Does this bank’s 0.1% savings rate strike you as high interest?

Is there really such a thing as a high interest savings account today? The big Canadian banks think so.

Submitted for your consideration:

• Desjardins High Interest Savings Account
• HSBC High Rate Savings Account
• National Bank High Interest Savings Account
• RBC High Interest Savings
• Simplii Financial High Interest Savings Account
• TD High Interest Savings Account
• VanCity JumpStart High Interest Savings Account

These accounts pay a standard rate of 0.05 or 0.1%, which is by no means a high interest rate. The most apt description is pitiful. Savings accounts from alternative banks pay standard rates of up to 1-1.5%, while a 12-month Government of Canada treasury bill has a rate of 1% these days. High-interest savings accounts billed as mutual funds pay around 0.25%.

We all know that interest rates are low and there are no high rates apart from investments that carry a lot of risk. We accept that savings provide rock-solid security as long as deposit insurance rules are followed and the cost of security is a low return. But slapping the term high interest on accounts paying 0.05-0.1% is misleading.

Some banks compound the problem by offering temporary bonus interest offers at rates that seem respectable. But these accounts always revert to the standard rate at some point.

Many of the big banks’ high interest rate accounts are legacy products that have been around since the days when rates were much higher. A name change would be slightly costly for the banks and counterproductive. The phrase high interest might just be the soothing reassurance a busy customer needs to put money into a large bank savings account instead of a competitor paying more.

Your homework is to check the interest rate on your big savings bank account, then read my Tuesday newsletter. The fifth installment in the Back to Basics series will look at how to ensure you get a decent rate of return on your savings.

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