What are the features of a high interest savings account?

Traditional savings accounts tend to offer a very low-interest rate, which makes it challenging to earn. To boost your savings consider opening a high interest savings account, also known as a HISA.

A HISA allows you to earn passive income by accruing interest on your balance. Before choosing a high interest savings account, you can compare different providers to see which accounts offer the most important features.

Features of a high interest savings account (HISA)

While the defining characteristic of a high interest savings account is the high interest rate, other factors must be considered. Here’s a list of features to consider when shopping for a HISA.

Interest Rate

A HISA allows you to earn a higher interest rate than a traditional savings account. However, the interest rate can vary based on where you choose to save, how long you save, and how much money you hold in your account.

Some institutions will offer an introductory promotional rate that allows you to earn an elevated interest rate, usually for the first few months. Once the promo period is over, you will revert to the regular interest rate.

Compounding

Different institutions offer different options for how interest is compounded. You can check with your bank or financial institution to see if they compound daily, monthly, or annually. Daily compounded interest will grow your savings faster.

Minimum Balance

It’s common for banks to require a minimum balance, but it’s also possible to open a HISA with a $0 balance. Check to see if a minimum balance is required to earn interest. In some cases, the interest rate varies based on the balance you hold in the account. For example, some banks offer a higher interest when the the balance you hold in your account meets a certain threshold.

Withdrawals

How you access your savings in a HISA will also vary. While some institutions provide bank cards or checks, many do not. In this case, you may have to transfer your money into a checking chequing account or do an e-transfer. You might also have access to a certain number of free monthly withdrawals and then receive a charge if you exceed the limit.

Monthly Fees

When comparing accounts, don’t forget to ask about fees. Find out if the account requires you to pay monthly maintenance, withdrawal, or transfer fees, as these can vary significantly between institutions.

Safety

When you save in a HISA, there is almost no risk to your money, as long as the bank has deposit insurance through the Canada Deposit Insurance Corporation (CDIC). With CDIC insurance, all eligible deposits are protected up to $100,000. Before you choose a HISA, confirm your CDIC membership.

The Bottom Line

If you have money set aside that you don’t need for day-to-day expenses, a high interest savings account offers a safe place to store your money while earning interest. Before you choose a HISA, you can compare different institutions to find the account that best suits your needs.