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High-interest Savings Accounts (HISAs) Explained in 2025

Can a HISA help you grow your savings and meet your financial goals? We take a deeper look at the benefits and limitations of this popular savings account.

Updated

7 min. read

What is a high-interest savings account?

If you enjoy the security of savings accounts but are looking for opportunities for your money to do more for you, there's an option that’s worth exploring.

Enter the high-interest savings account (HISA), also known as a high-yield savings account, which is a type of bank account that offers interest rates that are above and beyond what you'd typically find with traditional savings accounts.

Commonly available at major banks, credit unions and digital banks in Canada, these accounts aim to motivate individuals to grow their savings by offering competitive interest rates.

How a high-interest savings account (HISA) works

Let's dive into the mechanics of a high-interest savings account together.

A high-interest savings account (HISA) is a bit like a traditional savings account in how it works. You deposit your money and watch it accrue interest, although at a more favourable interest rate compared with your traditional savings account. That means your money can grow faster in a HISA than in a traditional savings account. The interest for a HISA is calculated daily on your account balance, but it is paid out monthly, and interest rates are typically quoted on an annual basis.

Now, when it comes to transactions, you’ll find that most of the typical transaction options offered by a traditional savings account are also offered by a HISA. As far as fees go, HISAs are similar to other traditional savings accounts in that their associated fees can vary, depending on the specific type of account and the financial institution offering it. Some accounts may have monthly fees or fees for certain types or amounts of transactions. At BMO, for example, the high-interest Savings Amplifier Account features no monthly fees, no minimum balance requirement and unlimited free self-serve transfers between BMO bank accounts. Other fees may apply.

Some banks may waive certain fees if you maintain a minimum balance, but it may be helpful to think about the amount and types of transactions you expect to make, as well as any associated fees, before you decide whether a HISA is right for you.

A high-interest savings account operates similarly to a traditional savings account but typically offers more favourable interest rates.

How to use a high-interest savings account

A high-interest savings account can be a formidable savings tool for reaching your financial goals but it is just one piece of the puzzle in your overall financial portfolio. It's important to strategize how to effectively leverage this account alongside your other accounts to align with your financial plans.

Let’s have a look at some common ways to use a HISA.

Purposeful savings strategies

Are you envisioning owning a home in the near future? Perhaps home renovations are on the horizon? Or maybe you dream of embarking on an adventure across Asia?

No matter the reason you’re saving money, a high-interest savings account is well equipped to help you meet those goals. By earning more interest on your savings, you can reach your goals faster and more efficiently. Plus, the easy accessibility of the funds ensures that you can access the money whenever you’re ready to make a significant purchase or investment.

Emergency savings

When it comes to building an emergency fund, opting for a high-interest savings account can really work wonders.

Not only does it provide the benefit of higher interest rates, but it also makes accessing your funds easy and convenient. So, as you diligently set aside money for emergencies, you can also watch it grow via the interest you earn. This dual advantage ensures that your money is not only safely waiting for unexpected expenses, but also working for you in the background.

A HISA can play a pivotal role in achieving personal financial goals by offering enhanced interest rates and easy access to funds, making it ideal for targeted savings and emergency funds.

Next, let's explore the typical transactions that can be carried out using a HISA:

Deposits such as cash and cheques
Withdrawals at banks or ATMs
Preauthorized payments
Transfers between linked bank accounts
Interac e-Transfer^®§ transactions

Alternatives to a high-interest savings account in Canada

While a HISA can help you reach your financial goals sooner, it’s not the only road you can take. Other options for saving and, in some cases, investing your money include:

The top benefits of a high-interest savings account

To be sure, the high-interest savings account has many advantages. Let’s look at three of its top benefits.

Higher interest rates:

The standout feature of a high-interest savings account is, of course, the higher interest rates compared with traditional savings accounts.

Safe and secure:

If you are banking with a financial institution covered by the Canada Deposit Insurance Corporation (CDIC) your HISA protects up to $100,000 CAD in deposited funds, like other accounts held with CDIC-insured financial institutions.

Liquidity and accessibility:

Ultimately, you’ll want to keep your funds in place for the long term to really take advantage of a HISA’s interest rate. But if life happens, a HISA allows you to access your funds when you need to. That flexibility and convenience are invaluable when plans change, or emergencies arise.

The high-interest savings account offers advantages including high interest rates, ensured safety through CDIC protection, and flexibility in accessing funds when needed.

Limitations of a high-interest savings account

When considering a high-interest savings account (HISA), it’s important to weigh both the pros and cons. Some drawbacks to be aware of include:

Withdrawal limits: You may be limited to a certain number of transactions included in each billing cycle, beyond which you’ll be charged for each additional transaction. Your HISA may not limit how much you can transfer or withdraw, but it may still cap how many times it can be done per cycle.

Fluctuating rates: Even if you open a HISA at an attractive promotional interest rate, there’s no guarantee it will stay there. Interest rates on HISAs are variable and can change at any time.

Limited growth: Compared with traditional savings accounts, a HISA will certainly earn more. But those earnings can’t compete with investment options. A TFSA, for example, or self-directed investing, may help your money grow even more.

Tax implications: The interest earned on your HISA will be taxed as income.

What is the difference between a traditional savings account and a high-interest savings account?

The main difference between a traditional savings account and a high-interest savings account is the interest rates. Even with a small initial deposit in a HISA, its more favourable rates, along with the power of compound interest, can accelerate the growth of your money.

Let's break it down with an example: Imagine you want to deposit $20,000 into a savings account. Your traditional savings account might give you a 0.10% interest rate, but a HISA could offer a much more appealing 1.35% interest rate annually. If you stick with your regular account, after a year, you'll have $20,040 to your name. But if you go for the HISA and make no transactions that incur fees, you’ll see $20,271.68 in your account after the first year, earning an extra $230 in interest just by choosing a different type of savings account.

Hypothetical savings scenario comparison:

Account details	Hight-interest savings account	Traditional savings account
Initial deposit	$20,000	$20,000
Interest rate	1.35%	0.10%
Compound period	monthly	monthly
Interest earned in one year	$271.68	$40

*Information used in this table is an example only

To sum it all up

With a higher rate of interest than other savings accounts, your money can grow faster, and goals can be achieved quicker in a high-interest savings account. You can make as many contributions as you want, and the greater your account balance and the more time you keep your money in the account, the more you can earn. Just be sure to check the interest rates, fees and limitations before you open one.

Common FAQs about high-interest savings accounts

There’s no one answer to how much money you should keep in a HISA. Everyone’s needs and goals are different. But most agree that keeping six to 12 months’ worth of expenses in a HISA is a good idea. That way, you’ll have easy access to cash in case of emergency and can still save for larger financial goals, like buying a home.
Your earnings in a HISA will be taxed at your marginal tax rate. Every year your financial institution will send you a statement of investment income (T5) that you’ll have to submit with your personal income tax return.