High interest savings account Canada: If you're saving for an emergency fund, short-term goal, or parking money between investments, a high-interest savings account (HISA) can be an attractive option. This guide explains what HISAs offer, how they compare to alternatives, how taxes and deposit insurance work in Canada, and steps to choose the best HISA Canada options for your needs.
What is a HISA?
Definition: A high-interest savings account (HISA) is a deposit account that pays higher-than-average interest while keeping funds liquid and accessible.
Typical use: Emergency funds, short-term savings (vacations, down payments), or cash buffer between investments.
Note: HISA rates are usually variable and can change with market conditions.
How HISA interest works
Rate types: Variable—linked to market rates (often influenced by the Bank of Canada policy rate). Some accounts offer promotional rates for a limited period.
Compounding: Interest may compound daily, monthly, or annually; daily compounding usually yields slightly more.
Payment frequency: Interest paid monthly or annually into the account.
Example calculation: At 3.00% annually, $10,000 grows to about $10,300 in one year (not accounting for taxes).
For central-bank influences, see the Bank of Canada's rate information on how policy affects savings yields in Canada: Bank of Canada interest rate information.
Benefits of a HISA
Liquidity: Easy access to funds — ideal for emergency savings.
Safety: Eligible deposits are often protected by the Canada Deposit Insurance Corporation (CDIC) when held at member institutions.
Simplicity: No market risk and straightforward interest calculations.
Flexibility: Can be held inside a TFSA or RRSP (see tax section below).
See CDIC coverage details here: Canada Deposit Insurance Corporation (CDIC) coverage.
Downsides and limitations
Variable rates: Banks can lower promotional or posted HISA rates at any time.
Inflation risk: If HISA returns lag inflation, real purchasing power falls.
Taxable interest: Interest earned is fully taxable in non-registered accounts.
Opportunity cost: Higher returns may be found in GICs, dividend stocks, or bonds over longer horizons.
Tax treatment in Canada
Non-registered accounts: Interest is taxed as income in the year earned. Keep receipts for tax reporting.
TFSA: Interest inside a TFSA is tax-free; allows tax-free growth and withdrawals.
RRSP: Interest inside an RRSP is tax-deferred until withdrawal (taxed as income then).
Tip: Using a HISA within a TFSA is often the most tax-efficient setup for short-term, taxable-interest savings.
For official tax rules, consult the CRA: CRA information on TFSAs and RRSPs.
HISA vs alternatives (quick comparison)
HISA vs Chequing account
HISA: higher rates, limited transactions in some products.
Chequing: transactional, low/no interest, easy debit/cheque use.
HISA vs GIC
HISA: liquid, variable rate.
GIC: locked-in term, guaranteed fixed rate (often higher for longer terms).
HISA vs Money Market Funds
HISA: guaranteed principal (if CDIC-insured) with lower fees.
Money market: subject to market risk, may offer similar yields.
How to find the best HISA in Canada
Compare HISA rates: Look for current posted rates; consider promotional vs long-term rates.
Check compounding frequency: Daily compounding is preferential.
Confirm fees and minimums: Many HISAs have no monthly fees; watch for withdrawal limits.
Look for CDIC membership: Confirm the institution and account type are covered.
Consider account placement: Use TFSA or RRSP wrapper if tax treatment matters.
Read fine print: Check for tied products (e.g., chequing bundle) and promotional expiry.
Helpful resource: Financial Consumer Agency of Canada (FCAC) guide to savings accounts.
Step-by-step: opening a HISA (or moving your savings)
Gather ID: Government ID, SIN, proof of address.
Compare providers: Use bank websites and quotes for current HISA rates.
Decide on registered vs non-registered: TFSA? RRSP? Non-registered?
Open the account: Online or in-branch — provide documents.
Fund the account: Transfer from your chequing account or another institution.
Set up transfers: Automate contributions for discipline.
Monitor rates: Revisit annually or when promotions end.
Checklist: What to look for in a HISA
Competitive HISA rates (and whether rates are promotional)
Daily compounding and monthly interest payments
No or low account fees
Minimum balance requirements
CDIC insurance for principal protection
Mobile/online banking quality and ease of transfer
Ability to hold inside TFSA or RRSP
Real-world strategies
Emergency fund: Keep 3–6 months of expenses in a HISA inside a TFSA (if you have contribution room).
Ladder with GICs: Combine short-term GICs and HISA for slightly higher returns while keeping liquidity.
Switch when rates change: Move funds if a significantly better HISA rate appears, but watch promotional terms.
Use online banks: Online banks often offer higher HISA rates due to lower overhead.
Are HISAs worth it?
Yes, if: You need liquidity, low risk, and simple access to savings — especially for short-term goals or emergency funds.
Maybe not, if: You seek the highest long-term returns and can tolerate market risk — then consider diversified investments or locked-in GICs for predictable returns.
Final tips and resources
Keep track of TFSA room: Contributions in a TFSA can affect eligibility if you unintentionally over-contribute.
Check CDIC rules: Coverage depends on how the account is registered (individual, joint, TFSA, etc.).
Re-evaluate annually: Interest-rate environment and needs change.
Useful Canadian resources:
For consumer banking guidance, see the Financial Consumer Agency of Canada (FCAC).
For deposit insurance rules, check the Canada Deposit Insurance Corporation (CDIC).
For tax and registered account rules, consult the Canada Revenue Agency (CRA) information pages.