Compare high interest savings accounts

No matter whether you want to save for a vacation, a home deposit or just a rainy day, a high-interest savings account can help make it happen. The best account for you will offer a high rate and easy access to your money — and not have any pesky fees that could chip away at your savings.

Keep reading to find out how high-interest savings accounts work, and how to find the best high-interest savings account to help you reach your financial goals.

Compare high-interest savings accounts

What is a high-interest savings account?

While a high interest rate on your mortgage is bad news, a high interest rate on a savings account is a very good thing indeed.

A high-interest savings account pays a higher rate of interest on your balance than a standard bank account. This allows you to build a bigger bank balance without lifting a finger. And if you set up regular deposits into your account, you’ll reach your savings goal a whole lot sooner.

How does a high-interest savings account work?

A high-interest savings account pays interest on every dollar you deposit. Interest is usually calculated daily and paid into your account monthly, allowing you to earn interest on your interest.

A high-interest savings account is typically linked to your chequing account so you can easily make transfers between accounts. And if you set up a recurring direct deposit to your savings account — such as an automatic transfer every time you get your paycheque — you can sit back and watch your balance grow.

High-interest savings accounts are offered by traditional banks and credit unions as well as online-only banks and fintechs. You can manage your account 24/7 via online and mobile banking, but because this type of account isn’t meant for day-to-day banking, you typically won’t be able to access your funds using a debit card or cheque.

Benefits of a high-interest savings account

Why open a high-interest savings account? There are several reasons why this type of account could be a good choice for you.

Save for a major purchase

Whether it’s a vacation, a new car, home improvements or even a deposit for a house, a high-interest savings account will help you save the funds you need for a major purchase.

Save an emergency fund

Would you have enough money in your chequing account to cover an unexpected financial emergency? If your car broke down or your dog needed urgent veterinary treatment, how would you pay the bill? Instead of reaching for your credit card and racking up a big debt, a high-interest savings account provides a financial safety net.

Set and forget

You don’t need to actively manage your savings account or have any specialized investment knowledge. Simply open an account, deposit funds, set up a regular deposit and then watch your money grow. All you have to do is review your account every six months or so to make sure you’re still getting a competitive interest rate compared to what’s on offer from other providers.

Low risk

Savings accounts are considered one of the safest investments in the financial system. Most banks and financial institutions are guaranteed by the CDIC, which means that eligible deposits are insured up to $100,000 per person, per bank.

You still have access to your funds

Other investments require you to lock away your funds for a fixed period, but high-interest savings accounts allow you to access your money whenever you need. So if an unexpected expense arises, you can withdraw money without being slugged with extra fees.

Combat inflation

A savings account isn’t just somewhere you can park your money to keep it safe. The interest you earn also provides protection against inflation.

How to find the best high-interest savings account

Keep an eye out for these key features when comparing high-interest savings accounts:

Look for: High interest rate

The higher the interest rate, the faster your savings will grow. Look for the account with the highest rate, and make sure the rate applies to every dollar you deposit.

But watch out for…

Unfortunately, a high interest rate sometimes comes with strings attached. Some accounts require you to meet certain terms and conditions to qualify for the maximum advertised rate. Common traps to watch out for include:

• Introductory rate. The high rate you see advertised may only apply for a limited introductory period, such as 4 or 5 months. Once this intro period ends, the account will revert to a much lower standard interest rate. You can work around this by switching to a new account with a high introductory rate every few months, but that’s far from ideal for anyone who wants to ‘set and forget’ their savings account.
• Minimum balance or deposit requirements. Some accounts will pay a standard base interest rate as well as bonus interest. To activate bonus interest and earn the maximum advertised rate, you may be required to keep your balance above a minimum level or deposit a certain amount each month.
• Withdrawal limits. Some accounts will only pay the maximum rate of interest if you make no or limited withdrawals each month.
• Tiered interest rates. The interest rate may vary depending on your account balance — the bigger your balance, the higher the interest rate you will earn.

Before you open an account, check the fine print to find out whether you need to jump through any hoops to get the best possible interest rate.

Look for: No fees

The best high-interest savings account for you will have zero fees. You don’t want bank fees chipping away at your hard-earned money, so watch out for:

• Monthly account fees
• Withdrawal fees
• Excess transaction fees if you exceed a monthly limit

Look for: Easy access to funds

There are usually several ways to conveniently access your savings, including mobile and online banking. Some savings accounts even come with debit card access, but you may not want this if you’re keen to avoid dipping into your savings whenever possible.

Look for: CDIC protection

For added peace of mind, open your account with a financial institution that is a member of the Canada Deposit Insurance Corporation (CDIC). This provides up to $100,000 cover for your account in case the bank fails. Alternatively, if you open an account with a provincial credit union, make sure you’ll be covered by your provincial deposit insurer.

Dive deeper: See our list of the best high-interest savings accounts

How much can I earn with a high-interest savings account?

Is a high-interest savings account really worth it? How much difference does a high interest rate make?

Let’s say you start with an initial deposit of $1,000, then set up a direct deposit of $200 every two weeks when you get your paycheque. With a traditional savings account that has an interest rate of 1.50%, you’ll save $28,060 over 5 years. But if you have aa high-interest savings account that pays 4.50% interest, you’ll earn an extra $2,288 interest over 5 years — resulting in a total balance of $30,348.

	Normal savings account	High-interest savings account
Starting deposit	$1,000	$1,000
Regular deposit	$200	$200
Regular deposit frequency	Fortnightly	Fortnightly
Interest rate	1.50%	4.50%
Interest earned after 5 years	$1,060	$3,348
Total balance after 5 years	$28,060	$30,348

What to watch out for

• Interest rate terms and conditions. From introductory rates to tiered rate structures and minimum deposit requirements, check whether there are any terms and conditions you need to meet to earn the maximum interest rate.
• Linked account requirement. When you open a high-interest savings account, you may be required to open a linked chequing account (that may come with a monthly fee) with the same financial institution. Before you apply, check whether you’ll need to open two accounts or just link your existing chequing account.
• Transaction limits. You may only be allowed to make a certain number of transactions with your savings account per month without incurring a fee.
• Tax implications. The interest you earn from your account is taxable. You’ll need to include it with all your other general income when filing your taxes each year.
• Lower returns. While a high interest rate savings account is a low-risk choice, it delivers lower returns than other higher-risk investments. If you want to maximize your returns, you may want to consider other types of investments, such as trading stocks.

Dive deeper: How is interest taxed on my savings account?

High-interest savings account vs GIC

If you’re looking for a low-risk way to grow your money, you might be considering guaranteed investment certificates (GICs) as well as a high-interest savings account.

The key difference between the two options is that while a high-interest savings account lets you access your funds at any time, a GIC does not. Instead, you agree to invest your money in a GIC for a fixed period in exchange for a guaranteed return on your investment. If you want to access your money before the period ends, you’ll pay a penalty.

So while GICs have less flexibility, they can offer competitive rates. Check out our full guide to GICs to decide whether they might be a good choice for you.

How to apply for a high-interest savings account

Most banks and financial institutions will let you apply for an account online. You’ll need to provide:

• Proof of ID
• Your Social Insurance Number
• Your name, address and contact details
• Details of the chequing account you want to link to your new high-interest savings account

Bottom line

A high-interest savings account can help you save money for a big purchase or a rainy day. Compare account interest rates and fees — plus any conditions you’ll need to meet to earn the maximum interest rate — to find the best high-interest savings account for you.

Frequently asked questions

• Are high-interest savings accounts taxed?

  Yes, the interest you earn from a high interest rate savings account is taxable in Canada. You'll need to include it as part of the taxable income you declare to the CRA.

• Can I open a joint high-interest savings account?

  Yes. If you're sharing finances, a joint account may be easier. This kind of account allows two people access to the same account to deposit and withdraw funds. Joint accounts can help partners and couples reach a savings goal together. Read more about joint accounts here.

• Can I open a high-interest savings account for my child?

  If you want to teach your children good money habits, you can set up a youth savings account. Most banks offer competitive deals for youth savings accounts, so it's worth shopping around to find the best interest rate and no fees.