Saving

High Interest Savings Accounts at Discount Brokers

January 27, 2015

132 comments

[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

  1. You can park cash in these accounts by pulling up a quote for the fund code and clicking on the “Buy” button.
  2. 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.
  3. 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.
  4. 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.
  5. 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.
  6. 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.
  7. 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.
  8. 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.

RBC and BMO Offer Cheaper Business Banking Options

April 23, 2013

8 comments

Many small businesses may make only a couple of banking transactions each month — a couple of deposits and maybe a withdrawal or two — but still end up paying a chunk of it in banking fees. As far as I know, there are no free business chequing accounts available anymore (HSBC Canada briefly offered a free business chequing account but doesn’t any longer). All the big banks offer a basic pay-as-you-go business chequing account for monthly fees ranging between $6 per month at RBC and CIBC and around $10 at BMO, TD Canada Trust and Scotia Bank.

If you average just one or two transactions every month and are unable to maintain a large cash balance, you should take a look at the RBC Business Essentials Savings Account. There are no monthly fees and no minimum balance requirements but you will pay $1 for every electronic or cheque deposit. The first two withdrawals are free but every subsequent withdrawal will cost $3.50. If you are averaging less than 2 deposits and 2 withdrawls every month, you’ll save approximately $50 per year in business banking fees. CIBC also offers a no monthly fee business savings account but since each debit transaction costs $5, any savings are likely to be quickly wiped out.

If you are able to maintain a large cash balance and perform a larger number of transactions, you may want to look into BMO’s Small Business Banking Plan. The account has a monthly fee of $9.50 which is waived if you keep a minimum monthly balance of $4,000. The plan includes a fair number of free transactions but keep in mind that a $4,000 balance translates into an opportunity cost of $40 (assuming a 1 percent interest rate). TD Canada Trust and Scotia Bank also waive monthly fees for maintaining a minimum balance but the limits are higher ($8,000 at TD Canada Trust and $5,000 at ScotiaBank).

Teksavvy’s fly in the ointment

March 19, 2013

27 comments

A couple of years back, frustrated with Bell’s pricey Internet service, we switched to Teksavvy (See post Goodbye Bell, Hello Teksavvy). Teksavvy still offers significant savings over Bell but my initial enthusiasm has cooled considerably. I’ll explain why in this post.

Teksavvy’s 6Mbps, 75 GB per month DSL Internet service costs $29.99 per month. We find that sufficient for our moderate usage, which includes bandwidth intensive activities such as watching movies over Netflix. A similar package, albeit one at a slightly slower speed and much lower bandwidth, at Bell (5Mbps, 20 GB per month) costs $43.95 month. There are other minor differences between the two. Teksavvy requires customers to purchase their own modem while Bell rents it to subscribers. Also, it should be pointed out that Bell offers a discount for bundling with other services and might knock down the rate even more for some customers for a limited time.

At first glance, Teksavvy appears to offer a better Internet package at a significantly lower price but there is a catch. Teksavvy is essentially a reseller for Bell Canada, which owns and operates the telephone wires running to your home and charges a fee for doing so at a price set by the Canadian Radio-Television and Telecommunications Commission (CRTC). Therefore, when a Teksavvy customer orders a new service or a change to an existing service or reports a problem, the service order is often routed through to Bell Canada. Bell Canada, which offers its own suite of competing products, now has every incentive to be less responsive to the needs of a competitor’s customer compared to its own.

A case in point: last year, we moved to a new residence and called Rogers, Bell and Teksavvy to move our cable, phone and Internet services respectively. Rogers and Bell sent technicians to perform the move within 1 business day and followed up to check whether the service was up and running. Teksavvy said that it would move the Internet service one week later. And when the next week rolled around, Teksavvy could not complete the move saying that Bell claimed the phone service was still at the old address even though I had put in a move request to Teksavvy *after* moving the phone service and the move will be delayed one further week. We did get Internet service at the new residence the next week after a two week downtime and we have had no problems since. It turns out that my experience isn’t an isolated one. You can check out negative reports on Teksavvy on this forum but in fairness, it should be pointed out that positive reports far outweigh negative ones.

The bottom line: Teksavvy offers DSL Internet at a much cheaper price than Bell but you should be aware that if you run into problems, you may fall between the cracks because Teksavvy depends on Bell to fulfill its customers’ service orders.