Personal Finance » Banking

How to increase your returns by 10 fold in your bank account

Normally I am not one for completely misleading headlines like the one in this article but the truth is it may not be misleading at all. Canadians have over $100 billion dollars in regular savings and chequing accounts. Add in the fact that there is another $75 billion in money markets and you have a lot of money sitting in short term accounts earning next to nothing. Frankly, this surprises me considering that most bank accounts are paying a meager 0.25% or less.

There are two very important questions that you need to ask yourself:

  1. How much interest are you earning in your bank account?
  2. How much are you paying in service fees for your bank account?

In most cases the answer to question one is “little to nothing” and the answer to number two is “way too much”. There is a real opportunity to change the way you do banking so that you turn this situation around. Several financial institutions now offer high-interest bank accounts, many of which have low minimum balances and no fees.

What rates are these banks offering?

Currently, there are about half a dozen institutions offering high-interest bank accounts that range from 0.8% to 1.7%. Some banks will offer attractive short term incentives to get you to open an account. for example, Tangerine (who is offering up to $50 in bonuses and 2.4% interest for 6 months).

While these interest rates may not seem overly high, keep in mind that it is higher than most money market funds and higher than the 1-year posted GIC rate at the major banks.

In fact, more often than not they pay higher rates than conventional bank accounts, money market funds, cashable GICs and sometimes even higher than shorter-term GICs. The benefits are very clear – high interest and fewer fees. So why would someone not use these high-interest bank accounts?

  1. Savings vs. Chequing accounts – In some cases, these high-interest bank accounts act strictly as savings accounts. However, there are some institutions like Tangerinethat offer chequing privileges for free. You can make the switch to Tangerineeasily with their Switch Assistant. There are solutions for both savings and chequing accounts.
  2. Awareness – I think many investors are just unaware of the options. For many, high-interest bank accounts are foreign to them.
  3. Convenience – In my opinion, this is probably the biggest hurdle that you must overcome. Mainstream bank accounts offered by the 5 big banks have been part of our habits for so long that it can be difficult to change the way in which we bank. Many of these high-interest accounts are offered by companies that we do not naturally relate to banking like Tangerine, President’s Choice, or Manulife Bank. I know many people who have banked at the same bank for 30 years or more. Regardless of all the changes in personnel, the fact that the bank has been there for as long as they can remember, why should they change?
  4. Security – Many investors fear not knowing much about these banks that offer high-interest accounts. Part of the fear of the unknown is the lack of brand recognition and the fear of the bank going under. There are two things to keep in mind. First, find out if the bank is a member of CDIC and whether you would be covered up to the $100,000. In most cases, I think you will find you will be covered. Secondly, keep in mind that many of these banks are part of the big 5 banks. For example, the President’s Choice Financial is actually owned by CIBC, and Tangerine is owned by Scotiabank. BMO has also entered the high-interest bank account market.

The bottom line

When you simply do the math, you can increase your returns on your bank account by 10 times. This in itself is reason enough to take the time to look into high-interest accounts. You might be amazed at what you will find: It is possible to get your bank statements and actually earn interest each and every month. It is possible to reduce the number of fees that you pay without a lot of effort or bartering.

Next week, I want to share with you some real-life examples of people who have started reaping the benefits of high-interest bank accounts. If you have a story to share about using high-interest bank accounts, I would love to hear from you. I think the more people that use high-interest bank accounts; the more pressure there will be on all banks to offer higher interest rates and fewer fees when it comes to banking.


  1. Stephen

    An article on this subject is a bit remiss when EQ Bank is not mentioned. Deposits are covered under CDIC – and the savings account rate (ongoing) is 3%. Tangerine, since being acquired by BNS is quickly heading to the also ran segment of the market.

  2. Claude Mayrand


    You wrote: “I think many investors are just unaware of the options”. I think investors are aware, but most other people aren’t.

    Some think it’s only $12 a month or only ½% more. $12 a month is $144 a year. Why not just light a match to it when there are so many free options today. In the olden days I would have more than one bank account because some had free chequing for the first 2 or 3 cheques. Cheap? You betcha!

    Many think small amounts are not a concern. It’s a mindset that changes over time or when you lose your job, whichever comes first.

  3. marpy

    Even the big five offer e- savings accounts that pay close to the regular 0.8% that Tangerine pays.People just have to ask and educate themselves. Tangerine and other on line institutions offer bonus interest but even if you want to stay with your bank, their are options available. Not sure why anyone would buy commercial paper and money market instruments as they all pay less than e-savings accounts which are government guaranteed. Makes no sense unless you are getting bad advice. JMO

  4. Thomas

    BMO has the Saving Builders Account with a base of.25% interest and bonus interest is 1% with a $200 deposit each month. It is possible to receive 1.25% interest per month. After it reaches $250,000, it goes back to .25%. In the meantime, you could do okay starting with $200,000 and adding $200.00 per month to get the interest.

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