Looking for the best place to save your money without being taxed? A tax-free savings account (TFSA) is the way to go.
Canadians can contribute a certain amount of money each year into their TFSA, and that money grows tax-free.
With so many options out there, it can be hard to know where to put your money. That is why we have written this article to help narrow down your search.
In this blog post, we will compare different TFSA rates from some of the top financial institutions in Canada and help you choose the best one for your needs.
So keep reading to learn more!
Table of Contents
What is a Tax-Free Savings Account (TFSA)?
A Tax-Free Savings Account (TFSA) is a savings vehicle available to Canadian residents that offers tax benefits for saving.
Even when withdrawn, most investment income received in a TFSA, including capital gains and dividends is tax-free.
This makes TFSAs an attractive option for those looking to save for short- or long-term goals, such as a rainy day fund, a down payment on a home, or retirement.
Also, this account is beneficial for those who do not have a lot of income because they will not be taxed on the money that they are making from their investments.
There are also no income limits for contributing to a TFSA. That means even if you have a low income, you can still contribute the maximum amount each year and enjoy the tax benefits.
However, there are limits on how much you can contribute to a TFSA each year. For 2022, the maximum contribution limit is $6,000.
Since the TFSA unused contribution room is carried forward to next year, the maximum limit for 2022 is $81,500 for Canadian residents that haven’t contributed to a TFSA since it started in 2009.
On the other hand, the maximum limit for new Canadian residents depends on the year they moved to Canada.
To find your TFSA contribution limit, check your recent Notice of Assessment from the CRA.
Overall, TFSAs provide an excellent way to grow your savings while minimizing your tax liability.
Best TFSA Rates Canada
There are several financial institutions in Canada that offer TFSA with different rates. As a result, choosing the best TFSA rates can be confusing.
That’s why we’ve compiled a list of the best TFSA rates in Canada. Check it out and see which one is right for you.
1. Tangerine Tax-Free Savings Account
- Interest Rate: 1.00% (4.25% promotional rate)
- Monthly Fee: $0
- Minimum Balance: $0
- Special Offer: $400 cash back
Tangerine is one of Scotiabank’s subsidiaries. It is a Canadian direct bank that offers several banking products.
The bank’s products include savings and chequing accounts, mortgages, GICs and mutual funds.
Tangerine Bank offers a Tax-free savings account with a great interest rate. Although its regular interest rate is 1.00%, you can get a promotional interest rate of 4.25%.
The Tangerine tax-free savings account has no minimum balance requirement or monthly fees.
You can withdraw your money from the Tangerine tax-free savings account at any time. This is because your money is not locked in the account.
Also, you won’t pay taxes on interest earned or withdrawals from your Tangerine Tax-free savings if you maintain your contribution limits.
2. WealthONE Tax-Free Savings Account
- Interest Rate: 3.00%
- Monthly Fee: $0
- Minimum Balance: $1,000
- Special Offer: N/A
WealthONE is a digital bank that focuses on lending options that are suited for independent contractors, property investors and new immigrants to Canada.
The WealthONE Tax-Free Savings Account can be an ideal account for your short-term financial goals.
You can get a high-interest rate of up to 3.00% without paying any monthly fees. This makes the WealthONE TFSA great for you if you are looking for a TFSA with a high-interest rate.
Your contributions to the account are insured by the Canada Deposit Insurance Corporation (CDIC).
Although the WealthONE TFSA has a minimum balance requirement of $1,000, it is not as high as other TFSAs in Canada.
3. CIBC TFSA Tax Advantage Savings Account
- Interest Rate: 2.90% promotional rate
- Monthly Fee: $0
- Minimum Balance: $25
- Special Offer: N/A
The Canadian Imperial Bank of Commerce (CIBC) is one of the five big banks that was founded in Toronto, Canada.
CIBC offers one of the best TFSA rates in Canada. You can get an interest rate of 2.90% for a limited time when you open the CIBC TFSA Tax Advantage Savings Account.
You can make tax-free contributions and withdrawals from your CIBC TFSA Tax Advantage Savings Account and access your money at any time.
Also, you have the ability to set up recurring transfers into your account through the account for a quicker and more practical approach to saving.
4. Motive Financial TFSA Savings Account
- Interest Rate: 3.00%
- Monthly Fee: $0
- Minimum Balance: $0
- Special Offer: N/A
Motive Financial is an online-only Canadian bank that offers you the opportunity to bank from the comfort of your home.
The Motive Financial TFSA Savings Account is another great option you might want to consider if you are looking for the best TFSA rates in Canada.
The account offers a competitive interest rate of up to 3.00%. It has no monthly fees or minimum balance requirement.
You can also withdraw funds from the account at any time without paying any tax.
5. Achieva Financial TFSA Savings Account
- Interest Rate: 2.85%
- Monthly Fee: $0
- Minimum Balance: $0
- Special Offer: N/A
Achieva Financial is one of the first online-only financial institutions in Canada which has been assisting Canadians with saving since its inception in 1998.
The Achieva Financial TFSA Savings Account has the same interest rate as its Daily Interest Savings Account.
You can get a competitive interest rate of up to 2.85% without paying any monthly fees and with no minimum balance requirement.
Also, all your deposits into the account are guaranteed unlimited by the Deposit Guarantee Corporation of Manitoba.
6. Hubert Financial High Interest Tax-free Savings Account
- Interest Rate: 2.85%
- Monthly Fee: $0
- Minimum Balance: $0
- Special Offer: N/A
Hubert Financial is an online financial institution in Canada that provides several saving options at your disposal.
If you open a Hubert Financial High Interest Savings Account, you will enjoy all the perks of Hubert Financial’s Happy Savings account with the extra benefit of tax-free growth.
Also, you can get an interest rate of up to 2.85% without paying monthly fees. There is also no minimum balance requirement.
Additionally, your contributions to the Hubert Financial High Interest Savings Account are guaranteed up to 100% by the Deposit Guarantee Corporation of Manitoba.
7. EQ Bank Tax Free Savings Account
- Interest Rate: 2.00%
- Monthly Fee: $0
- Minimum Balance: $0
- Special Offer: N/A
EQ Bank is a subsidiary of Equitable Bank. It is an online-only Canadian bank that was launched in 2016.
The EQ Bank Tax Free Savings Account is another great account that is worth looking at when looking for the best TFSA rates in Canada.
There is no minimum balance requirement or monthly fees on the account. You can get an interest rate of 2.00% on the account.
Also, your deposits in the EQ Bank Tax Free Savings Account are covered by CDIC up to $100,000 per category.
8. AcceleRate Variable Tax-Free Savings Account
- Interest Rate: 2.85%
- Monthly Fee: $0
- Minimum Balance: $1,000
- Special Offer: N/A
AcceleRate Financial is an online Canadian credit union that is based in Manitoba.
The AcceleRate Variable TFSA offers you all the flexibility and benefits of its high-interest savings account plus tax-free benefits.
You can get an interest rate of 2.85% with the account which is calculated daily and paid every December 31.
Also, your contribution to the account is guaranteed 100% by the Deposit Guarantee Corporation of Manitoba.
Although the account has a minimum balance requirement of $1,000, it’s still a great TFSA account.
How to Choose the Best TFSA Rates in Canada
Now that you have gone through our list of the best TFSA rates in Canada, you may be wondering how you can choose the best one.
When it comes to choosing the best TFSA rates in Canada, there are a few things you should take into account.
One of the most important factors is fees. Some financial institutions will charge you a monthly fee, while others will not.
Another thing to consider is the minimum deposit. Some banks will require a minimum deposit to open an account, while others do not.
Additionally, you should look at the regular and promotional interest rates. Some banks offer higher interest rates for promotional periods, but then the rate drops after that period ends. Others have lower interest rates but don’t have any promotions.
By considering all of these factors, you will be able to choose the best TFSA for your needs. Ultimately, it is up to you to decide which bank is best for your needs.
TFSA Contribution Limits
As mentioned earlier, there is a limit on the amount you can contribute to a TFSA account. This is referred to as the TFSA contribution limit.
If you are currently up to the age of 18, your TFSA contribution room began the year you turned 18 and continues to grow each year after that.
The table below shows the TFSA contribution limits in Canada from 2009 to 2022.
| Year | Amount |
| 2009 | $5,000 |
| 2010 | $5,000 |
| 2011 | $5,000 |
| 2012 | $5,000 |
| 2013 | $5,500 |
| 2014 | $5,500 |
| 2015 | $10,000 |
| 2016 | $5,500 |
| 2017 | $5,500 |
| 2018 | $5,500 |
| 2019 | $6,000 |
| 2020 | $6,000 |
| 2021 | $6,000 |
| 2022 | $6,000 |
From the above table, you can see that your contribution limit for 2022 is $6,000. If you exceed the contribution limit of $6,000, you will be charged a penalty fee of 1% per month of the excess amount.
Suffice to mention, CRA deems withdrawals from TFSA as contribution-related activity. This means, if you take out $5,000 in 2022, your contribution room is now $1,000 and any contribution above that will attract a 1% penalty per month on the excess contribution.
RELATED: Best RRSP Rates in Canada
Final Thoughts on the Best TFSA Rates in Canada
TFSAs are a great way to grow your money and there are lots of options available to you. This article has discussed some of the best TFSA rates in Canada.
TFSAs are also a great way of shielding capital gains when you choose to open a Direct Investing TFSA and invest in Stocks and ETFs within the TFSA account.
Depending on your goals, there are many factors you have to consider when choosing your TFSA.
To choose the best TFSA rate in Canada, you should consider more than just the interest rate.
While the interest rate is important, you should also look at the fees associated with the account and the minimum deposit required to open it.
In addition, you should compare the regular interest rate with any promotional rates that may be offered.
In the end, it comes down to your needs and preferences. Regardless of which option you choose, your TFSA money will grow tax-free, so be sure to take advantage of these savings.
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