Danielle Kubes is a trained journalist and investor who has written about personal finance for the past six years. Her writing has been published in The Globe and Mail, National Post, MoneySense, Vice and RateHub.ca. Danielle writes about investing and personal finance for Wealthsimple. She has a Bachelor of Humanities from Carleton University and a Master of Journalism from Ryerson University.
More and more Canadians are looking to take advantage of interest rates at historic lows. Investing in the stock market to capture bigger yields is one option, but it’s not right for those with a low risk tolerance or those trying to build an emergency fund or those who plan to use their savings within the next five years. Sometimes the only option is to stash your funds into a savings account and try to live with the low rates.
But the least you can do to try to maximize returns is comparison shop.
If you choose to bank at RBC then you have the option of at least three different savings accounts: High Interest eSavings, Enhanced Savings, and Day to Day. High interest eSavings offers, by far, the highest rate at 0.05%. Enhanced savings offers a tiered rate depending on your balance and tops out at 0.01% With a balance under $5,000 you get zero interest. Day to Day is also tiered and also tops out at 0.01% for those who have at least $1,000 in the account. If you have less than $1,000 the rate drops to 0.005%.
Let’s dig deeper into RBC’s High Interest eSavings account since it offers the best rate.Our cash account doesn’t have an “introductory rate” — because introductory rates disappear. Get started with Wealthsimple Cash to spend, save and earn 0.5% interest annually.
What is RBC High Interest eSavings?
RBC High Interest eSavings is a regular savings account that offers higher rates than other accounts but minimal features. You must have another RBC account because the primary way to access your money is by transferring funds electronically in and out through a chequings account. You can add the account to your debit card and can withdraw cash at the ATM once a month for free. You can deposit funds by taking a picture of your cheque and sending it through the mobile app. You can set up pre-authorized contributions from another RBC account to help grow your savings faster. In these ways, it’s pretty similar to an account at a typical online, fee-only bank such as Eq, Tangerine, Simplii, and Wealthsimple.
Fees at RBC High Interest eSavings
Fees at RBC High Interest eSavings account are low compared to typical Big Five savings accounts but that’s because there’s not a whole lot of transactions the account is designed for. Instead it’s designed as a place to encourage you to stash and hold your money. If you want to avoid all fees simply move any money you want to spend electronically into your chequings account where you have a higher transaction limit.
|Monthly Debits included||1 Free RBC ATM cash withdrawal/month|
|Free Transfers||Electronic self-serve transfer to any RBC Royal Bank personal deposit account in your name|
|Debits Exceeding Monthly Limit||$5 each|
|Interac and PLUS System ATM Network Access Fees||Interac: $2 <br> PLUS System: $3 (Within Canada and U.S.) <br> PLUS System: $5 (Outside Canada and U.S.)|
|eStatement and eNotifications||Free — including cheque images viewed online less than 90 days old|
|Access to Online, Mobile, and Telephone Banking||Free|
RBC, like the rest of the Big Five banks, does not offer competitive interest rates compared with online-only banks, credit unions or other financial institutions. Its overhead is much higher and it is focused on making profit. In fact, RBC is the single most profitable company in the entire country, earning $12.87 billion in 2019. For these reasons, and others, RBC offers a fraction of the interest rate that most alternative financial institutions do.
Whereas RBC’s High Interest eSavings offers 0.050%.the Wealthsimple cash account offers an interest rate of 0.75%, for example. Of course, there’s no branch to walk into at Wealthsimple—but neither is there with the eSavings account. At both institutions you have to access your money online. Since the eSavings account is functionally designed as a typical online, low-fee account it doesn’t have the “perks” most people tend to give as a reason when going with a Big Five: such as access to humans and traditional banking services like safety deposit boxes. What RBC does have is over a hundred years of history and a strong reputation, which for many Canadians is enough
Compared to the Big Five, RBC’s rate is on target. But compared to alternative financial institutions, it’s low.
|Provider & Account Name||Rate||Account Minimum|
|RBC High Interest eSavings||0.05%||None|
|CIBC eAdvantage® Savings Account||0.10%||None|
|Scotiabank Money Master® Savings Account||0.01%||None|
|TD High Interest Savings Account||0.05%||$5,000|
|BMO Savings Builder Account||0.05% (increases to 0.35% if you save $200 per month)||None|
Let’s see what difference interest rates can make in the real world. Say you’re saving for a down payment and so you must hold your money in a low-risk account. If you invested $50,000 in RBC’s High Interest eSavings account for five years you would have earned a grand total of… $125, assuming the rate stayed constant. You’d have to subtract taxes from that, of course.
But let’s say instead you piled the cash at Wealthsimple, earning 0.75%. You’d have earned $1,875, minus taxes. Okay, still pretty modest considering such a large sum of money, but when you do the math the difference in return between RBC and Wealthsimple is 1400%.
In this environment of historic low interest rates the truth is that it’s simply not possible to find a true “high” rate. Instead, you should be seeking the best rate you can find, even if it means exploring accounts that are at different banks then the one you’ve traditionally used. The difference could be thousands of dollars.
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