6 Reasons a High Interest Savings Account Can Help You Fight

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Knowing where to put your savings can be difficult. Investing can yield high returns, but it’s harder to access your money in a flash. Although your standard savings account is still accessible, interest rates can be low. This can be hard to swallow as the cost of living keeps rising.

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If you’re looking for low risk, but hoping for modest returns, High Interest Savings Accounts (HISs) may be the answer.

Introduced to Canadians over two decades ago, CAIS offer higher interest rates than your standard everyday savings accounts. HISA rates are higher than they have been in years and are expected to rise further. This is the result of the Bank of Canada raising its target interest rates four times so far in 2022. On July 13, it announced the largest increase yet, bringing the funding rate to one day at 2.50% in the hope of calming inflation, which reached 8.1%. in June.

When the Bank of Canada raises rates, other lenders generally follow suit. That’s bad news if you’re in debt, but good news if you have money in the bank, because higher rates mean higher returns.

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Even though HISAs generally pay significantly more interest than a checking or savings account from a traditional bank, many people are hesitant to open one. Here’s what you need to know about HISAs, including how to set one up so you can start seeing your savings grow.

They pay high interest

The obvious reason to get a HISA is the high interest they pay. For example, digital banks such as EQ Bank, Neo Financial, and Oaken Financial currently offer HISAs that pay 1.65% to 1.80% interest. Although it may not seem like much, daily savings accounts usually earn next to nothing. Even then, you may need to keep a minimum amount in the account before you start earning interest.

More and more financial institutions have started to introduce their own HISAs, but their interest rates are generally lower, around 0.30% to 0.50%. When you sign up for a high-interest savings account, watch for promotions such as an increased interest rate for three months on new deposits. Some savvy customers will constantly move their money from one bank or credit union to another to maximize their returns.

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There are usually no fees

The other reason it’s worth signing up for a HISA with a digital bank is that there are usually no monthly fees or minimum balance requirements. Plus, you’ll often get unlimited transactions, including free Interac e-Transfers. If you normally do a lot of transactions, this can significantly reduce the fees you pay for banking.

With savings accounts, many traditional banks no longer charge monthly fees, but you can have a limited number of transactions unless you keep a minimum balance.

Unfortunately, Canadians are all too familiar with bank charges. High-interest savings accounts are a welcome role reversal, where banks pay you for the privilege of holding your money.

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You can easily transfer funds

Whether you opt for a HISA with a digital bank, traditional bank, or credit union, accessing your money is surprisingly easy. You can link your HISA directly to your bank accounts and transfer money as needed. That said, these types of transfers can sometimes take up to two business days.

If you need access to money immediately, you can take advantage of free wire transfers. Alternatively, a few digital banks, such as Simplii and Tangerine, offer debit cards so you can withdraw funds at ATMs.

It’s a good place to keep your money

A HISA is a great place to hold money if you have short-term goals or aren’t sure what to do with your money right now.

A high-interest savings account might be a good place to:

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When you have short-term goals, protecting your money is essential. This is why a HISA is the best place to put your money. That said, guaranteed investment certificate rates have been climbing lately. Buying a GIC with a term that matches your investment schedule is another option for earning interest.

Your money is insured

If you open a HISA with a member of the Canada Deposit Insurance Corporation (CDIC), your deposits are insured up to $100,000 per eligible account. This means that if your financial institution should ever go bankrupt, you could get your money back in just days, thanks to CDIC insurance.

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Eligible accounts include deposits held:

This means you could have up to $800,000 in coverage for various accounts at one bank. You can open accounts at another financial institution if you need more coverage.

If you do business with a credit union, your deposits will also be insured. Insurance coverage would fall under the regulatory body that oversees the credit union in the province or territory where you reside.

They are easy to configure

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Many people don’t realize that setting up a HISA can be incredibly easy. To open an online account, you must generally meet the following conditions:

Setting up your account is often done online and only takes a few minutes. You will also likely need to provide photo ID and your mobile device number to confirm your identity.

Once your account is open, you can link any external bank account by following your account instructions. It should only take a few days, so you’ll be set up in no time.

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.