How to Choose the Right High-Interest Savings Account for You
Choosing a high-interest savings account (HISA) is a smart way to grow your money while keeping it accessible. Whether you're saving for an emergency fund, a short-term goal, or simply looking to earn more on your savings, a HISA can offer better returns than a regular savings account. But with so many options available, how do you choose the right one for you? Here's a step-by-step guide to help you make the best choice.
1. Understand the Purpose of a High-Interest Savings Account
A high-interest savings account is designed to offer higher returns than traditional savings accounts, while still providing liquidity. The goal is to maximize the interest you earn on your money without taking on risk. HISAs are ideal for short-term savings goals, like building an emergency fund or saving for a vacation, where you want your money to be safe and easy to access.
Key benefit: Unlike investment accounts, the money in a HISA is not exposed to market risk, making it a safer option for conservative savers.
2. Compare Interest Rates
One of the main reasons people open a HISA is to earn higher interest. The interest rate is the most important factor to consider when choosing the right account. Look for competitive rates from different banks and online financial institutions. Often, online banks or credit unions offer better interest rates compared to traditional brick-and-mortar banks because they have lower overhead costs.
Pro tip: While some banks offer promotional rates, make sure you understand how long the promotional period lasts and what the regular interest rate will be afterward. Choose a bank that offers a consistent rate over time, not just a temporary boost.
Top HISA Options in Canada
Here are a few top high-interest savings accounts available in Canada that offer competitive rates and features:
Wealthsimple Cash Account: Wealthsimple’s HISA is a great option with a high-interest rate and no monthly fees. You can easily transfer funds between your Wealthsimple investment accounts and the Wealthsimple Cash account, making it a convenient choice for those looking to save and invest.
EQ Bank Savings Plus Account: EQ Bank offers one of the highest everyday interest rates with no fees or minimum balance requirements. Their account also includes free Interac e-Transfers, making it ideal for Canadians looking for flexibility and ease of access.
Motusbank High-Interest Savings Account: Motusbank is another strong contender, offering a high interest rate with no fees and unlimited free transfers. Their online platform makes it easy to manage your savings.
Tangerine Savings Account: Tangerine frequently offers promotional rates for new clients and has no fees or minimum balance requirements. However, after the promotional period, the interest rate returns to a lower base rate, so it's important to compare the regular rate before committing.
Simplii Financial High-Interest Savings Account: Simplii Financial offers competitive interest rates with no monthly fees and unlimited transfers. Their app also makes managing your savings convenient for those who prefer online banking.
3. Check for Fees and Minimum Balance Requirements
Some high-interest savings accounts come with fees, like monthly maintenance fees or transaction fees, which can eat into your savings. Similarly, certain accounts require a minimum balance to earn the high-interest rate or to avoid fees.
Look for accounts that:
Have no monthly fees
Do not require a high minimum balance to earn the advertised interest rate
Offer a reasonable number of free transactions per month
By choosing a no-fee HISA with low or no minimum balance requirements, you’ll get the most out of the interest you earn.
4. Review Accessibility and Transaction Limits
Consider how easy it is to access your money when needed. Some high-interest savings accounts come with restrictions on the number of withdrawals or transfers you can make per month, or they may charge fees for exceeding those limits.
Evaluate how frequently you might need to access your funds:
If you need frequent access, look for a HISA that allows for multiple free withdrawals or transfers.
If the account is strictly for long-term savings, transaction limits may not be a big concern, but make sure you’re aware of any fees for accessing your money.
Most online banks allow easy access to your savings through their mobile apps or websites, but some may have fewer physical branch locations if you prefer in-person banking.
5. Consider Additional Account Features
Some high-interest savings accounts offer extra features or perks that might align with your needs, such as:
Automatic savings tools: These allow you to set up recurring transfers from your checking account to your savings, making it easier to build your balance over time.
Linked accounts: Some banks offer additional benefits if you link your HISA to other accounts, such as a checking account, for easier fund transfers.
Insurance: In Canada, most savings accounts are protected by the Canada Deposit Insurance Corporation (CDIC), insuring deposits up to $100,000. Be sure that the account you choose is CDIC-insured for added security.
Choosing a HISA that offers features you find useful can improve your overall savings experience.
6. Look for Reputable Financial Institutions
Make sure the bank or financial institution offering the HISA is reputable and trustworthy. Established banks, credit unions, and online banks with a track record of strong customer service and reliable products are good options. Look for customer reviews or consult financial watchdogs to ensure you’re working with a reliable institution.
Additionally, check whether the financial institution is a member of the CDIC to ensure your savings are protected.
7. Align Your Savings Goals with the Right Account
Not all HISAs are created equal, and the right one for you depends on your financial goals. For example:
If you’re saving for an emergency fund, accessibility and ease of use are top priorities. You’ll want an account that allows you to make frequent withdrawals without penalty.
If you’re saving for a specific short-term goal, like a vacation or down payment on a car, a HISA with fewer transaction limits may suffice, as you won’t need constant access to the funds.
Always match your HISA to the purpose of your savings to ensure it meets your needs.
8. Watch Out for Teaser Rates
Some banks may advertise high 'teaser' rates to attract new customers, but these rates often apply only for a limited time. After the promotional period, the interest rate may drop significantly.
When evaluating accounts, be sure to ask:
How long will the promotional rate last?
What is the regular interest rate after the promotion ends?
Teaser rates can be useful in the short term, but if you’re looking for long-term savings, make sure you’re comfortable with the regular rate.
The Bottom Line
Choosing the right high-interest savings account is key to growing your savings while keeping your funds safe and accessible. By comparing interest rates, fees, accessibility, and additional features, you can find a HISA that meets your financial goals. Whether you’re building an emergency fund or saving for a specific goal, the right account will help your money work harder for you.