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High Interest Rate Savings Accounts

Update: Online bank ING Direct (read my ING Direct Review) offers a competitive interest rate along with a $25 bonus directly into your account when you register with an “orange key” code  Note that the bonus requires a minimum deposit of $100 with the initial registration cheque.

Get the latest Orange Key Referral Code


I’m a HUGE fan of the high interest rate savings accounts, especially those with no fees. Of all the accounts that I have reviewed, my pick is the PC Financial Interest PLUS Savings account. This account requires an account minimum of $1000 but gives you a competitive interest rate + anniversary bonuses. Don’t confuse this with the Interest First savings account, as the interest is slightly lower. This account does have its advantages however as it doesn’t require a minimum balance of $1000.

What I like about PC Financial is that everything is FREE (more free financial stuff here). Being as frugal as I am, I love free. :) I have a chequing account with them also and the cheques are free with no minimum balance. There is also no charge to transfer money between banks. For example, my main chequing account is with CIBC, so I Pay Myself First every two weeks, which goes directly into my PC Savings account. This can be programmed to withdraw automatically every two weeks and it works wonders.

If you don’t currently have a high interest savings account, there is a comprehensive review on most of the high rate savings accounts available in Canada on RedFlagDeals.com. The review includes a field that will calculate the interest on your savings balance. It’s a great function which will help you decide which savings account to go with.

After surfing through some of the savings accounts information pages, listed below are the current interest rates. I’ve also included direct links to each of the institutions in case you want to do further research. I don’t have any experience with ICICI bank, but it seems that they are extremely competitive with their interest rates and often on top of the pack.

Here is a list of some of the more popular high interest rate savings accounts available to Canadians (sorted by highest rate):

Rates updated as of July 28, 2009

  1. Achieva Financial: 1.85%
  2. Outlook Financial: 1.50%
  3. ICICI Bank: 1.40%
  4. ING Direct (ING Direct Review) 1.20% (use orange key code (click here for code) for $25 bonus – requires deposit of $100 with initial cheque)
  5. Manulife Bank: 1.10%
  6. Citizens Bank: 1.00%
  7. PC Financial Interest PLUS: 0.75% + annual bonus
  8. Altamira: 0.75%
  9. HSBC: 0.75%
  10. RBC High Interest eSavings: 0.75%
  11. E-Trade Cash Optimizer Account: ?

The biggest downside of these accounts is that interest is 100% taxable. This means that my savings of 26k earning 4% = $1000/year interest that will be taxed at my marginal tax rate. Boo on that. Perhaps it would be more efficient to move some of my savings into my investment account and purchase some dividend paying stocks.

(Update: With the new Tax Free Savings Account (TFSA), these high interest rate savings accounts will be able to grow tax free.  As of Nov 2008, here are the TFSA choices.)

Also note that these accounts are insured by CDIC which insures the account for up to $100,000.  If you have more than $100,000 cash, you may want to put the money into a discount brokerage account instead where the cash will be protected up to $1,000,000.

Confused about all the tax talk? Stay tuned, i’ll post later about How Canadian Taxes Work.

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FrugalTrader About the author: FrugalTrader is the founder and editor of Million Dollar Journey (est. 2006). Through various financial strategies outlined on this site, he grew his net worth from $200,000 in 2006 to $1,000,000 by 2014. You can read more about him here.

{ 9 comments… add one }

  • Alastair August 26, 2009, 12:59 pm

    Thanks for the info. $25 should be headed your way!

  • Steve September 21, 2009, 3:30 pm

    Why are the interest rates being offered getting slashed so much? I was just logged into ING and it’s now 1.05%. A year ago it was over 3%! A year ago with BMO I was getting 0.75% on my savings and now it’s 0.25%. And the GIC rates have plunged too. It’s a joke.

    I know the economy hasn’t been doing well but while the all banks have lowered the interest rates on savings accounts, they sure haven’t lowered the amount of fees that they charge users*. You would think with today’s economy, that encouraging people to save would be good for the banks.

    – Steve

    * I am well aware that some of the above banks have no fee accounts.

  • BCGray December 31, 2009, 6:26 pm

    I would check out Canadian Tire Financial Services rates are much higher than either ING or PC, and it is a Canadian Corporation

  • ITGUY March 7, 2010, 7:05 pm

    “I would check out Canadian Tire Financial Services rates are much higher than either ING or PC, and it is a Canadian Corporation”

    That may be true, though they’re moving everything they can to India.
    Just ask the poor saps who had train their Indian replacements.

  • Robyn February 23, 2011, 2:38 am

    You get taxed on money that sits in your bank account? Im new at this (and totally confused) and always lived paycheque to paycheque so i have never had to worry before but I am coming into some money in the next few weeks and I am trying to figure out the best way to save and also make some money on it, yet I still need some access to it as monthly withdrawls for rent will be needed. I currently have a scotia money master saving account but I think its one of the lowest interest paying….. help!!!!

    Robyn

  • UltimateSmartMoney October 10, 2011, 7:48 pm

    I have been very satisfied with ING account. I highly recommend it just like this post states. It really beats the bank rates.

  • Argos January 19, 2012, 6:27 am

    I opened a PCF savings account alongside my CIBC account. I think its important to have a brick and mortar bank though, any thought?

  • Melanie October 5, 2012, 5:13 pm

    Can someone time stamp this blog? The rates etc become irrelevant if this content is out of date. I don’t see any indicator here.
    Thanks

  • FrugalTrader FrugalTrader October 5, 2012, 9:34 pm

    @Melanie, the rates are time stamped “Rates updated as of July 28, 2009
    , but yes you are right, they are way out of date.

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