Savings account promotional rates in Canada: what happens when the promotion ends?
Many Canadian high-interest savings accounts advertise a promotional rate that applies only to new customers or new deposits for a limited time, often three to five months. After that the account pays its regular rate, which can be much lower. Before you move your money, compare both rates and check how long the promotion lasts.
How to read a savings rate
Regular (posted) rate: what the account pays with no time limit. The bank can change it at any time.
Promotional rate: a higher rate for a set period, usually for new customers only and sometimes only up to a maximum balance.
Tiered rate: the rate depends on your balance, so check the tier that matches the amount you will keep.
Conditional rate: some accounts pay their best rate only if you meet a condition, such as depositing your pay or growing your balance each month.
Tax and protection
Interest earned outside a TFSA, RRSP or FHSA is taxable income. Your bank sends a T5 slip when you earn $50 or more in interest in a year, but you must report all interest even without a slip.
Savings deposits at CDIC member institutions are insured up to $100,000 per insured category. Many online banks are members; check the CDIC member list if you are unsure.
Savings account or GIC?
A savings account lets you withdraw at any time, but the rate can change. A GIC fixes the rate for the whole term, but most lock your money in.
A common approach is to keep emergency money in a savings account and put money you will not need for a year or more into GICs.
Is a promotional rate an annual rate?
Yes. Savings rates are quoted per year. A 5% promotional rate that lasts three months pays about 1.25% of your balance over those three months.
Can I keep switching banks to get promotional rates?
Yes, that is allowed. Count the effort and any transfer-out fee your current bank charges before you move.
Does the promotional rate apply to money already in my account?
Often not. Many promotions apply only to new customers or to new deposits above your existing balance. Read the offer terms.
Official sources
- Financial Consumer Agency of Canada: savings accounts
- CDIC: what's covered
- Canada Revenue Agency: line 12100, interest and other investment income
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