HISA (High Interest Savings Accounts)

What Is a High Interest Savings Account?

A high interest savings account (HISA) is a type of savings account that offers a higher interest rate than a regular savings account. It’s a low-risk way to earn more on your savings while keeping your money accessible.

In Canada, these accounts are available through major banks, online banks, credit unions, and fintech platforms.

How Do HISAs Work?

• Interest is paid on your balance, daily, monthly, or annually depending on the bank’s terms.
  
• Rates are typically variable, which means they can go up or down.
  
• Most HISAs are non-registered, but you can also find TFSA or RRSP high interest options.
  
• Some accounts offer introductory rates for a limited time (e.g., 4% for 3 months).
  

Benefits of a HISA

• Better returns than regular savings accounts
  
• No risk of losing your money, unlike investing in stocks
  
• CDIC or provincial deposit insurance protects your deposits (up to $100,000 per insured category)
  
• Quick access to funds, often with no penalties or fees for withdrawals
  
• Great for short-term goals, like saving for a trip, emergency fund, or down payment
  

What to Look For

When choosing a HISA, make sure you consider the following aspects:

Interest Rate
Is it competitive relative to the rates on other accounts? Is there an expiry on promo rates?

Fees
Are there monthly fees on the account that will eat into your potential earnings?

Accessibility
Can you transfer funds easily in and out of the account? Is there a minimum holding period within which you cannot withdraw your funds?

Deposit insurance
Are your funds covered by some sort of insurance or backing scheme? Most accounts are, but they will have a maximum insured amount.

Account type
TFSA, RRSP, or non-registered? This will have implications on tax returns.

Example: Regular vs. High Interest Account

Below is a comparison of how much a regular and high interest savings account would earn after 1 year, with an initial balance of $10,000.

Regular savings account
With an annual interest rate of 0.05%, this account would return $5.

High interest account
With an annual interest rate of 4.00%, this account would return $400.

Remember these earnings are based on a fixed interest rate and only span a one year duration.

Key Takeaways

• High interest savings accounts help your money grow faster with minimal risk.
  
• They’re ideal for emergency funds and short-term savings goals.
  
• Shop around for the best rates, and be aware of fees or time-limited promotions.

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