The best TFSA savings accounts in Canada for 2019

Ratehub.ca
by Ratehub.ca October 15, 2019 / No Comments

Rates subject to change, updated:

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A Tax-Free Savings Accounts (TFSA) is a bank account and investing tool designed to shelter the interest that your savings earn, or, the gains that your investments earn, from taxes. While the name implies a tax-free savings account is a savings account, a TFSA acts more so as a tax-shelter for your money—if you keep your investments under your yearly TFSA contribution limit.

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 TFSA 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 unlimited 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 into this article, Ratehub.ca’s original TFSAs Explained video can be watched below.

 

The Best Tax-Free Savings Accounts in Canada for 2019

Unless the bank or financial institution issuing the TFSA has its own terms and conditions, TFSAs work in the exact same way.

However, Canadians should choose a TFSA with an interest rate above 2%. This interest rate keeps up 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.

The Best Tax-Free Savings Accounts in Canada 2019 (View All)
Rate Account Included
2.75% Steinbach Credit Union TFSA Account None get this rate
2.30% Implicity Financial TFSA Savings Account Unlimited deposits, 1 free withdrawal per month, $1 per additional withdrawal get this rate
2.25% Alterna Bank TFSA eSavings Account get this rate
2.75% Tangerine Tax-Free Savings Account unlimited transfers get this rate
1.60% Canadian Western Bank WestEarner®TFSA Account Yes get this rate
1.00% Scotiabank Savings Accelerator Account (TFSA) Unlimited no-fee self-service transfers to your other Scotiabank accounts get this rate
0.85% CIBC Tax Advantage Savings Account None get this rate
0.75% Bank of Montreal BMO TFSA Saving Account Unlimited transactions, plan restrictions apply with regards to when and how much one can contribute get this rate

 

1. Implicity Financial TFSA

  • TFSA Interest Rate: 2.30%
  • Unlimited deposits, one free withdrawal each month, $1 for every additional withdrawal.
  • No minimum deposit required.

Implicity Financial currently offers one of the best TFSAs in Canada, with an interest rate of 2.30%. 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.

2. Alterna Bank TFSA eSavings Account

  • TFSA Interest Rate: 2.30%
  • No monthly, administrative, or transfer fees.
  • No minimum balance.

The Alterna Bank TFSA eSavings Account has an interest rate of 2.30% and offers unlimited no-cost withdrawals and transactions. There is no required minimum balance or monthly fees.

Alterna Bank is the online-only subsidiary of Ottawa-based credit union Alterna Savings. Alterna Savings is the second oldest credit union in Canada and the first in Ontario.

Investments with Alterna Bank are CDIC insured.

Alterna Bank is available to all Canadian citizens.

3. Wealthsimple

Wealthsimple doesn’t only offer a TFSA savings account. It’s also a robo-advisor and online brokerage, in addition to offering additional types of saving and investing accounts.

Savings and various investments can be placed in a TFSA savings account and earn interest at 2%.

While not CDIC or provincially insured, Wealthsimple does have insurance coverage from the CIPF.

Wealthsimple is available to all Canadian citizens.

  • Get up to $10,000 managed for free for one year.
  • Choose between Conservative, Balanced, and Growth Risk Profiles.
  • Award-winning mobile app and online platform.

 

4. Questrade

Questrade, like Wealthsimple, 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.

  • Self-Directed Investing and Robo-Advisor options available.
  • No opening or closing fees.
  • Free account transfer.
  • Registered account options available.

 

5. Motive Financial Motive® TFSA Savings Account

  • TFSA Interest Rate: 2.40%
  • No monthly fees with unlimited transfers and withdrawals.
  • TFSA GIC options are available.

Motive Financial’s Motive® TFSA Savings Account has quite a competitive interest rate, currently offering one of the best TFSA rates on the market at 2.40%. 

Investing in a Motive® TFSA allows you the flexibility to deposit any amount of funds at any time, with no penalties, as unlimited withdrawals and transfers are honoured.

Motive Financial also offers TFSA GICs which come with tax benefits on interest earned with GIC investments. Investments are insured by CDIC insurance.

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

6. Scotiabank Savings Accelerator Account TFSA

  • TFSA Interest Rate: 1.05%
  • No monthly account fee.
  • Interest paid monthly.

Scotiabank is one of Canada’s most prominent banks, and currently offers a TFSA rate of 1.05% 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.

7. Steinbach Credit Union TFSA Account

  • TFSA Interest Rate: 2.75%
  • No monthly account fees.
  • Transfers and withdrawals are $3.00 each.

A Steinbach Credit Union TFSA Account offers an interest rate of 2.75%. It costs $3.00 per transaction to withdraw or transfer funds from a Steinbach TFSA. The Steinbach, Manitoba-based credit-union is provincially insured.

Steinbach Credit Union TFSAs are available to all Canadian residents. However, as a credit union, Steinbach may require an in-person visit before opening an account.

8. Luminus Financial Investment Savings Account TFSA

  • TFSA Interest Rate: 1.75%
  • No charge on in-branch, mail, electronic, transfers, payroll deductions, or direct deposit.
  • Interest calculated daily and paid monthly.

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

Luminus Financial currently offers a promotional rate on TFSAs at 2.85% for new accounts.

After 180 days, the interest rate on a Luminous TFSA returns to its regular rate of 1.75%. 

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.

9. DUCA TFSA Savings Account

  • TFSA Interest Rate: 1.40%
  • Free transactions, ATM withdrawals, e-transfers, and external ATM use.

DUCA Credit Union offers a competitive interest rate on their TFSA at 1.40%. Interest that a TFSA in DUCA Credit Union accounts accrues interest daily paid daily and monthly. DUCA offers its customers free e-transfers, withdrawals, and use of its external ATMs.

Investments made with DUCA Credit Union are DICO insured.

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

10. Parama Credit Union TFSA Daily Interest Savings

  • TFSA Interest Rate: up to 1.50%
  • Year-based fixed rate options available.
  • Mobile banking app.

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 TFSA 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.

11. CIBC Tax Advantage Savings Account

  • TFSA Interest Rate: 0.85%
  • No monthly fee for CIBC TFSA.
  • $25 minimum TFSA deposit.

CIBC currently offers a rate of 0.85% on deposits placed into a CIBC Tax-Advantage Savings Account. CIBC’s TFSA 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.

12. Tangerine Tax-Free Savings Account

  • TFSA Interest Rate: 3.00% for the first 182 days on deposits by new clients, 1.25% on deposits for existing clients.
  • No minimum deposit requirement.
  • No monthly fees.

Tangerine’s Tax-Free Savings Account offers a promotional rate, and one of the best on the Canadian market.

Rates for a Tangerine TFSA is 1.25% for current clients. New clients get 3% for the first 182 days. 

The account comes with no monthly fees and unlimited transfers. No minimum balance or monthly contribution is required 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.

Formerly known as ING Direct, Tangerine is among Canada’s first digital banks. It is also a subsidiary of Scotiabank.

Tangerine is available to all Canadian citizens.

13. Simplii Financial™ Tax-Free Savings Account

  • TFSA Interest Rate: 1.20%
  • No minimum deposit amount or monthly fees.
  • Unlimited transfers and withdrawals.

Simplii Financial™ offers an interest on TFSA contribution at 1.20%. Interest on deposits is calculated daily.

Contributions in a Simplii Financial™ TFSA 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.

14. BMO Bank of Montreal TFSA Savings Account

  • TFSA Interest Rate: 0.75%
  • $50 minimum contribution requirement.
  • No monthly account fee.

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.

15. motusbank TFSA Savings Account

  • TFSA Interest Rate: 2.50%
  • No monthly, administrative, or transfer fees.
  • Partnered with The EXCHANGE Network ATM network.

Motusbank is the digital subsidiary of Meridian Credit Union. A motusbank TFSA Savings Account offers a competitive TFSA interest rate of 2.50%. 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. Investments with motusbank are CDIC insured.

Motusbank is available to residents of Quebec.

16. TD Tax-Free Savings Account

  • TFSA Interest Rate: 1.00%
  • Registered TFSA options are available.
  • Availability in all Canadian provinces.

TD Bank offers a Tax-Free Savings Account with an interest rate of 1.00% on savings deposited into their tax-free savings accounts. 

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

TD Bank TFSAs are available to all Canadians.

 

What is a Tax-Free Savings Account (TFSA)?

A Tax-Free Savings Account (TFSA) is a bank account and tax-shelter that can hold savings and various types of investments.

As briefly explained above, TFSAs aren’t exclusive to cash savings. They 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. Though there are more TFSA rules, this generally covers the basics of the savings and investment account.

As a registered account, a TFSA comes with a yearly limit on the amount that an account holder can contribute 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 TFSA 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

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.

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

What is a TFSA Contribution Limit and How Does It Work?

A TFSA Contribution Limit is a yearly limit to what you can contribute to a TFSA savings account. 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 2019, 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 2019 is $63,500. 

Each year, your unused contribution limit is added to the next year’s TFSA 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.

Below is every contribution limit per year since the introduction of the TFSA.

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

Confused? Don’t worry. While a TFSA contribution limit might seem fairly complicated to understand, you won’t see any penalties if your balance remains below $63,500 by the end of 2019.

Should I Use a TFSA?

There’s no reason why everyone in Canada shouldn’t use a TFSA. Unless your bank is charging you a monthly fee for their services, tax-free savings accounts are entirely free to open and use. Since they can earn interest at no tax or penalty, you can contribute your savings as you see fit, and withdraw them as well.

Tax-free savings accounts are versatile. They can be used to save up for an emergency fund, short-term financial goals, as well as long-term financial goals.

A High-Interest Savings Account generally offer higher interest rates but are taxed, meaning a TFSA might be worth your time if you haven’t maxed it out, that is.
 

TFSA vs. RRSP

It’s surprising how common the TFSA vs. RRSP debate is among Canadians, considering how similar both accounts are. Both registered accounts are incredibly similar, with exception to a few differences and limitations. TFSAs and RRSPs both offer tax benefits. Both accounts have contribution limits.

The short answer to this question is that both accounts can be utilized to their full potential.

TFSAs, as mentioned several times, offer tax-free interest growth and unlimited withdrawals. RRSPs offer tax breaks but are also taxed on withdrawal.

RRSPs are purposed for retirement savings but should be contributed to regularly. Just keep in mind that these funds are inaccessible without being taxed upon withdrawal. It’s probably a good idea to contribute a small portion, while the largest deposits are kept for a tax-free savings account.