Bang for your bucks
High interest savings accounts may just live up to their name
The past 10 years have been a lost decade for savers as interest rates plummeted and stayed at historic lows.
Big banks pay next to nothing on their so-called high interest savings accounts. Meanwhile, those looking for higher rates on their deposits have to chase short-term promotional offers at online banks and out-of-province credit unions just to stay ahead of inflation.
Luckily, the tide is starting to turn, thanks to the Bank of Canada raising its key interest rate on five occasions in the past 15 months. While debtors bemoan the 1.25 per cent increase over that time, savers are cheering for higher rates on their deposits.
It’s been some time since I surveyed the market to compare high interest savings account rates. What I found was much of the same from Canada’s big banks, whose best rates range from a paltry 0.5 per cent to 1.2 per cent on a high interest savings account (rates quoted are valid as of Nov. 2).
RBC’s eSavings account is easily the best of the bunch for everyday deposits, paying a decent 1.2 per cent on every dollar with no monthly fees or minimum deposits required. The account also includes one free ATM cash withdrawal per month.
Mainstream banks’ interest rates 1.20: RBC High Interest eSavings Account 1.05: Scotiabank Momentum Plus Savings Account 1.05*: CIBC eAdvantage Savings Account .80: BMO Smart Saver .50*: TD High Interest Savings Account * $5,000 minimum balance required
In the middle of the rate pack, you’ll find online banking pioneers Tangerine and Simplii Financial (formerly PC Financial), plus other household names such as Manulife and Canadian Tire Bank.
At the top of the online competitors is EQ Bank, which pays a healthy 2.3 per cent on its savings deposits. EQ’s unique Savings Plus account comes with no monthly fees and no minimum balance, and acts as a chequing account with unlimited transactions, including free bill payments and five free Interac e-Transfers per month. Online banks’ interest rates 2.30: EQ Bank Savings Plus Account 2.25: Alterna Bank High Interest eSavings Account 1.50: Canadian Tire High Interest Savings Account 1.40: ManulifeBank Advantage Account 1.25: Simplii Financial High Interest Savings Account 1.25: Tangerine Savings Account
Finally, I’d be remiss not to include a section on credit unions, which for years have offered some of the highest in- terest rates on savings accounts in the country.
The trouble is that savers often need to look beyond their provincial border to take advantage of these higher rates.
Some of the best interest rates today are offered by littleknown Manitoba credit unions. Topping the list (and the country) is Manitoba’s largest credit union, Steinbach, which pays an incredible 2.65 per cent on its regular savings account. Not too far behind is Winnipeg’s AcceleRate Financial, which pays 2.35 per cent on its high interest savings account.
The Deposit Guarantee Corporation of Manitoba guarantees all deposits. Canadian residents outside of Manitoba can open an account with a Manitoba credit union by becoming a member and providing additional supporting documentation with their application.
Manitoba credit unions’ interest rates 2.65: Steinbach Regular Savings 2.40: Implicity High Interest Savings Account 2.35: AcceleRate High Interest Savings 2.15: Achieva Daily Interest Savings 2.15: Outlook High Interest Savings Account
Ontario also has its share of credit unions that offer competitive rates on savings accounts, among other products. Pacing the field is Alterna Bank, an online offshoot of Alterna Savings, which has 33 locations across Ontario. Alterna offers a high interest eSavings account at 2.25 per cent.
Ontario credit unions’ interest rates 2.25: Alterna High Interest eSavings 1.50: Meridian High Interest Savings 1.25: IC Savings Investment Savings The verdict
Many of the above listed banks, online banks and credit unions typically offer promotional interest rates upwards of 3 per cent or more for short periods of time.
A savvy customer with the time and inclination could stay ahead of the curve by moving their savings around every few months.
A less-complicated solution is to park your money with a bank that consistently offers an everyday interest rate at or near the top of the market with no hassles.
For my money, that’s EQ Bank and its Savings Plus Account at 2.3 per cent.