By Keph Senett on June 19, 2024
Estimated reading time: 5 minutes

An alternative to GICs: This new bank account pays high interest on your cash holdings

By Keph Senett on June 19, 2024
Estimated reading time: 5 minutes

Canadian investors have few options to earn interest on cash, such as HISAs and GICs. A new account offers benefits of both and pays up to 5.00% interest.

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Canadian investors hold cash in their portfolios for several reasons: It’s a safe way to cushion against market volatility. It provides easy access to funds in case of an emergency or unexpected expense. And it means you’ll have liquid assets in case of a market downturn—or the arrival of a compelling investment opportunity.

Until now, though, options for holding and growing cash in Canada have been limited to high-interest savings accounts (HISAs), guaranteed investment certificates (GICs) and money market funds (MMFs). So, the arrival of an accessible notice savings account (NSA) is great news for those seeking an alternative. (Note: The EQ Bank Notice Savings Account is not yet available in Quebec.)

Read on to learn all about EQ Bank’s brand-new Notice Savings Account, which offers 3.50% or 3.65% interest, depending on which option you choose. See why it’s a great option for short-term and medium-term savings goals.

EQ Bank Notice Savings Account

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Monthly fee: $0
Interest rates: 3.50% for 10-day notice, 3.65% for 30-day notice. Read full details on the EQ Bank website.
Minimum balance: n/a
Eligible for CDIC coverage: Yes

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Why hold cash in your portfolio?

When people think about investing, they often focus on stocks, mutual funds and exchange-traded funds (ETFs). Cash is less prominent than other types of investments, but it can be an important part of your portfolio, too.

For starters, cash is a way of diversifying, which helps mitigate risk. A resilient, diversified portfolio might include a combination of equities (stocks); mutual funds and/or ETFs (which invest in dozens or even hundreds of companies); fixed income (such as bonds and GICs); and cash. The exact mixture will depend on your financial goals, time horizon and risk tolerance.

Cash is stable, meaning that unlike equities or bonds, it doesn’t fluctuate in value. If you save up $1,000 and keep it in a savings account or buy a GIC, you’ll still have $1,000 in six months, plus whatever interest you’ve earned.

Finally, cash is liquid, which means that you can access it quickly and easily—a major benefit when you need funds but can’t or don’t want to sell your investments. You might need cash for an unexpected expense or emergency, or to act on a compelling investment opportunity, for example.

Where Canadian investors can hold cash

There are only so many places that Canadian investors can hold their cash, aside from a regular bank account. As noted above, traditionally these have included HISAs, GICs and MMFs, like mutual funds and ETFs. Now, however, investors in Canada can also choose the EQ Bank Notice Savings Account, the first in the nation to offer NSA benefits with no minimum deposit. And, like HISAs and GICs, NSAs are covered by the Canada Deposit Insurance Corporation (CDIC), meaning that if your financial institution fails, your funds are insured for up to $100,000 per account.

	EQ Bank NSA	HISA	GIC	MMF
Interest rate or yield	3.50% or 3.65% interest	Interest rates typically range from 0.01% to 4.00%	Varies—generally, GICs with longer terms and less flexibility have higher interest rates. Current rates for 30-day GICs (the shortest term available) range from 2.8% to 4.3%.	Currently, you can find money market funds yielding 4% to 5%
Withdrawal terms	10 days or 30 days, depending on the account	Cash withdrawals are immediate; transfers may take a few days	At end of term only (unless it’s a cashable or redeemable GIC)	Usually takes a few days to withdraw
Minimum balance	No	No	Usually $500; only $100 minimum investment with EQ Bank	$100 to $5,000, depending on the fund
Maximum contribution	$200,000 for an individual account, $500,000 for a joint account	No	Non-registered accounts usually have either a very high maximum or no maximum amount. Registered accounts (RRSPs, TFSAs, etc.) have contribution limits.	No
Fees	None	Sometimes	None	Management fees of 1.5% to 2%
CDIC coverage (up to $100,000)	Yes	Yes	Yes	No

HISA and GIC annual interest rates and MMF trailing 12-month yields were sourced from a range of Canadian financial institutions in late May 2024. Rates and yields are provided for information purposes only and are subject to change at any time.

How a notice savings account works

Although notice savings accounts are common in the United Kingdom and Australia, they’re not common in Canada and have typically been restricted to businesses or aimed at high-net-worth banking customers. The EQ Bank Notice Savings Account is the first of its kind in Canada to be available to everyday investors and savers, with no minimum balance or fees and the same rates for all account holders.

A notice savings account is like other savings accounts with a few key differences. Investors can deposit their funds, without any fees or paperwork, and earn a high interest rate. In return, they agree to give their bank notice (hence the name) before making a withdrawal. In general, the longer the notice required, the better the rate they earn.

With an EQ Bank Notice Savings Account, investors can choose between two products: the 10-day and the 30-day. With the 10-day Notice Savings Account, you’ll earn 3.50% on your deposit, and with the 30-day Notice Savings Account, you’ll earn 3.65%.

You’ll start earning daily interest as soon as you deposit your money, and you can continue to make deposits to the account whenever you want, without any fees. You can simply log in to EQ’s online or mobile banking and fill out a withdrawal request.

Why open a notice savings account?

When you deposit your money into an EQ Bank Notice Savings Account, you pair high interest rates with moderate accessibility. While HISAs let you access your money more quickly, many of them have promotional interest rates that drop after a few months. Higher-interest products like GICs usually lock in your funds for longer. An NSA gives you the high return with a short delay to access your funds, making them perfect for longer-term savings.

Visit the EQ Bank website or download the app to open your EQ Bank Notice Savings Account today.

Interest on the EQ Bank Notice Savings Account is calculated daily on the total closing balance and paid monthly. Rates are per annum and subject to change without notice.

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This is a paid post that is informative but also may feature a client’s product or service. These posts are written, edited and produced by MoneySense with assigned freelancers and approved by the client.