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Today we saw the official launch of EQ Bank, whose headline feature is a 3% savings account. Regardless of whether even 3% can be called “high interest”, that is still 71% higher than the top rate (1.75%, shared by 6 institutions) on our chart and almost 4 times higher than Tangerine and PC Financial’s standard savings account interest rates (0.8%). EQ’s savings account also includes bill payments and 5 free Interac e-transfers per month, among other features.

EQ Bank’s launch is the latest in a string of new developments in the Canadian high interest savings landscape in this current era of generally low rates. Undoubtedly, people are seeking higher returns in equities and other investments, but high interest savings remain a key element of many Canadians’ strategies.

20 years ago, PC Financial launched, and a year later ING Direct (now Tangerine) came onto the scene. These were game-changers, offering rates much higher than the big banks and pushing an online model where the savings from not having traditional brick & mortar locations could be passed on to customers. They were considered pioneers in this space and are very much mainstream today.

Fast forward to 2012 when Scotiabank acquired ING Direct, and re-branded it as Tangerine in 2014. Savers complained about how Tangerine would never be as attractive again, but in reality, Tangerine / ING’s rates had lost their competitive edge since about mid-2009.

The online divisions of several Manitoba credit unions, as well as other upstarts such as Canadian Direct Financial, Canadian Tire Financial, and ICICI Bank launched in the 2000s. (Technically, Achieva Financial came even earlier: 1998.) They quickly hit the top of the rate charts and have stayed there to this day. None of them have reached the name recognition or adoption of PC Financial and Tangerine, but savers in search of the best rates have been touting these institutions for many years, and the number of alternatives has increased steadily.

In 2013, we saw the beginning of frequent promotion rates. While there have always been promos for new accounts, these promo rates advertised the best rates for new deposits in existing accounts. A look at our promo page shows the proliferation of such offers. Although PC Financial and Tangerine’s regular rates still languished at the bottom of the chart, these promos shot them back to general relevance. These promos require savers to strategize more, however, and many people transfer their savings between institutions before a “new deposit” promo ends so that they are eligible for the next one. Zag Bank joined the promo scene, although with a few glitches. Tangerine and Zag Bank have also started to offer promotion rates on entire balances instead of just new deposits. Tangerine has recently started an even more involved variation where you have to call in to ask for a higher rate, testing the limits of how much savers are willing to chase higher rates. This keeps the hardcore savers mostly happy but normal savers who can’t be bothered still get the lower rates.

Thus, at the beginning of 2016 we still have a few financial institutions offering good, normal rates on savings accounts on all balances, and an increasing number of institutions trying to stay relevant by relying on promotions that make savers jump through hoops. EQ Bank states that 3% is their regular, non-promo rate. There is a bit of hope that this could usher in a new era of high interest savings despite the general economic malaise, but only time will tell whether EQ Bank can become a serious player!

This article explores the pros and cons for Canadians to open US dollar high interest bank accounts, and provides an overview of the various options available.

There are many cases where you might benefit from having a US dollar high interest bank account, if you stay frequently in the US, go south for the winter, or go cross-border shopping, for example. US dollar high interest accounts…

• are relatively easy to set up
• make it easy to transfer funds between Canadian and American dollar accounts
• help you take advantage of favourable exchange rates
• are a decent option to transfer money to from low interest US accounts at the “big banks”

There are also a few disadvantages to owning a US dollar high interest savings account:

• Another account to keep track of.
• The exchange rate may not always work in your favour.
• It might not be practical for daily transactions.

The following “high interest savings” financial institutions offer US dollar high interest savings accounts (note: interest rates are listed as at publish date; they are subject to change):

Features of these accounts

• All of the above banks are available to Canadian residents
• There are no minimum deposits required
• No monthly fees, with the exception of Manulife, which charges $1 a month for a statement.
• US dollar high interest savings are not covered by CDIC.
• Interest on all accounts are calculated daily and paid monthly
• No chequing privileges on US high interest savings accounts except for Manulife

These accounts can be funded on an ongoing basis by making transfers from a Canadian bank account at the current exchange rate; transfers from a linked US dollar account at another Canadian financial institution; or you can mail in a cheque to deposit that is made payable to yourself in US dollars, provided that it is drawn on a Canadian Bank. You cannot deposit cheques payable to yourself drawn on US banks or deposit these cheques through an ATM. In some cases, withdrawals can be made at an ATM, but this service is very limited. If this service is important to you, please check with the relevant bank prior to opening the account.

These general account features and fees are listed on each bank’s website and are subject to change. Information should be verified prior to opening an account.

How These Accounts Work

Ally Financial

http://www.ally.ca/en/us-dollar-savings/

Opening the account: Apply online. You can make your initial deposit in either Canadian or US dollars. If you choose to send an opening deposit cheque in US dollars, it must be from a US dollar account at a Canadian financial institution.

Withdrawing funds: You can transfer funds from Canadian dollar accounts into US dollar accounts and vice versa. The system will provide you with an exchange rate that you can confirm or decline.

There is a convenient online currency converter.

Hubert Financial

https://www.happysavings.ca/the-american-dream.aspx

Opening the account: Apply online. You can send a cheque from US dollar account at a Canadian financial institution with your application payable to yourself for your first deposit. You can convert money from your Happy Savings Canadian account to your US Happy Savings Account at any time.

Withdrawing funds: Transfer funds from your US account to your Canadian account at any time. Hubert is not able to link their US dollar account with another financial institution’s US dollar account. To transfer funds to another US account, wire transfer is available for a fee of $22.50.

Exchange rates are posted on their website.

Deposits are covered by the Deposit Guarantee Corporation of Manitoba.

ICICI Bank

http://www.icicibank.ca/personal/personalaccounts/hiSave.htm

Opening the account: Apply online. Write a personalized cheque (with your name pre-printed) in the currency of the account from any Canadian financial institution, payable to yourself for any amount, as your initial deposit. Send with your application.

Withdrawing funds: You may move money between your Canadian dollar and US dollar accounts within ICICI Bank Canada. To move money from or to an external linked account, the external linked account must be in the same currency as your account with ICICI Bank Canada. For example, you may transfer money between your US dollar savings account in ICICI Bank Canada and the linked US dollar savings account with another financial institution.

ING Direct

http://www.ingdirect.ca/en/save-invest/usisa/index.html

Opening the account: Apply online. Send a cheque in US funds made payable to yourself from your chequing account at a Canadian bank or financial institution with your application for your first deposit.

Withdrawing funds: Your initial cheque links your bank account to your new ING DIRECT Investment Savings Account. You can transfer money between your bank and ING DIRECT whenever you want. You can transfer funds to and from your Canadian high interest savings account.

Exchange rates are posted on their website.

Manulife Financial

http://www.manulife.ca/canada/mbank.nsf/public/bank_personal_high-interest_deposit_accounts

Opening the account: Application must be completed with a financial planner. Send a cheque payable to yourself from another Canadian financial institution US dollar account, with the destination account number written on the back. Once your account is set up, you can deposit funds into your account by using the online banking system or the interactive telephone system.

Withdrawing funds: When making online transfers and writing cheques, the currencies must match. Transfers may be between two Canadian-dollar accounts or between two U.S.-dollar accounts only.

Comparison of interest rates at full service “big banks”

There are advantages to having a US Dollar bank account with one of the “big banks”. For example, if you are a Canadian business with US clients and receive occasional payments in US Dollars, you can deposit payments directly into your US dollar savings or chequing account.

BMO and CIBC have US dollar credit cards where US purchases are charged in US dollars. You can thus avoid exchange rate fees and timing issues. There are also some Canadian dollar credit cards (see this article for a summary) that do not charge an exchange rate surcharge. You lose the ability to time your exchanges, but if you are only making purchases in US dollars and payments in Canadian dollars, there will be some savings.

Check with your bank to see if they will permit US dollar cheque deposits through an ATM; you might have to go to a branch to make a deposit.

In some cases, withdrawals can be made from ATMs, but this service is limited. If this service is important to you, please check with the relevant bank prior to opening an account.

The table below summarizes general account features and fees provided on each bank’s website and the details are subject to change. Information should be verified prior to opening an account.

With the proliferation of high interest savings accounts, the chequing account is looking more and more unattractive. With zero to low interest and tons of fees (I cringe at the reports that say the average person pays over $200 a year in fees), you’re sometimes better off keeping cash under your mattress. Even the chequing account of all chequing accounts (at Coast Capital Savings) still has some drawbacks. For example, it gives you 0% interest and you have to pay for cheques after your first 10.

The only reason why I keep a chequing account is so that I can deposit the occasional foreign currency cheque with a teller and so that I can write cheques (although some hybrid accounts let you write cheques). However, I try to keep as little money as possible in my chequing account at all times.

Is it possible to experience high interest, no fees, and still have access to your money when you need it? No single account satisfies this, but as with most things in life, you can tweak your habits to improve you situation. Most day-to-day fees and hassles involve debit card and ATM transactions, cheques, bill payments, and transfers. Here are some simple tips that can help you to address these issues to get the most out of your bank accounts.

Use credit cards as much as possible

Stores would probably prefer that you use cash, but to the consumer, using a credit card helps you in three ways. First of all, you can perform unlimited credit card transactions (well, as long as you have the money for it). With many debit cards, your chequing account only allows you a certain number of transactions per month. Second, many credit cards have no annual fee and give you rewards like cash back or points to buy groceries and such. Third, you only have to pay off your credit card once a month. This means that you can continue to earn interest on money that sits in your bank account for up to two months before you have to pay off your credit card bill without penalty.

Of course, you have to be careful with credit cards. If you carry debt on the card, then obviously you are being charged interest. Also, if you have trouble spending money that you don’t have, credit cards exaggerate the problem. But keep track of your purchases and you should have no problem.

Pay your bills online or via telephone

Often, paying your bills online or via telephone is free. You don’t need to write a cheque, you don’t need to mail anything, and you don’t need to drive anything. In addition, online of phone payments are often posted the next day, so you don’t have to wait the week or more with other types of payments.

Use PayPal

With PayPal, once you have linked your bank account to your PayPal account, you can pay people via “pre-authorized payments”. This is different than debit card payments because there are often chequing account limits and fees on debit card transactions but none on pre-authorized payments (although you should check this with your bank).

Although PayPal became big because of eBay, you can use PayPal to pay for items and subscriptions on an increasing number of websites.

If you and your friends have PayPal accounts of the “Personal” type, you can pay each other instantly and without fees via pre-authorized payments. This lessens your need to carry around as much cash (thus lowering the need to go to an ATM) or write cheques.

Try and get your friends to open accounts with the same bank

Often, transfers within the same bank are unlimited and free. I have a friend that I’m constantly lending and owing money to. We pay each other back instantly and without fees through online banking because we both have accounts with the same bank.

Carry some cash around and don’t use other networks’ ATMs!

ATM network fees are a pain. But really, just find an ATM that is part of your bank’s network! For example, if you have an account with HSBC or any of the credit unions, you can use ATMs on any other HSBC or credit union THE EXCHANGE Network (I think it’s officially capitalized) without paying any fees. As another example, if you have an account with PC Financial, you can use any CIBC bank machine without paying network fees.

And if you have at least a couple hundred dollars in your chequing account, whenever you withdraw cash, just try and withdraw larger amounts at a time (like $200 instead of $60). This might sound simple too simplistic, but I used to always withdraw the smallest amount needed; it made a huge difference to withdraw slightly higher amounts in order to decrease the frequency of trips to the ATM.

Don’t be afraid of opening multiple accounts at different banks

Many chequing accounts that have no minimum balance simply limit the number of transactions you can do. So if you have $200, you can just keep $100 in one account and $100 in another account and thus get double the number of allowed transactions. And if you have accounts at different banks, this means that you have probably increased the number of ATMs you can access without incurring network fees.

Pick a high interest savings account over short-term GICs and pair a high interest savings account with a chequing account in the same bank

This goal of this tip is to help you earn a high rate on your money while keeping the money accessible.

High interest savings account rates are comparable to short-term GIC rates, but of course you don’t have to lock your money in. If you keep as much money as possible in a high interest savings account and have a chequing account with the same bank, you can transfer money back and forth as many times as you want between those accounts either instantly or within 1 business day on an as-needed basis. So if you know you need to write a cheque on a certain date, simply transfer your money last-minute from your high interest savings account to your chequing account. This trades off the additional simple step in order to access your money for chequing needs with the ability to earn a higher rate on your money.

*** 2012 update: this article is getting very out of date and is no longer actively maintained. However, please see our free chequing table that is more actively updated.

Recently, I needed to switch my daily bank account (my chequing account). I had been with my previous bank for over 13 years so I had not had the need to be educated or informed on what was out there. When I started looking into a couple of options, I realized that what I really needed was a comparison chart of all my options so that I could weigh the benefits of each one. Instead of just keeping such valuable information to myself, I thought I would share it with you.

First of all, you should have some information on what my financial background is like and what my banking needs are. I am a conservative investor, holding most of my funds in high interest savings accounts and in term deposits (or GICs), registered and non-registered. I am at a stage in my life where I am looking to purchase a place, so I need access to my funds either tomorrow or in months when I actually find a place that I want to buy.

In terms of my banking needs, it is very simple: I don’t want to be limited and I don’t want to pay fees. Sounds simple, but it really isn’t. I am looking for an account where I can perform as many transactions as I need, including bill payments, transfers, deposits, withdrawals and Interac direct payments. I also want to have cheques and easy access to ATM machines if I need one.

Based on this, I did a comparison of accounts at banks and credit unions, large and small. I focused first on finding accounts that did not have any fees and then on the features they provided for daily banking. I did not include accounts that were free but limited, for example only providing 4 free transactions a month; this would just not meet my needs.

Please note that this comparison table is accurate to the best of my knowledge as of August 28, 2007. Please let me know if you see any errors and I will correct them. Also, please check with the specific banks to confirm any information.

*HSBC Direct Savings Account is a high interest savings account with no minimum balance required and no monthly fees.

I also noted that there are some banks that do not offer such an account: RBC, CIBC, and Envision Credit Union.

*** 2012 update: this article is getting very out of date and is no longer actively maintained. However, please see our free chequing table that is more actively updated.