The recent interest rate cut by the Bank of Canada has resulted in a decrease in borrowing costs, but it has also impacted the rates Canadians can expect on savings accounts. The central bank’s policy rate not only influences the cost of borrowing but also affects the rates offered on savings products by lenders. Following the rate cut, some interest rates on savings accounts and guaranteed investment certificates (GICs) have come down at major banks in Canada. However, uncertainty about the pace of further rate cuts may lead many banks to keep their savings rates competitive.
Competition for savings products like high-interest savings accounts and GICs can be fierce, prompting Canadians to explore offerings from challenger or digital-only banks which often provide more attractive rates due to lower overhead costs. While some Canadians may feel uneasy about banking solely online, it’s important to research and ensure that these banks have good customer service levels. Certified banks in Canada come with insurance from the Canadian Deposit Insurance Corp. to protect deposits up to $100,000, providing a standard level of protection across the banking industry.
To attract new business, banks often offer promotions on savings accounts with high initial rates that decrease after a set period. It’s essential for Canadians to understand the terms and conditions of these accounts, including fees and minimum balances required to maintain the higher rate. Some banks may add requirements like setting up direct deposit to increase customer retention. While moving money between promotional accounts can be a strategy to maximize savings, it can be challenging to keep track of multiple institutions, and the next promotional rate may not be as attractive.
EQ Bank, a digital bank in Canada, recently introduced a notice savings account that offers relatively high interest rates, requiring customers to provide 10 or 30 days’ notice for withdrawals. This account is ideal for Canadians saving for medium-to-long-term goals like travel or a down payment on a home or vehicle. The stability provided by the notice period for withdrawals enables EQ Bank to offer competitive interest rates. While the notice savings account offers attractive rates, it may not be suitable for emergency funds due to the withdrawal notice requirement.
Ultimately, Canadians looking to save should consider their financial goals and liquidity needs before selecting a savings account. While products like the notice savings account from EQ Bank can offer high returns and minimal fees, they may not be ideal for short-term cash needs. By understanding the terms and conditions of savings accounts and exploring offerings from challenger banks, Canadians can maximize their savings and achieve their financial goals.
