Savers Roundup December 2023: Would you pay for a higher interest rate?

Neo Financial ups the competition

For the second time in less than a month, Neo Financial has raised its savings account interest rate, which now sits at 4.00% and is also newly available in Quebec. In Quebec, this ties it with the Wealthsimple Cash account for the highest interest rate on our savings account comparison chart. In the rest of Canada, that puts it in a 3-way tie behind Motive Financial’s 4.10% interest rate.

One of the accounts tied with Neo Financial at 4.00% is Wealth One Bank of Canada, which increased its regular savings account and TFSA interest rate from 3.65% to 4.00% last week.

KOHO Financial: Paying $4 per month earns you 5.00% interest

KOHO Financial’s account plans have changed again. Its Easy plan is free and offers a 3.00% interest rate on the balance in your account. However, you can get a 5.00% interest rate if you pay $4 per month for its Essential plan. This brings up the question of whether you would pay to get a higher interest rate, and reminds us of the forever debate of whether you would pay an annual fee for a credit card to get better rewards.

If you consider only the raw numbers, paying $4 per month could make financial sense. If your alternative is a 4.00% savings account elsewhere, you would need to keep an average of more than $4,800 in the account for the month to come out ahead with KOHO Financial’s Essential plan. (The difference is 1.00% of $4,800, divided by 12 months.) If you’re comparing against the KOHO Financial Easy plan’s interest rate of 3.00%, then you’ll need to keep more than $2,400 in the account to make the monthly fee worthwhile.