Understanding Savings Accounts in Canada
A savings account is a type of bank account that allows you to store your money securely and earn interest on the balance. The interest rate on savings accounts can vary significantly depending on the bank and the type of account you choose.
In Canada, savings accounts are typically offered by banks, credit unions, and online financial institutions. Each type of institution has its own advantages and disadvantages. As a consumer, it’s important to understand the differences and choose the option that best suits your needs.
Banks
Banks are the most common type of financial institution in Canada. They offer a wide range of products and services, including savings accounts. Banks typically have a large branch network and offer convenient access to your money. However, they may also charge higher fees and offer lower interest rates than other types of institutions.
Credit Unions
Credit unions are member-owned financial cooperatives. They offer many of the same services as banks, including savings accounts. Credit unions may offer higher interest rates and lower fees than banks. However, they may have a smaller branch network and may not offer as many products and services.
Online Financial Institutions
Online financial institutions are becoming increasingly popular in Canada. They offer many of the same services as traditional banks and credit unions, but they don’t have physical branches. Instead, they offer online and mobile banking services. Online financial institutions may offer higher interest rates and lower fees than traditional banks and credit unions. However, they may not offer the same level of convenience or accessibility.
Factors to Consider When Choosing a Savings Account
When choosing a savings account, there are several factors to consider. These include:
Interest Rate
The interest rate is one of the most important factors to consider when choosing a savings account. The higher the interest rate, the more money you’ll earn on your balance. However, it’s important to remember that interest rates can change over time.
Fees
Some savings accounts may charge fees for things like monthly account maintenance, ATM withdrawals, or paper statements. It’s important to understand the fees associated with a savings account before opening it.
Accessibility
Accessibility is another important factor to consider. Some savings accounts may offer limited access to your money, while others may offer more flexibility. It’s important to choose an account that meets your needs.
Minimum Balance Requirements
Some savings accounts may require a minimum balance to be maintained in order to avoid fees or earn interest. It’s important to understand the minimum balance requirements before opening an account.
Other Features
Some savings accounts may offer additional features, such as overdraft protection or bonus interest rates for meeting certain criteria. It’s important to consider these features when choosing a savings account.
The Best Savings Accounts Rates in Canada
Now that we’ve covered the basics of savings accounts and factors to consider when choosing an account, let’s take a look at some of the best savings account rates in Canada.
EQ Bank Savings Plus Account
EQ Bank is an online financial institution that offers a savings account with a high interest rate and no monthly fees. The EQ Bank Savings Plus Account currently offers an interest rate of 1.50%, which is one of the highest rates available in Canada. This account also offers unlimited free transfers and no minimum balance requirements.
Tangerine Savings Account
Tangerine is an online bank owned by Scotiabank. The Tangerine Savings Account offers a competitive interest rate of 0.25%, which is higher than most traditional banks. This account also has no monthly fees and no minimum balance requirements. Tangerine also offers a cash bonus for new customers who open a savings account and deposit at least $250.
Alterna Bank High-Interest eSavings Account
Alterna Bank is a credit union that offers an online savings account with a competitive interest rate. The Alterna Bank High-Interest eSavings Account currently offers an interest rate of 1.20%. This account also has no monthly fees and no minimum balance requirements.
Motive Financial Savvy Savings Account
Motive Financial is an online financial institution that offers a savings account with a competitive interest rate. The Motive Financial Savvy Savings Account currently offers an interest rate of 1.25%. This account also has no monthly fees and no minimum balance requirements.
Simplii Financial High-Interest Savings Account
Simplii Financial is an online bank owned by CIBC. The Simplii Financial High-Interest Savings Account offers a competitive interest rate of 0.05%. This account also has no monthly fees and no minimum balance requirements. Simplii Financial also offers a cash bonus for new customers who open a savings account and deposit at least $100.
FAQs for Best Savings Accounts Rates in Canada
What is a savings account?
A savings account is a type of bank account that allows customers to save money while earning interest on it. Unlike a checking account, which is designed for frequent transactions, a savings account is typically used for longer-term savings that you don’t need to access regularly. Deposits in savings accounts are usually insured by government organizations such as the Canada Deposit Insurance Corporation (CDIC) in Canada.
How do I choose the best savings account rates in Canada?
When comparing savings account rates, it’s important to look at the interest rate offered, how often interest is paid (monthly, quarterly, or annually), and any fees associated with the account. You should also consider the bank’s reputation and customer service, as well as the convenience of their online and mobile banking platforms. It’s best to shop around and compare a few different options to find the account that offers the best combination of features, rates, and fees.
What is the average interest rate on savings accounts in Canada?
The average interest rate on savings accounts in Canada is around 0.10%, according to the Bank of Canada. However, it’s important to note that interest rates can vary widely based on the bank and the type of account, so it’s worth shopping around to find the best rates.
Are online savings accounts better than traditional savings accounts?
Online savings accounts often offer higher interest rates than traditional savings accounts, as they have lower overhead costs and can pass those savings on to customers in the form of better rates. They may also offer more flexible features such as unlimited free transactions, no minimum balance requirements, and no monthly account fees. However, if you prefer to do your banking in person or you value having a physical branch location to visit, a traditional savings account may be a better choice for you.
Is it safe to open a savings account online?
Yes, it is safe to open a savings account online as long as you choose a reputable bank with strong security measures in place. Look for a bank that uses encryption to protect your personal and financial information, and that offers two-factor authentication when logging in to your account. You should also make sure that the bank is insured by the CDIC or another government organization, to ensure that your deposits are protected.