How to Choose & Open a HISA/ HYSA
What is a High-Interest Savings Account?
A High-Interest Savings Accounts (HISAs), also called High-Yield Savings Accounts (HYSAs), is a type of savings account that offers a higher interest rate compared to a traditional savings account. This means that the money you deposit in the account earns more interest over time, helping your savings grow faster.
High-interest savings accounts are a popular choice for individuals looking to maximize their savings with minimal risk, as they provide a secure place to store your money while earning a competitive return.
These accounts are ideal for anyone who wants to make their money work harder without committing to riskier investments. Whether you’re saving for a specific goal, like a vacation or a down payment on a house, or simply want to build a solid emergency fund, a high-interest savings account can be a smart and effective way to achieve your financial objectives.
In this blog post, we'll delve into the benefits of high-interest savings accounts, what to look for when choosing one, and how to get started. By the end, you’ll have a clear understanding of how these accounts can help you grow your savings more efficiently and securely. Let's get started on the path to smarter saving!
What to Look for in a High-Interest Savings Account
First things first: let’s talk about what you should be looking for when choosing a high-interest savings account.
Here are a few key factors to consider:
Interest Rate: Naturally, the interest rate is a crucial consideration. Look for accounts offering competitive rates that will help your money grow faster. Keep in mind that some accounts may offer introductory rates that drop after a certain period, so be sure to read the fine print.
Minimum Balance Requirements: Some accounts may require you to maintain a minimum balance to qualify for the advertised interest rate. Make sure you're comfortable with the minimum balance requirement and that it aligns with your financial situation.
Fees: Watch out for any sneaky fees that could eat into your savings. Common fees include monthly maintenance fees or fees for falling below the minimum balance. Ideally, you want an account with no or low fees.
Accessibility: Consider how easy it is to access your funds when you need them. Look for accounts that offer convenient online banking, mobile apps, and even ATM access. Also watch out for withdrawal limits (e.g., only allowed 2 withdrawals per month) and withdrawal timeframes (e.g., takes up to 5 days to transfer to your checking account). Many HISAs have no withdrawal limits and you’re able to transfer money immediately or within 24 hours so keep your eyes out for them!
Bank Reputation and Insurance: Ensure that the bank or financial institution offering the savings account is reputable and trustworthy. For Canadians, look for accounts insured by the Canada Deposit Insurance Corporation (CDIC). In the US, accounts should be insured by the Federal Deposit Insurance Corporation (FDIC) for added security.
Short-Term Offers: Be cautious of short-term promotional offers that may expire, leading to a decrease in interest rates. Make sure you're aware of any changes that may occur after the promotional period ends.
Some people like to maximize their earnings by jumping from one promotion to the next, sometimes as often as every 6 months. If you have the time to do this, feel free to go for it! But note that most people can’t be bothered to deal with the admin side of doing this so they keep an eye out for the highest interest rate without a promotion (including us!).
Now that you know what to look for, let’s explore how to open a high-interest savings account in both Canada and the US.
Choosing a High-Interest Savings Account in Canada
In Canada, traditional banks like TD Canada Trust and CIBC offer high-interest savings accounts, but you may also want to consider non-traditional banks like Wealthsimple, EQ Bank, Simplii Financial, Neo, Koho, or Tangerine. These online banks often offer competitive interest rates with fewer fees.
When comparing accounts, pay attention to the interest rates, fees, and minimum balance requirements. Wealthsimple, for example, offers a high-interest savings account (not just a promotion) with no monthly fees and competitive interest rates.
Choosing a High-Interest Savings Account in the US
In the US, you'll find a similar mix of traditional and online banks offering high-interest savings accounts. Banks like Ally Bank, Marcus by Goldman Sachs, and SoFi are popular choices known for their competitive rates and minimal fees.
When evaluating accounts, consider factors like interest rates, fees, and accessibility. SoFi, for instance, offers a high-yield savings account with no monthly maintenance fees and competitive interest rates.
One resource that we recommend checking out is Nerdwallet, who maintains an always-up-to-date list of the best HISAs in Canada and the US.
Opening Your Account
Once you've chosen the right high-interest savings account for your needs, opening it is a breeze. Most banks and financial institutions allow you to apply online, often requiring basic personal information and a funding source for your initial deposit.
Be sure to review the terms and conditions carefully before finalizing your application. Once approved, you can start depositing your savings and watching your money grow!
KEY TAKEAWAYS:
When choosing a high-interest savings account, prioritize factors like interest rates, fees, and accessibility.
Traditional and online banks in both Canada and the US offer high-interest savings accounts, so explore your options to find the best fit.
Ensure that the bank or financial institution is reputable and insured for added peace of mind.
Keep an eye out for short-term promotional offers and be aware of any changes that may occur after the promotional period ends. Read the fine print!
With the right high-interest savings account, you can watch your savings grow faster and take steps towards achieving your financial goals.
About The Authors
Amanda and Siobhan found a shared passion for personal finance shortly after completing their MBAs in 2018. Amanda excelled as a Director of Product in the tech industry, while Siobhan established herself as a leader in e-commerce before transitioning to academia as a Professor.
In 2020, they joined forces to found Hiver Academy, a platform born from their own experiences and triumphs in conquering student loans and building wealth. Realizing that financial success is within reach once the complexities are simplified, their mission now revolves around empowering individuals to achieve financial freedom.
With a wealth of knowledge and a commitment to demystifying money and investing, Amanda and Siobhan are dedicated to helping others navigate the path to success.
