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Interest rates are in a holding pattern, as the central bank assesses how the dramatic run-up in rates from the past two years will affect inflation and the economy. When will rates start to drop again? The Bank of Canada kept the key interest rate the same on January 24, and said they expect inflation to remain around 3% for the first half of the year. The consensus is that it will take until the second half of 2024 before we see some rate cuts.

Big variations in savings account and GIC rates

There have been no savings account interest rate changes, up or down, on our comparison chart over the past month. We did see the long-awaited launch of Oaken Financial’s TFSA, although its 3.40% rate lags behind leaders such as Ontario-only Saven Financial (4.15%), Motive Financial (4.10%), and Wealth One Bank of Canada (4.00%).

The best promo rate is currently at Simplii Financial, where you can get 6.00% for 5 months if you are a new customer. There is a decent number of other promos for registered and non-registered accounts on our promos page.

GIC rates remain inverted (with shorter terms offering higher rates) and mostly unchanged, although there have been some minor increases in rates. For a moment, Peoples Trusts’ 15-month GIC was the highest GIC rate we track at 5.60%, although that has now dropped to 5.20%. You can still get up to 5.50% on a 1-year GIC (at Hubert Financial or Ideal Savings).

There is quite a variation in GIC rates offered. Tangerine Bank, which had made a bid to be competitive last year, is now an outlier at the bottom of non-registered GIC rates with a 5-year GIC of 3.35%, well below the top 5-year rate of 4.75% (at Hubert Financial and Ideal Savings) or even 5.00% at a GIC broker. To be fair, Tangerine’s registered GIC rates are meaningfully higher than its non-registered rates.

Cash back offers

We have some increased cash back offers this month:

• Neo Financial High-Interest Savings: $40 via Interac e-Transfer or $45 Amazon.ca gift card
• Tangerine: $150 via Interac e-Transfer or a $150 Amazon.ca gift card for opening a Money-Back Credit Card
• Scotiabank: $140 via Interac e-Transfer or a $150 Amazon.ca gift card for opening a Passport Visa Infinite credit card

Rewind to January 2023: the headline inflation number in Canada was 6.3% (from December 2022). The highest savings account interest rates on our comparison chart were Ontario-only Saven Financial at 3.75%, Oaken Financial at 3.40%, and Outlook Financial at 3.35%.

Today, Ontario-only Saven Financial leads the pack at 4.15%, followed by Motive Financial at 4.10%, and a trio of options at 4.00%: Neo Financial, Wealth One Bank of Canada, and Wealthsimple. You can even get 4.00% at EQ Bank if you set up direct deposit, or up to 4.75% in a brokerage investment savings account. Savings account interest rates increased modestly in 2023, but the year-over-year inflation number from December 2023 was 3.40%; thus your humble savings account can currently beat inflation! How’s that for some good news to start off 2024?

The beginning of the year signals TFSA and RRSP season, including another $7,000 of TFSA contribution room. If you’re looking for a short-term strategy, check our promotions page, with new promos this month for as high as 5.75%.

GIC rates have peaked; how will 2024 go?

GIC rates appear to have peaked in November and December. More than half of the financial institutions we track decreased their GIC rates in the first two weeks of January. Furthermore, the Bank of Canada governor says that the key interest rate will decrease at some point in 2024.

Shorter-term GICs are still offering better rates than longer-term GICs. 8 financial institutions on our GIC comparison chart will give you at least 5.40% on a 1-year term right now, whereas last year, the 1-year leader was a single financial institution at 5.30%. The 4-year and 5-year GIC rates are lagging behind, but you can still get 5.00% at Wealth One Bank of Canada, and slightly higher if you use a GIC broker.

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.

Holiday headlines

• Not all cash ETFs are created equal
• Saven Financial (Ontario only) now has an FHSA offering 6.00% until April 1, 2024
• The EQ Bank Card is now available in Quebec
• Oaken Financial is launching TFSA and RRSP accounts in January 2024
• Only one non-broker 6.00% GIC remains on our GIC comparison chart

Neo Financial’s Neo Money account has been languishing near the bottom of our savings account comparison chart, having kept its rates the same — despite a rising interest rate environment — for over a year. However, Neo Financial just released its High-Interest Savings account, and that account just got an interest rate increase to 3.75%.

Elsewhere, Canadian Tire Bank has increased its regular savings account and TFSA interest rate from 3.50% to 3.70%, while Ideal Savings increased its regular savings account interest rate from 1.01% (yes, 1.01%) to 3.60%, presumably to match merger partner Hubert Financial.

Motive Financial continues to top our chart with a 4.10% rate for both its regular savings and TFSA accounts. Wealthsimple is garnering more attention on our discussion forum thanks to its 4.00% Cash account interest rate and growing feature set.

GICs for 6.00%+

Both Motive Financial and Oaken Financial have hit new highs with 6.00% 1-year and 2-year GICs to lead our GIC comparison chart, and you can even get over 6.00% for a 3-year GIC via a GIC broker.

Ontario-only Omnia Direct is offering 6.00% for a 6-month GIC, 5.90% for 1-year GIC, and 6.05% for an 18-month GIC.

Latest promos for new deposits

Some recently added promotions to our promos page include:

• HSBC new deposit promo until January 12, 2024: 5.85% on balances up to $24,999; 6.35% on balances of $25,000 or higher
• Manulife Bank new customers: 5.25% savings account interest rate for the first 4 months if you open an account by December 15, 2023
• DUCA Credit Union (Ontario only): 5.75% (previously 6.25%) on new deposits to an Earn More Savings Account
• WFCU (Ontario only): 5.69% for 4 months on new deposits in an ALTO Savings Account opened by November 30, 2023

Odds and spends

• Oddly, LBC Digital is removing the ability to send Interac e-Transfers
• FHSA is coming to Hubert Financial. Who else offers an FHSA?
• Scotiabank credit cards are back on our cash back website, with up to $250 on successful sign-up

Wealthsimple and Manulife Bank are new to our chart

We’ve made two additions (Wealthsimple and Manulife Bank) and one removal (AcceleRate Financial) on our savings account comparison chart. AcceleRate Financial merged with Hubert Financial, and the merger has been the hottest topic on our forum over the past month.

Wealthsimple’s Cash account offers a minimum of 4.00% (with higher rates if you meet minimum thresholds for combined deposits across Wealthsimple’s offerings), which is just below rate leader Motive Financial at 4.10%.

Manulife Bank’s 2.85% savings account interest rate is a bit middling, but is nationally available and thus on the consideration list for Quebec residents.

How widespread are the Tangerine Bank and Simplii Financial promos for existing customers?

Net new deposit promos for existing customers at Tangerine Bank and Simplii Financial have become a staple on our promotions page. But just how prevalent are these promos? We ran a quick poll and discovered that 78% of respondents have received a Tangerine Bank promo at least once per year, versus 34% for Simplii Financial customers. 19% of Tangerine Bank customer respondents have received promos but less than once per year, versus 45% for Simplii Financial customers. And 3% of Tangerine Bank customer respondents have never received a new deposit promo, versus 21% at Simplii Financial.

Some GIC terms don’t need to be in full-year increments

Motive Financial is a financial institution that allows you to open GIC terms in partial year increments. Its 1-year rate is for terms of 12 months to less than 24 months; its 2-year rate is for terms of 24 months to less than 36 months; its 3-year rate is for terms of 36 months to less than 48 months; and so on.

For example, Motive Financial is currently offering a 2-year GIC for 5.70% and a 3-year GIC for 5.40%. If your desired term is closer to 3 years than 2 years, you could open a 35-month GIC (1 month shy of 3 years) for the 5.70% rate and end up with more money after 3 years than you would have in the 3-year / 36-month term.

More news for savers

• Neo Financial appears to have a new high interest savings account
• DUCA Credit Union’s new deposit promo is now up to 6.25% until January 31, 2024
• On October 1, the minimum balance to waive the monthly fee on the Scotiabank Ultimate Package chequing account increased from $5,000 to $6,000