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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.

If you would like to read more articles like this, you can sign up for my free newsletter service below (we will not spam you).

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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.

{ 96 comments… add one }

  • chris October 3, 2008, 7:33 pm

    Good postings,
    It seems that the new tax free savings plans in 2009 will take care of a lot of tax concerns, 10,000 pa per couple, all interest/profits tax free.
    Does anyone know if it’s retroactive for any years? How do people intend to use it?

  • Chris October 5, 2008, 2:49 pm

    I know that this is an old post, but I’ve finally got to the point where my emergency savings account has grown to a decent amount. Instead of having it sitting in a checking account earning like 0.1% or something, I’ve been looking into high interest saving accounts.

    I remember the days when PC financial was giving like 4%, but I don’t see that anymore. Under $1000 balance, they give 2% and over $1000 they give 3.05%.

    I was looking at the TFSA at ING Direct. You can sign up now and they’ll pay you like double interest to make up for the tax until TFSA’s legally come into effect January 1st.

    Basically, what do you think I should go for? I currently use PC Financial for my regular checking account. I want the highest interest I can get. I’m not really concerned about where. It might be best, psychologically, to be done outside of PC financial where it isn’t easy for me to touch on my day to day banking.

    I’m also curious. Do these interest rates end up changing due to Bank of Canada’s interest rates??

  • DAvid October 5, 2008, 8:03 pm

    Chris,
    I understand savings account rates are based on bond rates, whereas lending rates are based on the Bank of Canada overnight rates. In either case, they do fluctuate.

    ING has a pretty good come-on! They are offering you an extra $37.00 (taxable in your hands) to open a TFSA with them. Cheap advertising for them in my opinion.

    You can find rates here:
    http://money.canoe.ca/rates/gics.html but some institutioons offer higher rates to new customers, so check around.

    DAvid

  • Shyler October 6, 2008, 7:07 pm

    Hey all :)

    We are debating between and ING’s high interest savings account or the promotional TFSA they are offering at the moment. It’s not alot, but we have $2000 + $500/month to set aside and seeing as our Mutual Funds are in the hole, we’re looking at other options. Our goal is to use this money towards a down-payment on a house in 2-3 years. Not all of it will come from this account, but we’d still like maximum value. I’m just not sure what the better option is a would love it if someone could break it down for me!! Thanks in advance ofr any advice :)

    Shyler

  • Nic October 8, 2008, 11:30 am

    Hi all,

    I too need advice. I’m in my late twenties & don’t have any concept of how to save money or what I’m supposed to do with it. I just got a new job this year & am making 47K. I was told that rather than putting $ towards savings, I had to pay down my debt first (minimal credit card/OSAP – will be paid off in 3mths -woohoo!). So, now I’m looking into savings accts/GICs/RRSPs & I am completely lost. Can anyone offer a little bit of direction? I don’t want to end up like my parents with very small pension & no savings.

  • DAvid October 8, 2008, 12:10 pm

    Shyler & Nic,

    I suggest you look into the TFSA (ING or GICs) as your current savings vehicle. For Shyler, the wish to withdraw it for a house piurchase in a few years means preservation of capital is very important.

    In Nic’s instance, it will give breathing space to learn how & where he wishes to invest his money. Nic also should be considering the benefit of RRSPs, and at what stage to invest and when to claim them. If his income is likely to increase there might be value in claiming the RRSP contributions in the future when he is in a higher tax bracket.

    DAvid

  • Shyler October 8, 2008, 12:55 pm

    Thanks David :)

    I think we’ll be going through ING for sure. I have a couple more questions if ya don’t mind :) With the economy in a steep slump, my mutual funds are worth less and less everyday. Seeing as they are a long term investment, is it wise to leave them in and have faith in the knowledge that markets always flucuate and things will turn around? Should we actually be buying more because they are low right now? Or, should we take them out, put them into an account where the principal is secured until things bottom out and then buy back into the market at a cheaper price? Like Nic, I am also in my late twenties with 3 kids and am trying to figure this all out!! It’s scary working so hard to put aside a small chunk of change and lose over 15% of it in a week and a half.

    I really wish they would teach these kinds of real money issues in high school, so young people wouldn’t have to spend the majority of their making mistakes and figuring all this out the hard way! They don’t even teach you to do basic taxes. Algebra certainly doesn’t help with budgeting lol! I just wish I knew what little I know now, when I was 19 :)

  • Alan P October 8, 2008, 8:11 pm

    Great article.
    I just sold my house and with the turbulent financial market (will it be recession or just keep bumbling along with the usual ups and downs?) I will be temporarily sticking the proceeds into high-interest savings accounts, like
    Presidents Choice (3.05%),
    Can Tire (3.05%)
    and maybe Peoples Trust (4%),
    all CIDC insured to $100,000 each.

  • Nic October 9, 2008, 12:22 am

    Yes, thank you DAvid for narrowing down the options instead of giving us too many. I was vacillating between PC Financial, ING & ICICI. Even though ICICI has the highest rate at 3.4%, the tax free option with ING sounds like a good idea.

    However, while searching the ING Direct website, a few more questions popped up. ING has a new 1.5 yr GIC @ 4%. Can someone explain why a GIC for 1.5yrs can have such a special rate (i.e. it doesn’t follow the trend based on the other rates)? They also offer 1yr @3.65%, 2 yrs @3.80%, 4 yrs @ 3.90%, and 5 yrs @4%.

    Also, DAvid, please excuse my next very basic question, but as Shyler mentioned no one taught us about taxes! Which income bracket am I in and what bracket do I have to be in to claim RRSP contributions? Alternatively, I’m assuming the money that I put in the TFSA will lower the income for which I’m taxed at the end of the year. Based on the bracket that I’m in currently, how much would I have to put in by the end of the year to drop me down into a lower bracket? I guess I started this too late. I am ashamed to say that my mother has always done my taxes. So I don’t even know how it works, although I never made nearly as much as I do now.

    Shyler – WORD. I feel like I am paying the price for not majoring in business or finance.

    Nic (She hopes everyone keeps posting comments b/c they are so informative!)

  • DAvid October 9, 2008, 1:39 am

    Shyler asks: ” With the economy in a steep slump, my mutual funds are worth less and less everyday. Seeing as they are a long term investment, is it wise to leave them in and have faith in the knowledge that markets always flucuate and things will turn around? Should we actually be buying more because they are low right now? Or, should we take them out, put them into an account where the principal is secured until things bottom out and then buy back into the market at a cheaper price?”

    I can’t offer you advice on this. Some would say “Buy up the bargains”; others, “Hold the course'; and yet others, “The sky is falling….”. My Financial Advisor reminded me that even in the 1930’s, those who stayed invested did far better than those who pulled out of the market! On a personal note, I am currently taking a wait and see approach as to further investing, having watched much of the RRSP top-up I made in August disappear.

    and: “I really wish they would teach these kinds of real money issues in high school, so young people wouldn’t have to spend the majority of their making mistakes and figuring all this out the hard way!”

    We all learn from the school of Hard Knocks, few accept learning for others without empirical testing. I call this the “Wet Paint” school of learning.

    Nic asks: “Can someone explain why a GIC for 1.5yrs can have such a special rate (i.e. it doesn’t follow the trend based on the other rates)? “

    To loan money, the bank must have deposits. Just now that bank likely has insufficient deposits to cover expected loans in that 1.5 year window. Thus they offer a premium rate to attract customers to that period rather than others. In that fashion they maintain liquidity.

    and: “Which income bracket am I in and what bracket do I have to be in to claim RRSP contributions? Alternatively, I’m assuming the money that I put in the TFSA will lower the income for which I’m taxed at the end of the year. “

    You can find out your tax bracket at: http://www.walterharder.ca/MarginalTaxRateCalculator.html as well as the effect of buying RRSP. An RRSP is equal to reducing your income by the amount of the RRSP, i.e. a $5000 purchase comes off the top of your income. You can purchase an RRSP at any time, and at any income, however, if you buy it today, but wait and claim it in future years, you gain the benefit of growth, and may see a benefit from claiming the tax refund when you have a higher taxable income. Of course, if you also invest your refund, instead of waiting you would likely come out furthest ahead.

    The TFSA does not lower income; you pay no taxes on the income the deposits produce.

    I appreciate your response, but please remember I am not a financial planner (I actually work in the health field), so please take my comments accordingly.

    DAvid

  • Shyler October 10, 2008, 2:11 am

    No worries Dave :)

    I’m just looking for an opinion and enjoy hearing other peoples perpectives and experiences! Despite how helpful you have been….rest assured I will not be basing my future money making endeavours solely on your wealth of knowledge ;) I appreciate that you, and others on here, are willing to share what you do know with everyone else. I find searching for info online super frustrating sometimes and have gained lots of useful knowledge and insight from this thread. For instance the Walter Harder tax calculator…LOVE IT!! I’ve been looking for something like that for a while. Obviously my web-surfing skills are something to be desired :)

    I’ve just come to a place in my life when suddenly all that is going on politcally and econmically is very important to me. I know i’m not the only one at that stage right and this collective brain sharing is a wonderful thing!

  • DAvid October 10, 2008, 2:31 am

    Shyler,
    Discussions like this are a form of knowledge transfer. In the not-to-distant future, I hope to see your contributions helping this community.

    I can only hope my contributions get the gears turning, and the smoke rising.

    DAvid

  • Joe October 15, 2008, 12:49 am

    FInally the Tsunami is hit. All the Financial institutions hit the ground like roller coaster. In stead of blaming Federal Reserve for failing to forecast and control the private Financial sectors, it is better to concentrate on owns future. It is evident from the history that assets cannot be made using Credit. The money hungry Institutions have ignored fundamental principles thats the credit to be balanced in the form assets. Granting Credits with out validation, raising house values when there is a slump in Manufacturing sector, slump in IT sector, outsourcing service Industry, increase in unemployment rate, spending trillions on Iraq war show the gross misconduct of the Financial Institutions.
    The only way to overcome this is wise spending and building assets by every American, reducing expenditure at every possible way. Then it should not be too long before the econonmy rises. This applies to Federal Govt. also. Unfortunately people who doesnot have money sense will not visit websites like this and will never know. I felt very sad to see the vanishing of hard earned dollars by sheer labor. I hope Americans will learn this lesson and teach the lesson to Govt.

  • nait October 28, 2008, 5:31 pm

    Hi everyone, all the comments are very interesting. Could someone tell me more about ICICI. Is there a office I could visit?

  • Mike K October 28, 2008, 11:20 pm

    People’s Trust looks interesting with their 4% savings account. I’d love to hear from anyone who has their money there. Any catches?

    Mike

  • Mike K October 28, 2008, 11:54 pm

    For those interested, there is a decent threat about them on RedFlag:

    http://www.redflagdeals.com/forums/showthread.php?t=625050

    Main gotchas seem to be 9 day $ hold, 1 external account can be linked, and no online banking (though this can be done from another bank that allows push/pull of funds, like ING)

    They currently don’t have plans for a TFSA, but if they go down that path, I’m signing up.

    Mike

  • Vance November 14, 2008, 1:16 pm

    ING just dropped their rate from 3% to 2.7%, which also means the introductory rate for their tfsa goes from 6% to 5.4%. BOOO.

  • Alan P November 14, 2008, 1:46 pm

    Maybe good time to lock in those rates? with a GIC?

  • Online Savings Account November 15, 2008, 7:36 am

    Right now in the States you can get a 4.00% APY on an online savings account through CNB Bank Direct.

  • Scott November 15, 2008, 11:07 am

    I would be careful about opening an American account right now, especially if you have to convert to $US. You will “pay” 20% to deposit your cash down South, but when their dollar starts dropping in 2009… Why risk loosing 20% in the long term just to gain a measly 1% in the short term? Especially if it’s concerning your ‘Emergency Fund’!

  • Chris November 17, 2008, 6:58 pm

    For those able to save in US banks, venturebankdirect.com has been a good find for me. They are offering 3.8% APY with no minimum balance. Unlike a lot of other online savings accounts I looked at, there was no delay in crediting funds to my acccount. I was earning interest in 1 day.

  • kabloona November 17, 2008, 8:26 pm

    The INGDirect rate on the Investment Savings Account is now 2.7%.

    Ouch….switched most of my money out until it goes back up….

  • Mike November 25, 2008, 11:02 am

    I bank at a large bank and at Citizens Bank. Was just on citizens website and they will give you $50 if you open an account with them. Have to be a new customer though so doesn’t help me but may help others on this blog. You may want to read the small type. I didnt pay that much attention since I cant take up the offer.

  • Alan P November 25, 2008, 2:13 pm

    Thanks for the head’s up about Citizens Bank. I checked it out.
    Receive $50 for a minimum $100 deposit!
    They have savings and free chequing, and online, phone, or ATM (mostly through Credit Unions) transfers.
    It will take a few days to join up, so don’t delay. Here is the info:
    https://www.citizensbank.ca/Personal/Products/BankAccounts/50GiftPromo/ and here is the nitty gritty:
    ================
    The $50 Bonus is eligible to any new Citizens Bank member that applies for their first Citizens Bank Global Chequing Account and/or Ultimate Savings Account between November 24, 2008 and December 22, 2008. To qualify for the $50 Bonus, a minimum initial cheque deposit of $100 into the account is required by December 22, 2008 and the initial deposit is maintained in the account for a period of three months from the date of the deposit. One $50 Bonus per member but for joint accounts, only one $50 Bonus will be deposited into the joint account.

  • Alan P November 25, 2008, 10:57 pm

    So the important thing with this account is to keep the first investment low. (QUOTE
    the initial deposit is maintained in the account for a period of three months from the date of the deposit
    END QUOTE)
    That way, if you put in more in a second deposit, and want to remove just a part of it within 3 months, you won’t loose the $50 bonus.
    It pays to read the fine print!

  • Carol December 8, 2008, 6:21 pm

    HSBC Direct are offering a rate of 3.75% for a promotion on new money. I think it lasts into the new year. As far as I can tell you can also apply for the 2009 tax free savings account through the direct savings account login.

  • Pinkmel December 9, 2008, 4:21 pm

    I have 2 pc financial cheq accounts and a saving. Love it, except in recent months, they have introduced bounced cheq fee of $7 – still lower than BMO charging $35.

    I would love to have another pc cheq acct to track expenses according but they won’t let me.

    Anyone had experience getting more than 2 pc cheq accounts with them?

  • Alan P December 16, 2008, 5:10 am

    Million Dollar Journey, that last post may be a troller/linker, it’s for USA markets – lets keep this Canadian, it’s hard enough trying to sort through all the numbers in one country.

    And the interest rates on high-interest rates (and GICs) seem to be dropping, so the lat update at the top of this page may be getting a little old (Ocotober) But maybe you like the dust to settle a little first….

    Nevetheless, I appreciate this site!

  • DAvid December 16, 2008, 11:30 am

    Alan P,
    Up to date rates can be found here: http://money.canoe.ca/rates/

    DAvid

  • Sky December 31, 2008, 8:01 am

    Outlook Financial.ca High Interest Savings 3.05 % & checking
    Citizens Bank Checking 0.05 %

    0.05% = 0.0005 = 5 thousandths of a % ….”so don’t delay”..big bank philanthropy??

    on $20 000 for a year Outlook = $610 Citizens = $10

    I use Outlook as a checking & savings account = one free debit a month and I manage with 2 or 3 debits / month. Hey– for the extra $600 at Outlook, depending on your needs, that’s a lot of banking.

  • Alan P December 31, 2008, 7:31 pm

    what would their website be, Sky?

  • blue sky January 27, 2009, 3:43 am

    Hi Alan P
    Couldn’t re-find this site till now. The websit for Outlook is
    http://www.outlookfinancial.com although I’m sure you got it by now.

    Their parent company is Assiniboine Credit Union, based in Winnipeg, Manitoba. From outside Wpg. their number is 1-877-958-7333 & in Wpg is 958-7333.

    All deposits are guaranteed without limit. But like everyone else they have dropped their interest rates drastically…high interest savings is now 2.80%. They have also dropped the GIC rates…..[1yr cashable…2.85%]–[2yr…3.20%]—-[3yr…..3.45%]—-[4yr…3.60%]—-[5 yr…..3.85%]

  • Carole February 2, 2009, 3:31 pm

    Check out PCF now as they slashed their interest rate on TFSA from 3.5% to 2.55 as soon as people signed in to the new account within two weeks.
    Also cut their highest interest plus account from 3.05% to 2.25 I have moved every penny out fast…sounds like bait and switch to me!

  • DAvid February 2, 2009, 3:59 pm

    Carole,
    So where did you move your money? All the time it sits outside the TFSA the interest earned attracts taxes, giving you an even poorer return…..

    DAvid

  • kevinw February 9, 2009, 5:23 pm

    check out maxa financial 4.55 gic rates up to 7 yrs…its the best around that I can find

  • Helpplease February 27, 2009, 12:29 am

    Hi!
    I am wondeirng if anyone has heard of Primerica, their dealings, and what they offer. An associate at work is a representative of the company who would like to come over present his company. I have looked online and cannot find any hard information on who they are and what they offer. Can anyone offer up advice?
    Also, I am looking to begin investing for the short term (another home) and the long term (retirement). Where would my money be best invested? I am also looking to invest for my child education. I was considering the standard family RESP, though have heard that it is sometimes better to invest in a high interest savings account. I do not see the advantage to this, as I am sure I would be taxed on the interest earned. Any advice?
    Thank you.

  • 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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