000 by the Canada Deposit Insurance Corporation, it’s advisable to keep individual bank account balances below six figures anyway.
READ MORE: EQ Bank review
* Interest is calculated daily on the total closing balance and paid monthly. Rates are per annum and subject to change without notice.
KOHO Earn Interest
Launched in April 2021, KOHO Earn Interest offers a high-interest savings account where you can earn interest on your entire KOHO account balance, up to 1.50%. There are other cool features to this account, such as the ability to set savings goals and schedule automatic deposits to ensure your targets are met on time. There are no extra fees, no minimum balance requirement, and no promotional rates, plus your money is securely held in a federally regulated financial institution.
The catch? You must have a KOHO (Prepaid Mastercard®). But given that this costs $0 for the KOHO Easy version and you actually earn up to 5% cash back at eligible partners (and up to 2% with KOHO Premium on selected categories), why wouldn’t you want to sign up?
READ MORE: KOHO Review
If you want decent interest and no fees, consider Wealthsimple Save — a saving and spending account that offers 0.5% interest on your cash deposits. This is an annual rate, calculated daily and paid out monthly.
The account functions like a prepaid Visa card: fund the account in advance and spend only the cash that you’ve deposited. After signing up, link your external bank accounts and transfer the funds to your Wealthsimple Save account. You’ll eventually receive a matte-finish Tungsten metal Visa debit card (coming soon!), which can be used anywhere that Visa is accepted. There are no monthly account fees, no low balance fees, and eventually, no foreign transaction fees.
READ MORE: Wealthsimple Save review
Oaken Financial offers some of the highest interest rates on cash savings accounts for Canadians. You’ll earn 3.40% with no fees or minimum balance.
The Oaken Savings Account is the perfect choice for long-term savings goals like an emergency fund, house down payment, or retirement. Because it offers both TFSA and RRSP accounts, you have the opportunity to tax-shelter the income you earn on all your savings. The only downside is the account does not have a debit card or prepaid credit card, so it does not work as an everyday spending account. However, for savings, Oaken is one of the best options out there.
The interest on your Oaken Savings Account is calculated daily and compounded monthly. They also offer high-interest GICs with terms ranging from 30 days to five years, if you’re looking for more long-term savings options.
What is a High-Interest Savings Account?
HISAs are bank accounts that pay superior rates of interest compared to a traditional savings or chequing account.
This higher rate of interest earnings allows your savings to grow and compound more quickly, but still provides you easy access to the funds—as opposed to fixed-income investments such as GICs, which are locked in for a given period.
HISA vs. Savings Account
While each HISA is slightly different (and depends on the terms set by the financial institution offering the account), most pay interest rates that are at least a percentage point or two above a basic savings account—and tend to more closely match the rate of inflation. This higher rate of interest protects the purchasing power of your savings since prices for most goods and services usually increase over time.
But inflation is not the only factor that can erode money held in a traditional savings account (many of which currently pay a measly 0.01% interest). The monthly account and/or transaction fees attached to most basic savings or chequing accounts can also cut into your hard-earned savings. HISAs, on the other hand, usually have low or no fees, keeping more money in your pocket.
Who is a HISA Best For?
HISAs are excellent savings vehicles for anyone who has short-term savings or money that they might need to dip into at a moment’s notice, such as a deposit to buy a house or an emergency fund. These accounts can also be a good option for those who simply want to earn a decent amount of interest on the money they use for day-to-day transactions.
While it’s true that many types of investments, including GICs, bonds, stocks and ETFs, can earn greater average annual returns than what you’d get in interest from a HISA—these investments can’t always be easily cashed. And, even if you can access the money, you might have to pay an early withdrawal fee or sell at a loss.
Deposits in a HISA, on the other hand, are guaranteed (up to $100,000) by the CDIC, can often be withdrawn (or used to pay bills or for other transactions) for free, and still pay far more interest than other types of bank accounts.
Perhaps then it’s not surprising that the majority of Canadians prefer HISAs as a savings vehicle. It’s easy to see why: here’s a practical example of how much a HISA could earn you. Say you’ve got a $10,000 emergency fund. You’re wary to invest the money since you never know when you’ll need that cash and you don’t want to risk selling right after the market tanks (as was the case earlier this year when COVID-19 first broke out in Canada). So, you put the $10,000 in a HISA.
How to Choose a HISA
While you’ll want a competitive rate, the percentage of interest paid is not the only factor you should be looking at when comparing HISAs. Here are a few tips for selecting the right HISA for you:
- Determine the average annual interest. If you are wooed by a HISA’s promotional rate, make sure you know what the rate will be after the promotional period is over, and how much interest that works out for the year as a whole. That way you can be sure you’re comparing apples with apples when deciding between accounts. To get a breakdown, take a look at our chart below that details the difference in earnings on short-term promotional interest rates and longer-term base interest rates.
- Think about your savings time horizon. If you’re saving for a short-term goal and plan to withdraw your money in the next few months, a high promotional interest rate will give your balance the biggest boost, as illustrated in the chart below. If, on the other hand, you’re saving for the long term, a high base interest rate will be your best option.
- Check minimum balance requirements. Some HISAs require a minimum balance in the account to avoid service fees, or to earn the HISA’s higher rate of interest. You don’t want to lose out because you didn’t check the fine print.
- Consider your transaction needs. If you’re fairly certain you will leave your savings in the account, untouched, for a prolonged period, then unlimited free transactions won’t be important to you. If, on the other hand, you plan to use the money as an alternative to a chequing account, but with better interest, find out if there are restrictions or additional fees attached to the transactions you expect to make.
- Digital vs. bricks-and-mortar options. Most people don’t visit their local branch anymore to do banking. However, some people still prefer to bank with institutions that have an established ATM network, as opposed to doing all their transactions online. Be aware that Canada’s best online-only banks usually offer the best interest rates, due in part to lower overhead costs.
The Last Word: Are High-Interest Savings Accounts Worth It?
While the low interest-rate environment may have taken the shine off of HISAs for some, they are still a good place to park money that you plan to use within the next year, or that you’re not sure when you’ll spend.
Bottom line: when it comes to saving vs. investing, a high-interest savings account is the way to go.