The Best Interest Rates in Canada for 2021
Maintaining a cash cushion is a key component of good financial management, both positively and negatively. On the one hand, cash liquidity will protect you against unexpected emergencies, and on the other hand, it can help you take advantage of spur of the moment investing opportunities. That said, if you've got your cash buffer in a chequing account earning 0.01% interest, you are doing your money a disservice. In fact, with an interest rate that low, your money is losing value due to inflation.
Fortunately, you have options. Even in Canada's current low-interest rate environment, various banks offer interest on cash savings at a rate far higher than 0.01%, and we've compiled them into a list below.
In this Wealth Rocket article, we'll provide the best interest rates in Canada for high-interest savings accounts that will help you save more effectively while beating inflation.
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The Best High-Interest Savings Accounts in Canada for 2021
Savings accounts with higher than average interest rates are called high-interest savings accounts. These accounts, known in shorthand as HISAs, usually have several common features, including no minimum balance requirements, low monthly fees, and (of course) attractive interest rates. We've hand-selected the best in Canada and listed them below.
A note on safety: The financial institutions listed below are members of the Canada Deposit Insurance Corporation (CDIC), which provide insurance on your deposits up to $100,000.
So if you haven't heard of a bank or financial institution listed below, rest assured that they are 100% safe to use.
1. EQ Bank High-Interest Savings Account
EQ Bank is an online bank launched by Equitable Bank in 2013. There are no brick and mortar branches as an online bank and operate entirely online.Guaranteed Investment Certificates (GICs) and savings accounts are the only products that they offer. Due to this simplified product offering, EQ Bank can offer an industry-leading 1.50% interest on all deposits. This interest rate is not a promotional rate and is available to both individual and joint savings accounts. Additionally, if you open a Tax-Free Savings Account or an RSP Savings Account, that interest rate is boosted to 2.30%. If you're looking to supercharge your savings even more and are confident you won't need your money for at least three months, you can even lock into a TFSA or RRSP GIC and earn 2.50% interest.
2. Laurentian Bank of Canada
Laurentian Bank of Canada offers an online arm called LCB Digital services. Through LCB Digital, you can open a high-interest savings account that earns a competitive 1.40% interest on all deposits.
There is no monthly fee associated with this account and no minimum balance. You'll be able to fund this account by linking it with your other financial institutions or transferring money directly from an LBC Digital chequing account.
3. Alterna Bank
Although not as well known as some of the other financial institutions on this list, Alterna Bank has provided Canadians with banking solutions for 110 years and even won the Globe and Mail endorsement for Canada's Best Bank for Millennials.
Alterna Bank is not technically a digital-only bank, with branches across Ontario and Quebec. Still, you'll access their high-interest savings accounts purely through their digital interface, a simple and easy to use app available through the App Store and via Google Play.
Beyond high-interest savings accounts, Alterna Bank also offers no-fee chequing accounts, RRSP and TFSA eSavings Accounts, mortgages, investments, and GICs. The wide range of products makes this innovative bank an excellent choice for either a high-interest savings account or your go-to primary bank.
4. Wealthsimple Cash
Wealthsimple is best known for its pithy advertising and low fee robo advisor investing products. Still, recently they've entered the space of high-interest savings accounts with a product they call Wealthsimple Cash.
Wealthsimple Cash is a hybrid savings and chequing account that you can use for daily spending but still earn a hefty 0.75% interest – an unheard-of rate for a chequing account. You can fund this account from other financial institutions, and soon you'll be able to make purchases directly from the account or withdraw money from ATMs using an attractive Tungsten metal card.
Wealthsimple Cash is still in its infancy, and the lack of available features limits this account's usefulness.
For example, you cannot yet open a TFSA or RRSP with Wealthsimple Cash.
Many of the touted features aren't yet available, like compatibility with Apple Pay and Google Pay, no foreign exchange fees, or even access to the debit card. Without these features, the interest rate is not attractive enough to recommend this product as your go-to choice for a high-interest savings account.
5. Oaken Financial
Founded in 2013, Oaken Financial is part of Home Trust, one of Canada's largest mortgage lenders. Oaken Financial has physical branches in Halifax, Toronto, Calgary, and Vancouver, where you can open an account in-person and earn 1.25% on your deposits. That said, you can do all of your banking through their digital portal, where they offer GICs and high-interest savings accounts for both personal and commercial customers.
You can open both TFSAs and RRSPs through Oaken Financial and choose whether to save your money in a high-interest savings account yielding 1.25% or, if you have at least $1,000 to deposit, lock your money into a GIC where it will earn up to 2.30% over five years.
6. Motive Financial
Haven't heard of Motive Financial? You're not alone, but you don't need to worry about the legitimacy of this new online bank. Before 2017, Motive Financial was Canadian Direct Financial. It is the direct banking arm of Canadian Western Bank, a Schedule I bank founded in 1984 in Edmonton, Alberta.
Motive Financial offers both chequing and savings accounts to their customers, and the Motive Savvy Savings Accounts offer 1.55% interest on all deposits.
Unlike some other financial institutions on this list, Motive Financial limits the monthly transactions on its savings accounts to two per month.
Still, in my experience of using online savings accounts, you'll only make transfers a few times a month. You'll pay $5 per additional transaction.
7. Tangerine Bank
The original online bank, Tangerine, used to go by the name of ING Direct before Scotiabank purchased them in 2012. Today, Tangerine is one of the most popular online banks in Canada. It offers various financial services from chequing and savings accounts, investments, credit cards, lines of credit, and even mortgages.
Their comprehensive product line does not mean they offer the best rate. When you open a Tangerine savings account, you'll earn 2.10% on all new deposits for the first five months, but after that, your interest rate drops to just 0.10%. While Tangerine is accessible and an excellent place to do your daily banking, there are other banks with higher rates.
8. Simplii Financial
Simplii Financial is the digital banking arm of CIBC. While Simplii is relatively new to the online banking scene, they do offer an impressive 2% interest on new savings account deposits until March 31, 2021.
Unfortunately, after the promotional rate expires, the interest rate drops to 0.10%, which is not competitive with some of the alternatives we've listed above.
However, Simplii does offer a full suite of financial products and free access to all CIBC ATMs across Canada, along with unlimited debit purchases, bill payments, and withdrawals.
This flexibility makes Simplii a good choice as a digital bank, but not the best place to deposit your cash.
What is a High-Interest Savings Account?
A high-interest savings account pays higher interest than a "regular" savings account. Most regular savings accounts offer an interest rate of around 0.05%, while the average high-interest saving account has an interest rate closer to 2%.
Banks can offer these higher interest savings accounts with the aim that you will deposit your money and leave it in the account to grow.
To further this agenda, some banks will limit how often you can withdraw cash, such as charging fees in the range of $5 per withdrawal.
These limits encourage you to leave your money in the account where it will earn interest.
That said, many online banks that do not have high costs associated with physical locations can offer higher interest rates and unlimited withdrawals.
Some online banks only offer high-interest savings accounts, and they often have the best rates in Canada.
How Does a High Interest Savings Account Work?
Opening a high-interest savings account is straightforward and can be completed online.
You'll need to provide basic information, including your email, home address, full name, and Social Insurance Number (SIN).
You'll also need to provide information on the purpose of the savings account and whether you will share it with anyone else. The process usually takes about 15 minutes.
When your account is open, you can choose to fund your account by linking to your other financial institutions or using e-transfer.
This process of linking your bank account can take several days. Once you transfer money into the account, it will accumulate interest.
If there is a promotional interest rate available, you'll earn that higher rate, and once it expires, your money will earn interest at the account's regular rate. Most high-interest savings accounts debit their interest earned monthly.
How to Choose the Right High-Interest Savings Account
There are several factors that you should consider when choosing the right high-interest savings account, including:
If your primary goal is to earn more interest, choose a high-interest savings account that offers a higher rate before bonuses or promotions.
Your returns guarantee a high-interest return in a high-interest savings account, and your funds are CDIC insured up to $100,000 if the bank is a member.
Are you looking for more than just a high-interest savings account? What about TFSAs, RRSPs, GICs, or chequing accounts? If these additional products are essential to you, choose an institution that offers them, even if their interest rates are slightly lower.
Some banks offer cash bonuses or higher rates for new deposits. While these bonuses are usually short-lived, they might be enough to tip your decision in a specific direction.
Frequently Asked Questions
The interest you earn in a high-interest savings account is taxable unless deposited into a TFSA or RRSP. Before tax season, your financial institution will issue the necessary documents to claim your earned interest on your taxes.
The best interest rate is currently 2.30% offered by EQ Bank, but a "good" interest rate depends on the market at the time. It's essential to research by checking personal finance websites to get a sense of what is available in the marketplace.
You can do both! A TFSA is simply a tax-sheltered account that can hold various assets, including stocks, GICs, and cash. Many banks offer TFSA high-interest savings accounts, sometimes with even better interest rates than their regular high-interest savings accounts.
Suppose you have available contribution room in your TFSA (which you can check by logging into your My Account portal with the Canada Revenue Agency). In that case, a TFSA is an excellent place to hold cash in a high-interest savings account.n