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The first half of the 2020s has been a time of dynamic improvement in the most ordinary of all financial products.

Where savings accounts once offered only trace levels of interest and zero everyday utility, they now offer returns that solidly beat inflation while letting you pay bills and send e-transfers. Savings accounts are a vital part of the financial ecosystem, and the ones available today are the best we’ve ever had.

The newest offering in this space is the no-fee EQ Notice Savings Account, a kind of hybrid of a savings account and a cashable guaranteed investment certificate with no upfront minimum deposit. If you’re willing to give EQ 10 days’ notice of a withdrawal, you get 4.5 per cent interest as of the launch this week. With 30 days’ notice, you get 5 per cent.

The rate on EQ’s regular account is 2.5 per cent, but you can get 4 per cent if you have your paycheque directly deposited. Other players, including Koho, Motive Financial, Neo Financial and Wealthsimple, offer 4 to 5 per cent. And then there are the temporary promotional offers for rates of 5 to 6 per cent or more from bigger players.

“The rate environment is incredibly competitive right now,” said Mahima Poddar, senior vice-president and group head of personal banking at EQ parent Equitable Bank. “The number of promo offers that are out there, especially among the large banks, is higher and more active than I’ve seen in the whole time that I’ve been working in banking.”

Beyond high rates, savings accounts are also getting more versatile. Some offer the bill-paying and e-transferring functions of a transactional account, in addition to a far better rate than those paid in traditional big bank savings accounts.

Popular in the British market, the notice account is built on the idea that banks can offer higher rates on deposits that offer more predictable withdrawals. If there was an event in the economy or financial system that prompted a run on savings, money in notice accounts might at least stay put for the notice period. If you’re a banker, that breathing space is valuable.

You can make deposits and withdrawals on the new notice account from another EQ account or another bank. Giving notice of a withdrawal is simple with the notice account – you just open the app or go online to schedule the transaction. Deposits in the notice account are covered by Canada Deposit Insurance Corp., which EQ is part of through its parent.

Ms. Poddar said clients could access money in a notice account without giving proper notification by calling EQ, with requests considered on a case-by-case basis. Expect to forfeit your interest in this case. As a result, this account is strictly for people who are saving for specific goals and can plan their withdrawal. Vacation savings, vehicle purchases and home renos are a few examples.

Saving for a home down payment is another. Ms. Poddar said EQ is considering whether to offer a first home savings account version of the notice account, as well as versions for a tax-free savings account.

One-year non-cashable GIC rates currently range from about 4.5 to 5.4 per cent at best, while cashable GICs pay around 3 per cent. As for competition to the EQ notice account, Canadian Western Bank’s Flex Notice Account has a $25,000 minimum, notice periods of 31 or 93 days, and rates from 4.6 to 5.5 per cent.

Bank of Nova Scotia’s MomentumPlus account is a somewhat comparable product – there’s a regular rate of 1.3 per cent and interest premiums of 0.85 to 1.25 per cent if you leave your money untouched for between 90 and 360 days. Speaking of rate bonuses, there’s an extra 3.4 per cent available for three months on new accounts.

The question that has to be asked about all savings accounts today is how much longer today’s elevated rates will be available. The Bank of Canada is expected to start cutting its trendsetting overnight rate as soon as June 5 or July 24. Savings rates will come down after the bank makes its move, but by how much and how quickly?

Ms. Poddar said the rate on the notice account would be affected by a lower overnight rate, but competitive factors play a role as well. Bottom line, expect the rate to fall, but not necessarily in line with the overnight rate.

Are you a young Canadian with money on your mind? To set yourself up for success and steer clear of costly mistakes, listen to our award-winning Stress Test podcast.

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