It may be a lot of fun to see a large balance in your chequing or “savings” account when you check from an ATM. But there are downsides to keeping all of your money in one chequing account with a bank.
For starters, these types of accounts often have a minimum balance that you need to maintain. So, immediately, that’s an amount of your money that you can’t make use of. Next, the interest rates offered by chequing accounts are rather low at an average of 0.3%. And finally, these types of accounts often limit the transactions you can make.
The purpose of a savings account is for long-term storage of money to achieve long-term goals. As such, you want to be able to maximize your money as much as possible. But you can’t exactly do that with a standard chequing account. So, what other options are there?
Before deciding which savings account to go with, you first need to know what makes an account great. A few rules of thumb to keep in mind when shopping for savings accounts are:
Look for the account that offers the highest yield.
Earning interest for depositing money into a savings account is pretty standard. Most banks offer a savings account with an interest rate. The difference is in the rate and the consistency of that yield. You obviously want to pick the one with the higher interest rate. But in doing so, make sure that the high-interest rate actually stays high. Don’t go for the ones that are only high in the begin and then trickles down as time goes by.
Make sure the bank is insured.
Specifically, make sure that you’re opening an account with a bank protected by the Canadian Deposit Insurance Corporation (CDIC).
Pick the right account extras.
Bells-and-whistles are nice, but some are better than others. Great extras to look for in a savings account are: free transactions, bonus Interac e-Transfers, and online and mobile banking options.
Find a savings account with no monthly fees.
Again, the goal is to find the best savings account that will let you maximize your money. A savings account that charges you seems a little counterintuitive.
Choose a savings account with the most number of free transactions.
The idea of savings accounts is to have a place to store your money for the long haul. It’s a place to put in and leave your cash. As such, banks usually charge you for your transactions. There’s nothing bad about limiting the number of possible transactions. But choose the one with the most leeway anyway, just in case.
All things considered, there are a number of options for savings accounts. There’s youth savings accounts, tax-free savings accounts, and seniors savings account. All of which provide different incentives. And all of which are designed with specific groups of people in mind.
What You Need to Know about the Best High-interest Savings Accounts
The creme de la creme – and the one you definitely want to look for – are high-interest savings accounts. High-interest savings accounts usually have no minimum balance. Not only that, some banks offer interest rates ranging from 1.05% to 2.25%. And that’s a lot considering the recession set the standard range from 0.8% to 2.1%.
There are downsides to high yield savings too. Some would offer fewer transactions at higher prices due to their nature. But this problem could be easily avoided by choosing the right bank. You have to pay income tax on the interest you earn too. However, again, this could be sidestepped. You just need to open a separate tax-free savings account and keeping the high yield account in that.
There’s a lot of savings accounts available to choose from. But by far the best option for a high-interest savings account in Canada is to choose one that operates online. By being completely digital, these banks have significantly less operational costs. As such, they’ll be able to offer you higher interest rates. Also, they usually provide round-the-clock customer care services for any questions you may have. Notable as being online-only banks are Tangerine and EQ Bank.
The best high-interest savings account in Canada
Tangerine was mentioned previously and for good cause. At the moment, Tangerine stands as the market leader when it comes to online banking. Being the pioneer to offer online high interest savings accounts, the former ING Direct changed the game. Tangerine allows users to complete transactions over a well-functioning mobile app. Further, they offered seamless integration with different services to make their banking experience unique. They incorporated easy transfers from your regular chequing account into your Tangerine savings account. And they offered integration with Mint, a crowd favorite among budgeting apps.
Both options are great considerations and both of them are insured by the government. They would be easy choices to make. However, ultimately, the best bank would depend on which one is best able to meet your banking needs.