First a note of caution: first check with your investment broker whether any fees are charged for buying or selling HISAs and for early redemptions. For example: Scotia iTrade charges an early redemption fee of 1 percent (minimum of $38.88) on all mutual funds other than Scotia and Dynamic Funds held for less than 90 days. A Scotia iTrade client parking $10,000 for 30 days in a TD HISA will earn $10 in interest but pay an early redemption fee of $100. If the client had instead parked her cash in the Bank of Nova Scotia HISA, there would have been no early redemption penalty.
The savings accounts offered through discount brokers have one huge advantage over high interest savings accounts offered by online banks such as ING Direct Tangerine. The cash parked in HISAs are counted towards the cash balance available in an account. Therefore, these funds are readily available for your trades and your broker may even automatically sell all or some of your HISA to fund your trade. In contrast, online banks are not practical for registered accounts and it may take 3-4 business days to transfer money from (or to) an online bank to (or from) taxable brokerage accounts. These savings accounts are also a much better alternative to traditional money market accounts because they pay a much higher interest rate. For example, as of this writing, the TD Canadian Money Market Fund sports an yield of 0.37 percent which is much less than the 1.25 percent paid by discount broker HISAs.
Tips for getting the most out of HISAs
- You can park cash in these accounts by pulling up a quote for the fund code and clicking on the “Buy” button.
- Most of these funds have an initial minimum investment of $1,000. Note though that the initial minimum investment may be quite different at your broker. TD HISAs have a minimum investment of $100 at TD Direct Investing even though the website says that the minimum is $1,000. Interest is accrued daily and paid monthly.
- Typically, these accounts are sold without any loads or minimum holding periods or any fees of any kind but as noted earlier, always check first before buying.
- If you have a large cash balance, make sure you split your savings in chunks of less than $100,000 between a number of these accounts. That way all your savings will be fully covered by Canada Deposit Insurance Corporation.
- All these HISAs are also available as F-series funds that are only available through financial advisors. Even if you are able to pull up a quote and place an order for a F-Series fund (such as RBF2011) in a discount brokerage account it will be rejected later.
- The multiple savings accounts from TD Bank and Royal Bank are equivalent. They are offered by subsidiaries and can be used to work around the $100,000 CDIC deposit insurance limit.
- Most brokers offer at least their in-house HISAs but your mileage may vary. For instance, only RBF* funds are available to clients at RBC Direct Investing.
Manulife Bank US$ Investment Savings Account (MIP511): 0.20%
ICICI Bank US$ HIISA (IBN200): 0.25%
Dundee US$ Investment Savings Account (DYN400): 0.20%
Bank of Nova Scotia US$ ISA (DYN1350): 0.20%
RBC US$ Investment Savings Account (RBF2014): 0.20%
BMO US$ HISA (AAT780): 0.20%
TD US$ Investment Savings Account (TDB8152): 0.20%
Altamira US$ High-Interest CashPerformer (NBC101): 0.20%
Availability at discount brokersThe following information is presented based on reader feedback and Canadian Money Forum posts. Do your due diligence and check with your investment broker first.