High-Interest Savings Accounts

Conventional High-Interest Savings Accounts

Conventional High-Interest Savings Accounts (HISAs) are bank accounts accessed via bank machines or (in some cases) bank branches. Some conventional HISAs require electronic access or are offered by virtual (branch-free) banks. These savings accounts were introduced in Canada by ING Canada, which was one of the first "virtual banks", and offered significantly greater interest than the savings accounts then offered by major banks. Several other providers entered the market later, including President's Choice Financial, Ally Canada and Canadian Tire Financial. Some of the major banks now offer similar plans, such as RBC e-savings. Current rates for many of these accounts can be found at Cannex.

The account sponsor should be contacted for the details on establishing the account, transferring funds, account minimum, and other requirements. Prospective investors are also advised to check the deposit insurance coverage provided for the account and how it may relate to the investor's other accounts. For some of the virtual banks, the deposit insurance may be through a third-party that is providing the banking back-end. For example, with President's Choice Financial services, deposits are held by CIBC, a member of the Canada Deposit Insurance Corporation. Ally Canada is a product of ResMor Trust Company, which is a member of the Canada Deposit Insurance Corporation (CDIC).

Although these accounts may be suitable for normal savings account use, most of them are not RRSP-eligible, nor are they convenient for holding day-to-day funds at brokerage accounts. These defects are addressed with the fund-based High Interest Savings Accounts discussed below.

Fund-Based High-Interest Savings Accounts

Fund-based High-Interest Savings Accounts are money-market fund (MMF) alternatives offered by some bank, insurance or fund companies. They trade as if they were mutual funds - that is, they are bought or sold as fund units, usually of $1 or $10 value - but actually represent a CDIC-insured savings account (if denominated in Canadian dollars). Settlement date is T+1; that is, the business day after the trade. These accounts can be used to store free cash in brokerage or registered accounts. However, some brokers may impose additional fees or conditions if the fund is not one of the brokers' own fund family. This may have the effect of restricting the investor's choice to a single fund. Nonetheless, for small investors they are often more convenient than GICs or Treasury bills.

As securities priced under $3 are not marginable, HISA funds with a $1 unit value cannot be used as collateral for margin. On the other hand, HISA funds with a $10 unit price generally have a loan value of 95%, consistent with money market funds.

A list of some of the applicable funds is given below. Prospective investors should confirm fund availability, minimum purchase, and any fees (including penalty fees if the fund is sold within 90 days, which apply at some brokerages) with their brokerage before purchase. Some of this information may be available if the fund identification code (e.g., "RBF2010") is entered into the mutual fund selection box. Several issuers offer similar funds from different corporate entities so that each fund has separate CDIC insurance.

CA$ Fund Symbol	US$ Fund Symbol	Fund Sponsor	Comments
ATL5000		Renaissance (CIBC)	-
BTB100		B2B Trust (Laurentian)	-
DYN500	DYN400	Dundee Bank	No-fee in Scotia Itrade accounts
IBN100	IBN200	ICICI Bank	Not available for registered accounts or TFSAs
MIP510 MIP710	MIP511	Manulife Bank Manulife Trust	-
NBC100	NBC101	Altamira (National Bank)	-
RBF2010 RBF2020 RBF2030 RBF2040	RBF2014	Royal Bank RBMC RT Corp RT Co	No-fee in RBC or RBC Direct Investing accounts
TDB8150 TDB8155 TDB8157 TDB8159	TDB8152	TD Bank TDMC TDPMC CTC	-