[Note: This post has been updated as of Jan. 27, 2015 to note a couple of recent changes at discount brokers and to reflect the drop in interest rates subsequent to the Bank of Canada rate cut on Jan. 21, 2015. Feel free to have it bookmarked.]
You can park cash in a High Interest Savings Account (HISA) in a discount brokerage account by buying it just like you would purchase a mutual fund. These HISAs typically pay much higher interest rate than money market funds and are ideal for the cash balance in your Registered Retirement Savings Plan (RRSP), Tax-Free Savings Account (TFSA) and investment accounts. Like online savings accounts like Tangerine, Investment HISAs are eligible for Canada Deposit Insurance Corporation (CDIC) insurance.
First a note of caution: first check with your broker that no fees of any kind are charged for buying or selling HISAs and no fees are applied for early redemptions. For example: Scotia iTrade charges an early redemption fee of 1 percent (minimum of $38.88) on all mutual funds other than Scotia and Dynamic Funds held for less than 90 days. A Scotia iTrade client parking $10,000 for 30 days in a TD HISA will earn $10 in interest but pay an early redemption fee of $100. If the client had instead parked her cash in the Bank of Nova Scotia HISA, there would have been no early redemption penalty.
The savings accounts offered through discount brokers have one huge advantage over high interest savings accounts offered by online banks. The cash parked in HISAs are counted towards the cash balance available in an account. Therefore, these funds are readily available for your trades and your broker may even automatically sell all or some of your HISA to fund your trade. In contrast, parking cash in an online savings account is not practical for registered accounts like RRSPs, RRIFs and TFSAs and it may take 3-4 business days to transfer money from (or to) an online bank to (or from) taxable brokerage accounts. These savings accounts are also a much better alternative to traditional money market accounts because they pay a much higher interest rate. For example, as of this writing, the TD Canadian Money Market Fund sports an yield of 0.41 percent which is much less than the typical 1.0 percent paid by discount broker HISAs.
List of Discount Broker High Interest Savings Accounts (interest rates as of Jan. 27, 2015):
|Account Name||Fund Code(s)||Initial Minimum||Interest Rate||Notes|
|B2B Bank HIIA||BTB100||No Minimum||1.35%|
|Renaissance High Interest Savings||ATL5000||$1,000||1.25%||Best at CIBC InvestorsEdge and QTrade|
|Altamira Cash Performer||NBC100||$1,000||1.0%||Best at Credential Direct, Disnat and National Bank Direct|
|Hollis Investment Savings Account||DYN500||$1,000||1.00%||Best at Scotia iTrade|
|Bank of Nova Scotia ISA||DYN1300||$1,000||1.00%||Best at Scotia iTrade|
|BMO CAD HISA||AAT770||$5,000||1.0%||Best at BMO InvestorLine|
|RBC Investment Savings||RBF2010, RBF2020, RBF2030, RBF2040||$500||1.0%||Best at RBC Direct Investing|
|TD Investment Savings||TDB8150, TDB8155, TDB8159, TDB8157||$1,000||1.0%||Best at TD Direct Investing|
|Manulife Bank/Trust Investment Savings||MIP510, MIP710||1.25%|
|Home Trust HISA||HOM100||$1,000||1.40%|
|ICICI Bank HIIS||IBN100||1.20%||Not available for RRSP accounts|
Many discount brokers also carry US$ high interest savings accounts. Note that US dollar HISAs are not eligible for CDIC insurance.
Manulife Bank US$ Investment Savings Account (MIP511): 0.20%
ICICI Bank US$ HIISA (IBN200): 0.25%
Dundee US$ Investment Savings Account (DYN400): 0.20%
Bank of Nova Scotia US$ ISA (DYN1350): 0.20%
RBC US$ Investment Savings Account (RBF2014): 0.20%
BMO US$ HISA (AAT780): 0.20%
TD US$ Investment Savings Account (TDB8152): 0.20%
Altamira US$ High-Interest CashPerformer (NBC101): 0.20%
Availability at discount brokers
The following information is presented on a best effort basis based on reader feedback, Canadian Money Forum posts and Rob Carrick’s June 1, 2014 column. Please do your due diligence and check with your broker first before proceeding.
TD Direct Investing: TDB8150, TDB8155, TDB8159 and TDB8152 (USD) have no fees. Other HISAs not available since 2012. TDB8157 is also not available.
RBC Direct Investing: RBF2010, RBF2020, RBF2030, RBF2040 and RBF2014 (USD) have no fees. Other HISAs not available.
Scotia iTrade: Only DYN500, DYN1300, DYN400 and DYN1350 are no-fee. Other funds are available but iTrade charges a fee of 1% (minimum of $38.88) for non-Scotia funds redeemed within 90 days.
CIBC Investor’s Edge: No fee on ATL5000. BTB100 is not available.
BMO InvestorLine: No fee on AAT770 and AAT780 (USD). Other savings accounts are not available for purchase as of Oct. 2013. Initial minimum of $5,000 and additional minimum of $500. Can be redeemed anytime without penalty. See this post for more information.
Credential Direct: No fee on NBC100.
Disnat: No fee on NBC100.
National Bank Direct: No fee on NBC100.
QTrade: No fee on ATL5000.
Interest Rate History
Oct. 30, 2010: 1.20%
Nov. 29, 2011: 1.25%
Oct. 29, 2012: 1.25%
Aug. 13, 2013: 1.25%
Jan. 21, 2014: 1.25%
Jan. 27, 2015: 1.00%
Tips for getting the most out of HISAs
- You can park cash in these accounts by pulling up a quote for the fund code and clicking on the “Buy” button.
- Most of these funds have an initial minimum investment of $1,000. Note though that the initial minimum investment may be quite different at your broker. TD HISAs have a minimum investment of $100 at TD Direct Investing even though the website says that the minimum is $1,000. Interest is accrued daily and paid monthly.
- Typically, these accounts are sold without any loads or minimum holding periods or any fees of any kind but as noted earlier, always check first before buying.
- If you have a large cash balance, make sure you split your savings in chunks of less than $100,000 between a number of these accounts. That way all your savings will be fully covered by Canada Deposit Insurance Corporation.
- All these HISAs are also available as F-series funds that are only available through financial advisors. Even if you are able to pull up a quote and place an order for a F-Series fund (such as RBF2011) in a discount brokerage account it will be rejected later.
- The multiple savings accounts from TD Bank and Royal Bank are equivalent. They are offered by subsidiaries and can be used to work around the $100,000 CDIC deposit insurance limit.
- Most brokers offer at least their in-house HISAs but your mileage may vary. For instance, only RBF* funds are available to clients at RBC Direct Investing.
- You’ll notice that the Investment Savings Accounts pay a typical trailer fee of 0.25% to the dealer. The interest rate published in the table above already takes into account the trailer fees paid to the dealer. For example, TDB8150 is currently listed as paying 1%, which is the interest you’ll earn on your deposits and is net of the trailer fee paid by TD ISA to the broker.
Update (Oct. 31, 2010): B2B Trust High Interest Investment Account. Fund code is BTB100. Not available at TD Direct Investing. (See Rob Carrick’s column How to get some bang for your safe bucks).
Update (Nov. 29, 2011): Updated with new high-interest savings offering at TD Direct Investing. Also check out Canadian Couch Potato’s post on parking cash in your portfolio.
Update (Oct. 29, 2012): Updated with rates and high-interest savings accounts availability at discount brokers. Also check out the HISA page at Finiki – the Canadian Financial Wiki.
Update (Aug. 13, 2013): Updated with HISA availability at Scotia iTrade and BMO InvestorLine.
Update (Jan. 21, 2014): Minor edits and formatting. Updated BMO HISA interest rate. Updated BTB100 availability at CIBC InvestorsEdge.
Update (Jan. 27, 2014): Minor updates. Updated BTB availability at CIBC InvestorsEdge. Added Home Trust ISA.