Please note this is not a sponsored post
It is notorious Canadian banks and credit unions alike pay peanuts on savings accounts. Guaranteed Investment Certificates -GICs- aren’t faring better.
As a reminder, in order to not loose buying power on any deposit you make, the interest paid needs to be above inflation. Currently, inflation in Canada sits at 2%. If your savings are in a non-registered account, you need to factor-in the taxes as well.
Money market funds used to be the solution to the interest rate conundrum….not anymore.
A well diversified portfolio always includes a portion of cash savings, regardless of your risk tolerance, age and objectives. The amount of cash, however, depends on the 3 latter points. The reason for this is simple.
CASH PROVIDES STABILITY
In turbulent times, it is best to draw from your cash reserves, rather than selling your stocks and bonds at a loss. Remember, as long as you are not actually selling your investments, you are actually not gaining or losing money.
So, to come back to the original intent of this post, and to cut to the chase, there are currently only 2 banks in Canada offering high-interest savings accounts and GICs that are worth your money.
EQ BANK
EQ Bank has been consistently offering rates in the 2.30%-2.60% range on their savings accounts. For Canada, this is pretty good!
A lot of financial institutions tend to offer a great rate for 2 or 3 months and then go back to 0.5%. EQ Bank is not such bank.
EQ Bank also offer GICs with very good rates as well. For example, their 1-year term currently sits at 2.76%. Their 5-year term is at 3.36%.
There is no minimum balance required on the savings account and for GICs, it is only $100.
EQ Bank does not charge any monthly fee and you can also do 5 Interac transfers per month at no cost.
Opening an account is very simple. All you need to do is go to their website and follow the prompts. No need to go to a branch.
The only downside to EQ Bank is that they currently do not offer registered accounts such as TFSA or RRSP.
For this, please check…
TANGERINE BANK
Tangerine offers a wide range of products, more than EQ Bank. From chequing to savings accounts, RRSPs, TFSAs, investments, mortgages….you name it, they most likely have it!
The interest paid on their savings account is lower than EQ bank’s, including for TFSAs. It currently sits at 1.10%.
Their rates on GICs, however, are interesting -no pun intended-, particularly in registered accounts. Their 1-year term is at 2.50%; their 5-year term is at 3.00%.
Tangerine does not charge you any fee and does not require a minimum balance either. Opening an account is equally easy, but your ID needs to be verified and you will need to go to one of their branches or any Canada Post office to do so.
FINAL WORD
I opened accounts at both EQ Bank and Tangerine and found the process very quick and easy.
I am ready to see my cash reserve grow.
If you are interested in opening any account with Tangerine, please use my key 52844966S1.
We will both earn $50.00!
The Money Savvy Blog 