The best TFSA savings accounts in Canada for 2020

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by Ratehub.ca April 28, 2020 / No Comments

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A Tax-Free Savings Account (TFSA) is a savings account and investing tool designed to shelter interest or gains from taxes. That means interest that your savings earn, or gains that your investments earn can grow tax-free.

While the name of the TFSA implies a tax-free savings account is an only savings account, a TFSA acts more so as a tax-shelter for your money—if you keep your contributions and investments under your yearly TFSA contribution limit.


Want to compare the best TFSA savings accounts in Canada? Compare TFSA Savings Accounts

 

The Best Tax-Free Savings Accounts (TFSAs) in Canada for 2020

*In-text rates are current as of April 28, 2020.

Below, you’ll find Canada’s best interest rates on tax-free savings and investing accounts. These accounts are ordered by interest rates or flexibility

1. Alterna Bank TFSA eSavings Account

More information on Alterna Bank
  • Interest Rate: 1.90%
  • Minimum deposit: None.
  • Monthly fees: None.
  • Insurance: CDIC
  • Available in Quebec: Yes.

Alterna Bank is a digital bank owned by Ottawa-based credit union Alterna Savings. Alterna Savings is the second oldest credit union in Canada and the first to open its doors in Ontario back in 1908.

Alterna Bank offers a TFSA eSavings Account with an interest rate of 1.90%.

There is no minimum account balance requirement or monthly fees.

Alterna Bank also offers various additional spending, saving, and investing options. It is also a member of the EXCHANGE Network and the ACCEL ATM networks.

While Alterna Savings is a credit union, Alterna Bank is a Schedule-1 bank protected by CDIC insurance.

Alterna Bank is available to all Canadian citizens.


2. Tangerine Bank

More information about the Tangerine Bank
  • Interest Rate: 2.50% for the first five months, 0.25% thereafter.
  • Minimum deposit: None.
  • Monthly fees: No monthly fees.
  • Insurance: CDIC
  • Available in Quebec: Yes.

Formerly known as ING Direct, Tangerine Bank is a digital bank owned by Scotiabank. It was among Canada’s first digital banks.

Tangerine operates entirely online and offers a wide variety of banking and investing products. One of those products is the Tangerine Bank TFSA Savings Account. It currently offers a promotional interest rate of 2.50% for 5 months. After the promotional period is over, the rate drops to 0.25%. The promotional rate is one of the best TFSA interest rates in Canada.

The account comes with no monthly fees, unlimited account transfers, and no minimum balance requirements. There are also no monthly contribution requirements either.

Tangerine customers can take advantage of Tangerine’s Automatic Savings Program (ASP) and create a roadmap or financial strategy specific to their savings goals. The bank is also a member of the Global ATM Network, an added bonus for those who are considering opening a chequing account with the bank as well.

Tangerine is available to all Canadian citizens.


3. Scotiabank

More information about Scotiabank
  • Interest Rate: 0.15%
  • Minimum deposit: None.
  • Monthly fees: None.
  • Available in Quebec: Yes.

Scotiabank is one of Canada’s most prominent banks. As one of Canada’s “Big Five” banks, and currently offers a TFSA rate of 0.15% on its Savings Accelerator Account TFSA.

The TFSA provides customers with unlimited fund transfers within Scotiabank accounts.

Scotiabank customers can also enjoy the luxury of accessing over 1,000 Scotiabank branches, with e-Banking options for all of your on-demand banking needs.

Scotiabank products are available to all Canadian citizens.


4. motusbank

More information about the motusbank
  • Interest rate: 2.00%
  • Minimum deposit: None.
  • Monthly fees: None.
  • Available in Quebec: Yes.

Motusbank is the digital subsidiary of Meridian Credit Union. A motusbank TFSA Savings Account offers a competitive tax-free savings account interest rate of 2.00%. motusbank customers can enjoy no monthly costs or limits on the deposits that they contribute.

There is also no minimum deposit requirement, meaning customers can open an account today. Additionally, motusbank is a member of The EXCHANGE Network, meaning customers can access near 3,700 ABMs across Canada at no cost.

Investments with motusbank are CDIC insured.

Motusbank is available to residents of Quebec.


5. Motive Financial

More information on Motive Financial
  • Interest Rate: 2.20%
  • Minimum deposit: None required.
  • Monthly fees: None.
  • Available in Quebec: Yes.

Motive Financial is a digital bank owned by Canadian Western Bank. The online bank offers a wide variety of banking and investing products, including a TFSA savings account with an interest rate of 2.20%.

Motive Financial offers additional types of banking and investing products. Motive Financial is a CDIC insured institution.

Motive Financial’s Motive TFSA Savings Account is not available to residents of Quebec.


6. CIBC

More information about the CIBC
  • Interest rate:0.20%
  • Minimum deposit:
  • Monthly fees:
  • Available in Quebec: Yes.

CIBC currently offers a rate of 0.20% on deposits placed into a CIBC Tax-Advantage Savings Account. CIBC’s tax-free savings account comes with no monthly fees for the account itself and allows unlimited transfers between accounts.

As one of Canada’s largest banks, CIBC is available to all Canadian citizens.


7. Simplii Financial

More information about the Simplii Financial
  • Interest rate: 0.30%
  • Minimum deposit: None.
  • Monthly fees: None.
  • Available in Quebec: No.

Simplii Financial offers an interest rate on its TFSA contribution at 0.30%. Interest on deposits is calculated daily.

Contributions in a Simplii Financial tax-free savings account come with no minimum contribution requirement.

Putting your funds into a Simplii Financial TFSA also means there are no fixed terms or monthly fees on any of the funds you’ve deposited.

Simplii Financial, formerly known as President’s Choice Financial, is now the digital subsidiary of CIBC. Simplii Financial customers can use any CIBC ATM. Simplii Financial also offers a mobile app, online banking, and telephone service options.

Simplii Financial is not available in Quebec.


8. Royal Bank of Canada (RBC)

More information about the RBC Royal Bank of Canada
  • Interest rate: 0.05%
  • Available in Quebec:Yes

One of Canada’s oldest and most prominent banks, the Royal Bank of Canada (RBC) offers various savings, spending, borrowing, and investing products, including a Tax-Free Savings Account with an interest rate of 0.05%.

RBC offers tiered interest rates depending on the amount deposited into the account, ranging from $0 to $5,499.99, from $5,500 to $24,999.99, from $25,000 to $49,999.999, and from $50,000 to $999,999,999.99. All tiers offer an interest rate of 0.05%.

RBC has branches and ATMs available in all provinces and territories in Canada. Their products are available to all Canadian citizens.


9. BMO Bank of Montreal TFSA Savings Account

More information about the BMO Bank of Montreal
  • Interest rate: 0.05%
  • Available in Quebec: Yes

BMO’s TFSA Savings Account currently offers an interest rate of 0.75% on TFSA contributions.

Opening a BMO TFSA requires a minimum investment of $50. Rates are calculated per year and are subject to change without notice.

Bank of Montreal serves as one of Canada’s Big Five banks and has been in business in Canada for over two hundred years.

BMO is available to all Canadian citizens.


10. TD Bank

More information about TD Bank
  • Interest rate: 0.05%
  • Minimum deposit: None.

As one of Canada’s largest financial institutions, TD Bank offers several savings account options, including a tax-free savings account with the current interest rate of 0.05% on savings deposited into their tax-free savings accounts.

As one of Canada’s most prominent banks, TD offers tax-free savings account options for mutual funds, GICs, and various investment options that Canadians can use to let their investments grow with no tax deductions.

TD Bank tax-free savings accounts are available to all Canadians.

The best TFSA investing accounts in Canada

Tax-free savings accounts might give off the impression that they’re only meant for saving, but they’re also suitable investing accounts.

Below, you’ll find some investment accounts that can help you maximize your earning potential with a TFSA.

1. Wealthsimple Invest

Learn more about investing with Wealthsimple Invest

Wealthsimple is an investment corporation that offers various options for saving and investing. It’s become the leading robo-advisor in Canada for creating an approachable means to investing for the average Canadian citizen.

Along with a robo-advisor, Wealthsimple also offers an online brokerage, a savings account, and a tax-filing service.

Their robo-advisor comes with a TFSA.

Wealthsimple is available to all Canadian citizens.


2. Questrade

Learn more about investing with Questrade


Questrade is an online brokerage that offers a wide variety of investment options for all Canadian citizens. doesn’t lead with savings accounts but focuses primarily on investing options.

That’s why using a Questrade TFSA is an excellent option for those looking to hold investments in an account while reaping the benefits of tax-free interest. Questrade offers a robo-advisor option and self-directed trading option, both can be placed in a TFSA.

Questrade is available to all Canadian citizens.


The best TFSA rates from credit unions in Canada

 
In many cases, credit unions serve as an excellent alternative banking option for Canadian citizens. They often also offer most products that major financial institutions offer, including TFSA, with rates that usually compete with major banks.

Below, you can find the best TFSA rates in Canada made available by credit unions. While any Canadian can open an account with most credit unions, some institutions may require an in-person branch visit before opening accounts like a TFSA.

1. DUCA

More information about DUCA
  • Interest rate: 1.15%
  • Minimum deposit:None.
  • Monthly fees: None.
  • Insurance: Deposit Insurance Corporation of Ontario (DICO)

DUCA is an Ontario-based credit union that offers various financial products and solutions to Canadians. With over 50 years operating as a credit union in Canada, DUCA offers exceptional financial products today.

Their tax-free savings account currently offers an interest rate sitting at 1.15%. The account has no minimum deposits or monthly fees.

A DUCA Credit Union TFSA earns interest daily and pays it to the account holder monthly.

DUCA is also a member of the EXCHANGE Network, meaning customers can withdraw funds from affiliated ATMs.

Insurance for DUCA Credit Union is provided by the Deposit Insurance Corporation of Ontario.

DUCA products are available to all Canadian citizens but may require an in-branch appearance upon opening an account.

2. Steinbach Credit Union TFSA Account

More information about Steinbach Credit Union
  • Interest Rate: 1.60%
  • Minimum deposit: None required.
  • Monthly fees: None.
  • Insurance: Deposit Guarantee Corporation of Manitoba (DGCM)

Steinbach Credit Union is a credit union located in Steinbach, Manitoba. Steinbach Credit Union offers a tax-free savings account option with an interest rate of 1.60%.

Steinbach also offers a wide variety of saving and investing options, including savings accounts and GICs.

As a Manitoba-based credit union, Steinbach Credit Union is protected by the Deposit Guarantee Corporation of Manitoba (DGCM).


3. Meridian Credit Union

Learn more about Meridian Credit Union

  • Interest rate: 0.50%
  • Minimum deposit: None.
  • Monthly fees: None.
  • Insurance: Deposit Insurance Corporation of Ontario (DICO)

Meridian Credit Union is one of Canada’s largest and most reputable credit unions. Largely situated in Ontario, Meridian offers a TFSA interest rate of 0.50%.

Meridian is a member of the EXCHANGE Network, which allows customers to access ATMs that are affiliated with the network at no cost. Additionally, Meridian offers a wide variety of additional banking options, making the credit union a suitable option for persons who would like to save money on banking fees.


4. Implicity Financial

More details on the Implicity Financial
  • Interest rate: 2.00%
  • Minimum deposit:
  • Monthly fees: None.
  • Insurance: Deposit Guarantee Corporation of Manitoba (DGCM)

Implicity Financial currently offers one of the best TFSAs in Canada, with an interest rate of 2.00%. The credit union permits unlimited deposits, one free monthly withdrawal, and $1 for every additional withdrawal—a great account to keep money parked in.

Investments are covered by the Deposit Guarantee Corporation of Manitoba (DICM). Implicity Financial is a digital financial institution and a division of Entegra Credit Union, which has an established history in Canada with 15,500 Canadians and a reputation exceeding 50 years.

Implicity Financial products are available to all Canadian citizens.


5. Parama Credit Union

More information about the Parama Credit Union
  • Interest rate:
  • Minimum deposit:
  • Monthly fees:
  • Insurance: Deposit Guarantee Corporation of Manitoba (DGCM)

Parama Credit Union offers a competitive interest rate on TFSA deposits, starting with an interest rate of 1.50%.

Parama also offers fixed rates on registered investments, such as tax-free savings account GICs.

Though Parama Credit Union has two branches located in Toronto, Ontario, Parama customers can use their reliable digital banking platform and their mobile app to monitor their investments or make changes to their accounts.

Additionally, Parama Credit Union is an affiliate of the EXCHANGE Network.

Parama Credit Union is available to all Canadian citizens but may require an in-branch appearance to open an account.


6. Luminus Financial

More information about the Luminus Financial
  • Interest rate: 1.25%
  • Minimum deposit:
  • Monthly fees:
  • Insurance: Deposit Insurance Corporation of Ontario (DICO)

A Luminus Financial Investment Savings Account TFSA is available for savings as well as registered and non-registered investments.

Luminus Financial currently offers a TFSA interest rate at 1.25% for new accounts.

The Toronto-based credit union also offers free transactions, transfers, and access to ATMs in the EXCHANGE Network. E-transfers are $1.00 per transaction.

Luminus Financial is a Toronto-based credit union, and while open to all Canadians, may require an in-branch appearance to open one of their tax-free savings accounts.

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Learn more about tax-free savings accounts (TFSAs)

Below, you can learn more about the tax-free savings account, what it is, and how to choose the right one according to your saving and investing needs.

What is a TFSA?

A Tax-Free Savings Account (TFSA) is a bank account and tax-shelter that can hold savings and various types of investments. They aren’t exclusive to cash savings and can also hold GICs, Stocks, Mutual funds, Bonds, and Exchange-Traded Funds (ETFs).

TFSAs allow unlimited, penalty-free, withdrawals and contributions. That means you won’t be charged for removing or depositing funds, no matter how often you move your funds.

In 2009, the Government of Canada introduced the Tax-Free Savings Account as an initiative to encourage Canadians to save and keep more of their money. The effort resulted in one of the most popular and useful savings and investing tools among Canadians. However, considering that interest accumulated without taxation, a contribution limit was set in place.

Savings placed in a TFSA can help make a significant impact on your savings and the amount of tax you’ll have to pay come tax season—especially if you select a tax-free saving account with a competitive interest rate.

The benefits of TFSAs don’t stop there, either. You can also put different types of investments in a tax-free savings account, such as GICs, Bonds, Mutual Funds, Stocks, and more. All of these investments can grow tax-free.

A TFSA also permits withdrawals and contributions. However, this exception only applies to cash deposits. There is no penalty or taxation on the number of times you contribute or withdraw funds from the account.

TFSAs vs. RRSPs are often compared, as both hold significant benefits to reducing your yearly tax burden. Differentiating and strategically using both accounts properly can alleviate your tax burden even further.

For a brief overview of TFSAs before diving further into this article, Ratehub.ca’s original TFSAs Explained video can be watched below.

Unless the bank or financial institution issuing the tax-free savings account has its own terms and conditions, TFSAs generally work in the exact same way.

However, Canadians should choose a TFSA with an interest rate above 2%. This interest rate keeps with Canadian inflation. Any interest rates below 2% mean the amount deposited loses value over time, as it does not compete with steadily-rising inflation.

How does a TFSA work?

As a registered account, a tax-free savings account comes with a yearly limit on the amount that an account holder can and hold in an account. This limit is known as a TFSA contribution limit.

A TFSA contribution limit increases at the beginning of every new year for every Canadian citizen that owns an account.

Anyone who wishes to open an account must be a Canadian citizen and the age of the majority in their province or territory.

For residents of Alberta, Ontario, Prince Edward Island, Quebec, and Saskatchewan, residents who wish to open a tax-free savings account must be 18 years of age.

Residents of British Columbia, New Brunswick, Newfoundland and Labrador, Nova Scotia, Northwest Territories, Nunavut, Yukon must be at least 19 years of age


What is a TFSA Contribution Limit?

A TFSA Contribution Limit is a yearly limit to what you can contribute to tax-free savings accounts. The limit increases for every Canadian each year, and any unused amount from the previous year carries over to the following year.

At the beginning of 2020, Canadians received an additional $6,000 in contribution room for their tax-free savings accounts.

Since the introduction of the account, the cumulative contribution in 2020 is $69,500.

Each year, your unused contribution limit is added to the next year’s tax-free savings account contribution limit. Canadians will receive another increase in their contribution room at the beginning of 2020—and at the beginning of every year following.

Should you exceed your contribution limit, your savings or investments will be taxed at 1% each month. You’ll receive a notice that your limit has been exceeded, however.

What is my TFSA contribution limit?

The TFSA contribution limit is different for every Canadian. While the contribution limit increases each year for every Canadian, your age plays a significant factor in your total contribution room.

If you were 18 or 19 years old—depending on the province in which you reside—or more former in 2009, your total contribution room as of 2020 is $69,500.

Your limit starts the year you turn 18 or 19, and increases the contribution room with each new year.

If you turned 18 or 19 after 2009, your total tax-free savings account contribution limit includes every year’s deadline since you turned 18 or 90.
For example, if you turned 18 or 19 in 2020, your TFSA contribution limit is $6,000.

The unused contribution room from previous years carries forward each year. Still, your entire deposits across all TFSAs must remain beneath your cumulative limit.

Below is a chart of every contribution limit since the introduction of TFSAs in 2009. To calculate your limit, add up the amounts since you turned 18 or 19, depending on the province in which you reside.

Year Contribution Limit
2009 $5,000
2010 $5,000
2011 $5,000
2012 $5,000
2013 $5,500
2014 $5,500
2015 $10,000
2016 $5,500
2017 $5,500
2018 $5,500
2019 $6,000
2020 $6,000

Should I Use a TFSA?

There’s no reason why everyone in Canada shouldn’t take advantage of a tax-free savings account.

Using a tax-free savings account allows you to earn as much money as possible through interest or capital gains, without having to pay any taxes.
Unless your bank is charging you a monthly fee for their services, tax-free savings accounts are entirely free to use. They’re your right as a Canadian citizen.

A tax-free savings account is ideal for all types of saving goals, whether they’re long term or short term.

While high-interest savings accounts often tend to offer higher interest rates, interest is taxable, depending on your income bracket. You might have to do the math to see what your options are, but tax-free savings accounts are exceptional in keeping your earnings tax-free.

 

Should I use a TFSA or an RRSP?

It’s surprising how common the TFSA vs. RRSP debate is among financially savvy Canadians—considering how similar both saving and investing accounts are. Still, in both cases, they’re incredibly useful financial tools to Canadians—if used to their full potential.

Both the Tax-Free Savings Account and the Registered Retirement Savings Account (RRSP) are incredibly similar to each other. There are, however, several significant differences and limitations that come with both accounts.

Some similarities between accounts include:

  • Both accounts hold savings, along with a variety of investments.
  • Both accounts operate as tax havens, with different tax-oriented perks.
  • Both accounts can earn interest on savings or gains on investments tax-free.
  • Both come with a yearly contribution limit, which increases every year for every Canadian citizen.

Some of the differences between accounts include:

  • TFSAs offer tax-free withdrawals, while withdrawals from an RRSP account are taxed at a rate depending on the amount withdrawn.
  • RRSPs can reduce your taxes if your contributions are beneath your yearly limit, while TFSAs do not offer a decrease on your taxable income.
  • Withdrawing from your TFSA will not affect your total contribution room. The amount withdrawn from your RRSP removes the contribution room forever.

If you’re wondering which account to use, the short answer is that you should use both of them to your potential.

However, since RRSPs are proposed for retirement savings and taxed upon withdrawal, it might be sound to prioritize contributing more money to a TFSA. Consider putting 10% into your RRSPs throughout your life.

You should also consider building a secure emergency fund while contributing to an RRSP, as emergencies can become quite costly, especially when your savings are taxable at a higher rate.


Want to compare the best TFSA savings accounts in Canada? Compare TFSA Savings Accounts

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