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High Interest Rate Savings Accounts
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 of 4.10% + anniversary bonuses. Don’t confuse this with the Interest First savings account, as the interest is lower at 3.05%. This account does have it’s advantages however as it doesn’t require a minimum balance of $1000.
What I like about PC Financial is that everything is FREE. 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 June 20, 2008
- ICICI Bank: 3.40%
- Altamira: 3.20%
- Citizens Bank: 3.15%
- E-Trade Cash Optimizer Account: 3.05%
- PC Financial Interest PLUS: 3.05% + annual bonus
- Achieva Financial: 3.05%
- Outlook Financial: 3.05%
- ING Direct: 3.00%
- HSBC: 3.00%
- Manulife Bank: 3.00%
- RBC High Interest eSavings: 2.75%
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. Any thoughts?
Confused about all the tax talk? Stay tuned, i’ll post later about How Canadian Taxes Work.
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61 Comments, Comment or Ping
1. Decker
I am getting a whopping 5.05% return on a saving account I got through American Express when I got their AMEX One card (which deposits 1% of everything I charge into this account). When I got the card and made my first charge they deposited $35 into the account. My year anniverary just came and they unexpectedly deposited a $25 anniversary “bonus” into my account. I am able to transfer funds directy into it from my B&M checking and savings and of course schedule automatic transfers. Seems to good to be true and I’m wondering if the return rate will lower at some point.
Jan 11th, 2007 @ 10:36 am
2. canadian dollars
Decker: Can you tell us more about the AMEX One card 5.05% return deal?
FT: While the taxation on the interest portion of your savings is bad, throwing all that money into dividend paying stocks might be better but comes at a significantly higher risk. Ya, I know, again I’m preaching to the choir :)
Jan 11th, 2007 @ 10:58 am
3. FrugalTrader
I believe the AMEX deal is available to US residents only. Our neighbors down south get higher rates b/c their prime is higher.
FT
Jan 11th, 2007 @ 11:12 am
4. Decker
Here’s the info on the One card and the high yield savings account: https://www124.americanexpress.com/cards/loyalty.do?page=one
I am at work now, so only scanned the info, but didn’t see if this is limited to US customers only. It might be hidden in the fine print. This material says that account yields 5% interest. I thought I was getting %5.05, but either way, I like it.
Jan 11th, 2007 @ 11:28 am
5. Canadian Money Blog Reviewers
FT: why haven’t you moved all your banking to PCFinancial? I’ve just completed that move recently and it saves me from having to keep a minimum balance at another bank. That money is instead stored now in the 4% account at PCF :-)
Jan 12th, 2007 @ 8:49 am
6. FrugalTrader
Hey CMBR,
Thanks for the suggestion. I have considered that move, however, I like keeping a relationship with one of the big banks as I find that they do me “favours” for keeping business with them. For example, they give me preferential rates on LOC’s, mortgages.
But you’re right, those minimum balances required really tick me off. I’m actually considering moving my self directed RRSP to Questrade. Lower fees and no min balance.
FT
Jan 12th, 2007 @ 9:02 am
7. canadian dollars
I keep one big bank account as well. The rationale being that if I need to withdraw say 10,000 or something large, I can do so without having to go to the bank machine 10 times on 10 separate days. So like Frugal Trader stated, I do it because of the minor benefits it brings.
Jan 13th, 2007 @ 10:05 pm
8. Canadian Money Blogs Reviewer
canadian dollars: just to be silly, I’m tempted to ask you: what are your 10000$ doing in your regular bank account? :-)
I understand though that sometimes it might be easier to have access to a real bank. Is it worth having to keep a minimum balance though?
Jan 13th, 2007 @ 10:36 pm
9. canadian dollars
I don’t actually have 10K in my regular bank account. I keep it in my PCF account. What I’m saying is if I need to withdraw large amounts of money I’ll transfer from PCF –> big bank and then withdraw from the bank when I need it :)
Jan 13th, 2007 @ 11:35 pm
10. Jon Lee
I opened a PCF savings account alongside my CIBC account. I think its important to have a brick and mortar bank though - there are many things that PCF cannot do like EMT and wire transfers.
In hindsight, I wish I hadn’t gone with CIBC - so I would have access to no-free cash withdrawals at 2 different ABMs!
Mar 15th, 2007 @ 8:17 pm
11. djstef
Is anyone here in Quebec and using the PC High Interest Savings account and/or the No Fee’s banking from PC ?
I’m spoke to them on the phone, and the only thing seems that we can’t apply online, I must go to Cornwall (the closest branch) and apply in person.
Has anyone done this?
Apr 6th, 2007 @ 7:42 pm
12. Canadian Money Blogs Reviewer
djstef: I would try to call the Cornwall branch directly. I know somebody from Quebec that was told it was ok on the phone but they did need an Ontario address when they got there in person!
Apr 7th, 2007 @ 12:30 pm
13. djstef
I called the branch in Cornwall today, and told them I want to come in and open a bank account and saving account, and I’m from Quebec. The lady said it is not a problem, you neeed some ID’s when you go, she even started to fill in the forms over the phone with my address so it’ll go quicker when I get there. So looks like it can be done now for people in QC, I’m driving out on Wednesday!
Apr 9th, 2007 @ 2:41 pm
14. djstef
Just an update to anyone in Quebec thinking of using PC Financial, it can be done, I was there yesterday (less then an hour drive to Cornwall) and opened a no fee chq account and high interest savings account. The only limit right now in QC is that we can not have any credit products (such as line of credit or overdraft) but they’re working on that. Anyway, I’m excited cuz I have the accounts now and will be starting my no fee banking!!
Apr 12th, 2007 @ 11:05 am
15. Roc
Before opening up a high interest savings account, you need to consider how the interest is calculated.
Achieva offers 4.10% interest compounded monthly, while Steinbach Credit Union offers 4.20% paid annually. Which is the better deal?
Answer: Achieva is the better deal. Since Achieva pays interest monthly, then this interest carries forward to the next month which intern earns interest. Your essentially earning interest on top of interest. While Steinbach pays more interest, it does not pay interest on the interest earned each month.
Therefore I’m currently earning over $1,200/month interest on my $365,000.00 savings account with Acheiva, which then earns interest on top of interest!!!
Apr 13th, 2007 @ 6:51 pm
16. FrugalTrader
Roc: 4.1% compounded monthly on your $365,000 = 365,000(1+4.1%/12)^12= $380,249.44 after one year
4.2% compounded annually = 365,000 x (1+4.2%)^1= $380,330 after one year
The Steinbach Credit Union is a better deal on an annual basis. But I guess it depends if you need monthly income from your savings or not.
Apr 13th, 2007 @ 7:02 pm
17. Roc
FrugalTrader:
I did some research on Steinbach Credit Union and was wondering if you can provide some information on their high interest savings account.
Steinbach pays 4.20% on balances
Apr 17th, 2007 @ 9:52 pm
18. Darkman
Not a bad deal currently offered by HSBC
It’s not there regular one .. but a virtual one as well - HSBC Direct account:
http://www.hsbcdirect.ca/1/2/hsbcdirect
Paying 3.50% .. but very flexible .. unlimited withdrawals, bill payments, etc..
No checks .. but can provide links with other banks and transfer money back and forth as well..
PCF’s regular account is where from i pay my bills etc .. but the interest is low in it.. - i maintain around 5,000 there .. and it’s only 0.10 or 0.15% nawadays..
3.15% sounds better.. - i think i will keep about 1,000 in PCF daily (have there savings 4.00% also, btw, as well as Achiva’s 4.10% .. as well as E-trade’s 4.15% :)) .. and other 4,000 i will give to this HSBC Direct ;)
4,000 x 3.5% = $140 a year…
So pretty good rate will be earned .. on a flexible account, where i can deposit / withdraw as much as i want at the ATM.. pay all my bills etc (btw - HSBC ATM machines, as well as Bank of Motreal ones, and as well as National Bank ATMs, are considered with HSBC as your “home” machines.. and no interac fees are changed if using them (as well as as mentioned Free withdrawals)
If open bank account with them .. for limited time only (by already extended by the way) - one gets Bonus / Present of $25, deposited in account in a couple of months, if $100 balance or more is in the account on the specified future date :)
Live CSRs are available over tall free phone numbers 24/7 (as PCF used to be in the beginning - currently PCF cut those hours down for LIVE CSRs)
From their web site (provided above) :
“It pays to be direct.™
FREE, unlimited electronic deposits, withdrawals, transfers and bill payments within Canada
High interest rate of 3.50% (1)
24/7 ACCESS online, by phone and at 4,100 Cash machines (5)
The HSBC account is notable because of how user-friendly it is. Though you can’t access it through HSBC branches, you can deposit cheques or make no-fee withdrawals through a network of 4,100 bank machines (HSBC, Bank of Montreal and a network called The Exchange), and you get free bill payments.
Rob Carrick, The Globe and Mail
March 29, 2007″
That “The Exchange” Network. - some institutions belong to it or something.. and there is a sign at the ATM indicating this.. - That is why i mentioned National Bank, cuz was told by CSR that, in Winnipeg anyhow, National Bank is a part of that network.. and their ATM machines accordingly are a “home” machines for HSBC…
I already applied for their account few days ago.. and now in process of getting the welcome package from them.. and ATM card :)
May 8th, 2007 @ 8:47 pm
19. Elizabeth
Hello,
If I would like to open an online account in hsbc direct u.s., do i have to be the resident of U.S.?? I am a resident of Canada
Thank you
Jul 11th, 2007 @ 10:22 pm
21. Chris
Didn’t you forget EmigrantDirect.com?
They’re currently at 5.05% for a $1 minimum savings account.
I’m not sure if you can take advantage of it in Canada, but I know we can here in the US.
Aug 14th, 2007 @ 12:08 pm
24. Austin
I’m currently the higher {actually only}earning partner in the relationship.
Would opening the P.C Financial account in my spouse’s name alone save me from the painful losses of my earned interest to taxes??
Sep 19th, 2007 @ 9:56 pm
26. Chris
Austin,
I don’t know about a way to get around the 100% taxation on the interest in Canada.
I do know that in the USA, if you and/or your spouse has earned interest, you have to pay your marginal tax on the amount of earned interest.
Sep 20th, 2007 @ 10:22 am
28. Austin
Thanks Chris for ur response, I appreciate.
I may go with the Market Indexed RRSPs offered by the proffessional body to which I belong.
I was a bit questioning about continuing with that when I made a direct comparison b/w my ROI (3.6% over the last year) and the above 4.5% being offered by P.C Financial.
But looking at it closer now, i think I win with the MIRRSP’s b/c my 3.6% capital gains is tax exempt and that beats 2.25% (capital gains of 4.5% after marginal tax of 50% has been applied)
Sep 28th, 2007 @ 8:03 am
30. may
If you wanted to put 100,000 into a saving account which one would you put it in? im having trouble
Nov 4th, 2007 @ 9:42 pm
31. FrugalTrader
May, I currently have around $100k in my PC Financial account. The big thing to look out for is CDIC coverage. I believe all of the listed savings accounts have this coverage which insures your money up to $100k. Looking through all the savings accounts, looks like ICICI has the highest rate.
Nov 4th, 2007 @ 10:34 pm
32. Myself
Why they heck is there a CDIC (or in the US, FDIC) insurance up to $100,000.
Why isn’t it a little higher (say $200,000)? Especially since there are many millionaires in the world today.
It must from from an actuary I’m guessing who worked out the numbers and that’s what they came up with?
Nov 5th, 2007 @ 11:56 am
33. FrugalTrader
Myself, yes, it’s a pretty low number. It’s basically what they cover in case the company that’s holding your account goes belly up. If you have any more than $100k, it would be best to put it into a brokerage account where they will insure your account up to $1 million.
Nov 5th, 2007 @ 1:19 pm
34. natalie
i’m living in smiths falls, is there any achieva financial in this area?
Nov 6th, 2007 @ 7:20 pm
37. Nadine
Hi there!
I need help!
I currently have a Canada Trust GIC (which makes pennies); It’s pointless. I also have a ING direct account, and a Canadian saving bonds account.
I am interested in getting a Achieva account seeing how they are offering 4.35% which is amazing. Does anyone know much about this company?
Thanks in advance.
Dec 14th, 2007 @ 5:35 pm
38. DAvid
Nadine,
A number of financial institutions are offering high interest accounts. Have a look at the financial calculators at Dinkytown.net to gain an understanding of how different interest rates would affect your income. Also remember, savings accounts should be a short term investment, as other forms of investment are taxed at more favourable rates.
You may wish to take a walk around the financial district of your city, and see what the competition is offering. TD Bank has GIC products with interest rates of 4.2% currently. Once you are armed with the knowledge of what the competition offers, a long chat with the manager at your current bank, should gain you a better rate, else you will have learned where to move your money.
I am a strong believer in doing business with the institution that gives me the best package of services, rather than having accounts scattered across many. One of these services includes the ability to meet with a member of their staff to discuss options to best meet my needs.
You can learn more about Achieva at their website.
DAvid
Dec 16th, 2007 @ 2:08 pm
39. Ivan
I am not excited about 4.5%. Just have a look at these rates: http://www.vtb24.ru/en/personal/savings/deposits/term-deposits/profit/
The bank has BBB+ Fitch rating, 77.5% controlled by the government, savings are insured. Non-government (100% private but very good) banks normally offer even better rate. Not sure if they open accounts for non-residents though (I have Russian passport).
Dec 18th, 2007 @ 10:02 pm
40. Ivan
Forgot to mention that this is Russian bank ).
Dec 18th, 2007 @ 10:19 pm
42. Financial Imbalance
Achieva Financial just dropped there rate down to 4.10%. I have been using them and have been pleased with my experience thus far.
Jan 7th, 2008 @ 9:29 am
43. FrugalTrader
Thanks for the heads up. I just updated the entire list, some changes to interest rates with Citizens bank being the the only one increasing their rate.
Jan 7th, 2008 @ 3:13 pm
45. nancy (aka money coach)
Citizens Bank of Canada - usually one step ahead of ING, no minimum, no hidden strings etc., plus, they donate their profits back to the community since they’re owned by a credit union. It’s a virtual bank so you need to be comfortable with online banking (I can’t imagine bloggers being anything but!)
Feb 2nd, 2008 @ 4:47 am
46. Gean Oliveira
Hi FT,
I was checking the RBC rates and right now they’ve dropped to 3.50%.
Feb 19th, 2008 @ 4:06 pm
48. anthony
I have money with ICICI bank,,,which I just moved there from ING.
It currently pays 4.1%
They pay the highest rate i could find..it changes from time to time,like the others do, but basically its always at the top of the list.
I also got a 1 year gic from them at 4.65% for my mother.
She like the safety of gic’s.
I keep my loose money there,,,i keep some for paying bills in CIBC,
I have a wood gundy account but am looking for the best DISCOUNT BROKER, at this time,,,any suggestions would be appreciated.
Feb 27th, 2008 @ 5:42 pm
49. James
Any thoughts on the Bradford & Bingley savings accounts? It says that these accounts are for NON-UK members only. They have a number of them but these seem to be of interest to me: eSaver (6.25%) with only 3 transactions/yr or eIncome (5.8%.
http://www.bbi.co.im/offshore-savings-accounts/offshore-internet-banking/e-saver.aspx
http://www.bbi.co.im/offshore-savings-accounts/offshore-internet-banking/e-income.aspx
Feb 28th, 2008 @ 8:22 am
50. steven
hey i have a high interest accound with scoita there money master account but the interest is only 2.75% what bank would offer me the best interest paid monthly and have access to my savings incase i need them???
Apr 1st, 2008 @ 7:05 am
51. JohnnyCanuck
FYI…PC Financial recently lowered their interest rate from 4% to something like 3.8% or 3.2%. I can’t remember what the rate is now, but after my fiancee told me that the new posters are advertising a lower rate I called and they confirmed that they had lowered their rate. It’s still great to get free banking, but it ticks me off that they didn’t grandfather me or at least call or send a letter telling me.
There may be a lot more competition now.
Apr 8th, 2008 @ 7:47 pm
52. DAvid
3.35% if you have over $1000 in the account, then a sliding scale to 3.6% if you have over $100,000 in the account. They offer 2.5% on balances less than $1000.
As for grandfathering, I don’t understand why you’d expect that in a savings account - GIC’s would give you certainty of interest rate until renewal — savings accounts will vary from time to time as described in the fine print provided by your bank. As a matter of fact on the PC Financial site, the fact that ‘rates are subject to change’ is in normal print at the bottom of the page.
DAvid
Apr 8th, 2008 @ 11:35 pm
53. Wise Saver
You should update the rates on here. It seems to me that ING Direct has one of the better rates all the time and I think they started it all. Some of the others increase their rates to get you in and then lower them. Not cool.
Apr 16th, 2008 @ 1:21 pm
54. FrugalTrader
Thanks for the reminder, just updated the list. Although ING has raised from the bottom of the list of rates, it’s still in the middle of the pack. I personally lean towards PCF.
Apr 16th, 2008 @ 1:52 pm
55. DAvid
FT,
You might wish to link to either of these sites which are maintained regularly rather than re-visiting this post and updating your table!
http://money.canoe.ca/rates/savings.html
http://www.highinterestsavings.ca/chart
DAvid
Apr 17th, 2008 @ 12:28 pm
56. Susan
PC Financial regarding over draft protection. If you require overdraft protection and just started with a new company or line of work, to switch financial establishments immediately to either Royal Bank, TD, Scotia etc. As PC Financial will not set you up with overdraft protection if you are not past your 3 month probationary period. Ha! Because your also on probation with the bank too- even though you as a customer put thousands of dollars into the banks hands every year! I will be interviewing with other institutions this week regarding the same matter and or if they have exceptions for customers over 5 years with great track record.
Apr 21st, 2008 @ 6:10 pm
57. W D W
im lookin for the easiest way to dodge tax-man in canada… im just waitin on my 30-60k inheritance… i need a way (paid mthly of course due to bills that need attention) to make money! i was lookin at PCF but since were taxable to rat sh*t… how do i do this up?
and on a seperate note, what would the interest rate be mthly on that aproximate amnt?
Jun 21st, 2008 @ 9:57 pm
58. FrugalTrader
Depending on your province and income level, you may want to look at dividend paying stocks for the income and tax efficiency. If you don’t need the “income”, then the most tax efficient solution would be to pay down your debt directly.
Jun 21st, 2008 @ 10:07 pm
59. Amit in Vancouver Canada
I have both ING Direct and ICICI accounts, and my regular brick-and-mortar bank is TD Canada Trust (mainly because I am lazy, and like the ability to walk into the bank at 7:55PM and do my banking at that hour).
Some more benefits of ICICI bank are they offer the best forex rates if you have to transfer money out of Canada. Too bad, they only offer this to only 3 countries right now, but I had to transfer money to India last year in an emergency situation. Compared to TD Canada Trust, I saved around $500 by using ICICI on a $6000 transfer, TDC wire transfer rates are really bad. That’s a saving of 8.33%.
I love ING too and have been their customer since 1999. I must add that ING USA has a much better website than ING Canada. There are many features available in ING USA that are missing from ING Canada. For last 4 years since I immigrated to Canada, I still haven’t seen ING Canada adopting these.
Jul 25th, 2008 @ 7:23 am
60. johnrigley
my wife and myself have been running a small post office village shop in the uk for the past 12 years we will be returning to canada after the shop is sold . with close to a million $ cash to purchase a home perhaps half that amount iam 69 my wife 64 the remainder will make up retirement income how should it be invested
Jul 29th, 2008 @ 2:10 pm
61. FrugalTrader
Jul 29th, 2008 @ 2:23 pm
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