Most Canadian Banks provide a variety of financial products that enable customers to save money. A savings account is one type of such a product. It allows users to save money without the regular transactions that are synonymous with a chequing account. It is a straightforward process to open a savings account, and you don’t have to open it with the same bank you use for your regular transactions.
The unique nature of a savings account allows customers to earn interest on the money they deposit. Because the money is not readily drawn, the bank can channel the funds into profitable ventures and pay the customer interest over some time.
The downside to a savings account is that the bank encourages you to save. That means if you decide to withdraw your money regularly, you’d be charged a higher transaction fee compared to the average chequing account. Canada has many banks that offer excellent savings products, but before we dive into all that, you must know all the basics about a savings account.
Savings Account Types
There are four types of savings accounts. They are:
- High-Interest Savings Accounts
High-interest savings accounts have the best interest rates of any savings account in Canada. The downside is you get to pay taxes on your interest, which takes a big chunk out of your profits.
- Tax-free Savings Accounts
Unlike the HISA, a TFSA offers lower rates, but the good takeaway is that every cent you earn is tax-free.
- Youth Savings Accounts
A youth savings account is an account that teaches kids how to save. It provides special offers and freebies that teach little kids the art of saving money and carrying out basic financial transactions.
- Seniors Savings Accounts
Not as popular as a youth savings account, a senior savings account is specially designed for individuals who are 60 years or older. These seniors get special rates as well as reduced fees on account of their age.
Banking Terms
There are a few banking terms you need to take to heart for you to operate your savings account property. Some of them are stated below.
ROI
ROI simply means “return on investment.” It is the amount you earn on the money you deposit. Also known as interest rate, some banks offer a promo rate that starts on a high and tapers off to a low after a period. Your best bet is to ignore such rates and go for those offers with a decent and more stable return on investment.
Transaction charges/fees
Because banks want you to save, they discourage you from making transactions by charging a transaction fee. These fees cover various tasks, from depositing money to withdrawals as well as transfers. You should look out for banks that offer free transactions or minimal charges.
Monthly fees
Monthly fees are the charges you get for depositing your money. However, not all banks charge a monthly fee, especially for a savings account.
Deposit Guarantee
Deposit guarantee simply means your money is under the protection of the Canadian Deposit Insurance Corporation. That means if your bank ceases to operate for any reason, you get your money back. However, not all banks are insured by the CDIC. Ensure you open your account in a bank that has CDIC insurance.
Without further ado, these are the banks with the best interest rates in Canada:
Alterna Bank e-Savings
Alterna Bank is a leading Canadian bank that runs it’s operations online. The bank gives its customers so many different banking services, including saving accounts. And as a CDIC member, you can be sure your money is in safe hands.
Alterna’s TFSA has no minimum deposit criteria, and you get unlimited deposits and withdrawals. The icing on the cake is the 2% rate Alterna offers. And you get to keep what you earn because there are no monthly fees.
Alterna Bank began operations in 2000. Since then, the bank has grown from strength to strength. It is the banking division of Alterna Savings, the first Credit Union in Ontario.
motusbank TFSA
A relatively new bank in the finance industry, you’d need a hard credit check to open an account with motusbank. Your credit score will feel the impact as if you were applying for a credit card.
However, motusbank offers a whopping 2.00% if you open a TFSA. It is one of the best offers out there, with no minimum balance or monthly fees. The interest accrues daily and paid monthly. To sweeten the deal, motusbank insures your deposit up to C$100,000.
motusbank is the banking arm of Meridian, one of the popular Credit Unions in Canada. Apart from TFSAs, motusbank offers other account services, including the high-interest savings account and the chequing account.
EQ Bank Savings Plus
If you desire a bank that provides a good interest rate to its customers, you’d need to check out what EQ Bank has to offer. It is one of the most popular online banks in Canada for a good reason.
EQ bank has an interest rate of 2.00%. It isn’t the best out there, but there’s so much more to the offer than meets the eye. That’s because EQ bank charges no banking fees, zero minimum balance, unlimited e-Transfers, the free electronic transfer of funds, and deposit guaranteed.
The downside to the EQ Bank Savings Plus offer is that it isn’t available to Quebec residents.
Tangerine TFSA Savings
Tangerine is arguably the most well-known online-exclusive bank throughout the length and breadth of Canada. The unique nature of their TFSA allows customers to enjoy huge rates at 2.80%.
However, it drops down to a paltry 0.40% after five months. On a positive note, customers who open a savings account with Tangerine do not have to pay a monthly fee. There’s also no minimum balance requirement, and your money is insured up to C$100,000.
Motive Financial TFSA
Motive Financial is an arm of the Canadian Western Bank. The Canadian Western Bank is a member of the CDIC. That means your money is insured should you choose to open an account. Motive Financial offers customers a tidy rate of 2.40% on their deposits. Furthermore, the bank has no minimum balance requirements and provides unlimited transactions for free.
However, Motive Financial will charge you C$50 if you close your TFSA within twelve months of opening the account. You also pay C$50 if you choose to transfer your TFSA to another bank without notice. Although Motive Financial has a strong customer base, it isn’t available to individuals who reside in Quebec.
Hubert Financial TFSA
Hubert is an online bank that’s the property of the Sunova Credit Union. The bank provides its customers with a savings account TFSA that has an interest rate of 2%. And to lure customers, the bank guarantees its deposits through the Deposit Guarantee Corporation of Manitoba. But that’s not the end of it.
Hubert Financial charges no monthly fees and has no minimum balance requirement. The bank calculates the interest on a day-to-day basis while it’s paid out monthly.
Implicity Financial
Another online bank that’s owned by a Credit Union, Implicity Financial operates a TFSA that stands at a competitive rate of 2.10%. The Deposit Guarantee Corporation of Manitoba also insures the deposits.
Wholly owned by the Enter a Credit Union, customers do not pay monthly charges, and they also get a free withdrawal each month. Additional transactions will cost you C$1.
CIBC TFSA Tax Advantage
One thing about the big banks is that they offer lower rates. But if online banking isn’t your idea of banking, then the CIBC Savings Account just might be what you’re looking for. The CIBC TFSA provides its customers with a fair rate of 1.75%.
Wealthsimple Savings
Wealthsimple became popular by simplifying banking. Today this online bank offers numerous financial services, including the TFSA. The bank offers a competitive rate of 1.40%, which is more than you can get at many regular banks.
What sets Wealthsimple apart from the rest is that the bank insures your money up to C$1,000,000. The bank has no minimum balance and unlimited free transactions. That’s as good a deal as you can find anywhere in Canada.
Oaken Financial TFSA
Established in 2013, Oaken Financial offers an interest rate within the range of 2.50% to 2.95% depending on the term and length. Deposits also receive insurance from the CDIC.
However, Oaken Financial has a minimum deposit of C$1,000. And if your account is inactive for two or more years, you get to pay an extra C$20. On the other hand, the bank doesn’t charge a fee if you’re transferring your funds to another bank.
Scotiabank TFSA
Scotiabank is, without a doubt, one of the Big Five. It has the Savings Accelerator that provides an interest rate of 1.00% to its customers. If you like the allure of banking with one of the biggest banks in Canada, then you should consider ScotiaBank. But if you’re interested in the highest rates you can get, you should consider other banks on this list.
That being said, your money is insured as Scotiabank is a member of the CDIC. The bank charges up to C$20 for dormant accounts for up to two years and for transferring funds to another bank.
BMO TFSA
The last on the list is the Bank of Montreal TFSA. The interest rate is the lowest on the list at 0.75%. However, this does not deter customers from patronizing the bank.
BMO has two types of TFSAs. One for regular cash deposits and the other for GICs and other investments. Customers do not pay fees for withdrawing, although the bank does charge a C$50 fee if you transfer your funds to another institution.
Final thoughts
All TFSAs are not made equal. Some may look flashy to the eye but offer less value than you think. It’s important to look at the terms and conditions before deciding on a bank to deposit your hard-earned funds.
