There are few words Canadians love more than “tax-free,” which is why the popularity of the Tax-Free Savings Account (TFSA) has been growing steadily since it was introduced in 2009.
In case you missed the memo, a TFSA is a registered Canadian account with tax-exempt status, and a TFSA interest rate is often higher than regular savings accounts. But don’t let the word “savings” fool you: though you can use a TFSA as a straightforward savings account, it’s extremely flexible and can also be an investment account that holds stocks, GICs, mutual funds, ETFs and more.
For those looking to stash their cash in a savings account, we’ve rounded up the best TFSA savings accounts in Canada to help you get started.
Comparison of the Best TFSA Rates in Canada
|TFSA Account||Standout Features|
|EQ Bank||High-interest rate, no fees, and no minimum balance|
|Implicity Financial||Free unlimited deposits|
|Alterna Bank||Free unlimited transfers|
EQ Bank is a Canadian online-only bank known for its hard-to-beat interest rates and no everyday banking fees. EQ Bank added a TFSA version of its popular high-interest savings accounts and GICs. The EQ Bank TFSA Savings Account currently offers 3.00%* interest, tax-free, with no minimum account balances and no service fees. You can even pair your TFSA seamlessly with your regular Savings Plus Account or external bank account for easy one-time or recurring deposits.
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.
A division of Entegra Credit Union, the Implicity Tax-Free Savings Account also features a solid standard interest rate. There are no monthly fees and no minimum balance required; however, TFSAs are only allowed 1 free withdrawal a month and cost $1.00 per transaction afterwards. Furthermore, if you decide at a future date that you want to transfer possession of your TFSA to another bank, the fee is a whopping $75.00, which is one of the highest fees I’ve seen in Canada among online banks. Deposits are fully guaranteed without limit by the Deposit Guarantee Corporation of Manitoba. The account is open to all Canadians, not just residents of Manitoba.
Alterna Bank is an online subsidiary of Alterna Savings, one of the country’s oldest credit unions. Alterna’s TFSA eSavings account offers a high-interest rate with no minimum balance and no monthly fee. Though there are no physical branches of this credit union, you can easily link your outside bank accounts to Alterna and there is no charge for transfers. Furthermore, as a member of the Canada Deposit Insurance Corporation, all deposits are protected for up to $100,000.
TFSA Rules 101
A lot of Canadians get tripped up on the rules around TFSAs. The essential thing to understand is that any income you make on the money you hold in a TFSA is exempt from tax—even when you make a withdrawal. It’s this tax-free status that makes it different than any other kind of high-interest savings account or investment account on which you have to pay taxes. Even an RRSP, which does have the benefit of reducing your taxable income, is subject to tax when you make a withdrawal.
Of course, there are a few rules you have to follow. The contribution allowances for TFSAs are very strict. How much money you can deposit to your TFSA is based on your current annual TFSA contribution room, plus any unused contribution room you have from the previous years. Since TFSAs were introduced in 2009, your contribution room only goes back to that date. For 2023, the annual contribution limit is $6,500. Canadians who were at least 18 years of age in 2009 can have up to $88,000 total in a TFSA.
There are also some withdrawal rules as well. Though you can make withdrawals at any time, any funds you take out can only be added back to your TFSA the following year (unless you have contribution room left over from previous years). You can confirm your overall contribution allowance by checking your CRA account.
Over time, a TFSA is an unbeatable way to reap the rewards of compound interest tax-free, which is why every Canadian should have one.
READ MORE: A Guide to TFSAs
The Bottom Line: Take Charge of Your Savings With A TFSA
As Canadians, we’re fortunate to have such a flexible financial instrument like a TFSA that can give our savings a substantial step up. Because the income in a TFSA is 100% tax-free and you can make withdrawals at any time, it’s the perfect place to park your emergency or bucket-list fund. The best way to maximize the power of your TFSA is to do your research and ensure whatever bank (or banks—you can spread out your TFSA accounts across institutions) you choose has the services you need and offers some of the best TFSA rates available.
Now that you’re in the know, what are you waiting for? Just go for it!
READ MORE: TFSA vs RRSP: How to Choose Between the Two?