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Moving your money into a higher-interest savings account

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Interest rates on savings accounts in Canada have taken a substantial dive over the last year, and the bad news is that there doesn't seem to be much improvement on the horizon. Canadians spent so much of 2020 and 2021 putting their money into savings accounts that banks don't feel it necessary anymore to bend over backwards offering high rates to new customers. While that's not a great outlook for the next year, there are financial institutions out there still offering comparatively good rates for your savings. If you've been unhappy with what you're earning and thought about making a switch, here's where to look and how to do it.

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Where to find savings accounts with higher interest

Typically, if you're still looking to big banks for higher-interest on your savings, you're barking up the wrong tree. Online-only banks (such as Tangerine and EQ Bank), credit unions, and other alternative financial institutions can offer much higher interest on savings accounts due to their low overhead.  The only downside? Services like money orders or bank drafts may take a week or two to arrive via mail (as opposed to a brick-and-mortar bank which can usually provide these to you when you visit).

In addition, pay close attention to the difference between promotional and standard interest rates. Many institutions will offer ultra-high promotional interest rates on their savings accounts to attract new clients. While this is a great opportunity to earn more on your money, those rates do expire after a set period, so you'll want to know what your standard interest rate will be going forward after that happens.

 

How to move your money to a higher-interest savings account

 

Do some comparison shopping

Look online for pages that compare the highest interest rates on savings accounts (like the one at Ratehub.ca) and make a list of those that appeal to you. From there, do further research - look up any annual or monthly fees you’ll be charged, or any promotional perks or bonuses offered. Use a spreadsheet or document to compare their pros and cons, and think about what’s important for you to have in a savings account (other than high interest, of course). Eventually, you’ll arrive at the right match and will be ready to open your new account. But before you do, there’s a few more things to keep in mind.

 

What you’ll need to open a new savings account

Before opening any new bank account, you’ll need to provide proof that you are who you say you are. While most use a valid driver’s license or passport, there are a few other documents you can use if those aren’t an option:

 

  • Birth certificate issued in Canada
  • SIN card issued by the Government of Canada
  • Certificate of Canadian Citizenship or Naturalization
  • Permanent Resident card or an Immigration, Refugees and Citizenship Canada (IRCC) form IMM 1000, IMM 1442, or IMM 5292

 

Moving your money 

Once you’ve opened your new savings account, it’s time to move your funds over from the old one. There are two main ways to accomplish this:

The most direct method is to simply withdraw all the funds from your old account before closing it, then deposit the money in your new one. While this is certainly straightforward, there are some risks involved in the form of possible fees, depending on the rules set by your provider. Before doing this, check with them about how easy it would be.

The second method is to contact your old bank, inform them that you’ll be closing your savings account with them, and ask them to move your funds into the new account for you. You may be charged a processing fee for their trouble, but once you confirm the money has landed where it should be, you’ll be all done. One caveat to this is that it may take a few days for the money you’ve transferred to appear in your new account, so don’t panic if it doesn’t show up immediately.

Also, remember to confirm with your old bank that your account has been officially closed (and get it in writing if possible). You don’t want to end up arguing against inactivity fees or other charges due to an administrative error on their end, so make sure you’ve got solid evidence of your request in case that occurs.

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Will switching savings accounts affect your credit score?

Provided you’ve kept your old account in good standing and don’t owe any outstanding fees or penalties, moving your money to a new savings account should have no impact on your credit score. 

 

The last word

Given the state of interest rates in Canada at the moment, no one can be blamed for seeking out a better deal elsewhere. Before you do, remember our tips above and make an informed decision to move your money somewhere where it can work for you. Have any opinions about where to score the best interest rates on a savings account right now? Share them with us in the comments below.

 

Also read:

Saving vs. investing: the pros, cons, and differences explained

4 types of savings accounts everyone should have

Opening a joint savings account: what you should know

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