Rachel Surman • Nov 22, 2017
If you have a savings account, you’re most likely earning a bit of interest. But how does interest on a savings account work? We’ve got the answers. Let’s start with the basics of interest.
What is interest on a savings account?
In simple terms, interest is the cost of borrowing money. In most scenarios, you will collect interest if you lend money and you’ll pay interest when you borrow money.
Interest on your savings account will work in this same way and opening a savings account is an easy way to get started earning interest. When you open an account, you’re essentially lending your money to the bank and charging interest.
How does interest on a savings account work?
Our customer was specifically interested in comparing his current account (a traditional savings account with a 0.05% interest rate) with EQ Bank’s Everyday Savings Account. EQ Bank currently offers the most competitive interest rate on the market with 2.30%.
So let’s say you put $10,000 into your account with EQ Bank that offers a 2.30% annual interest, which compounds monthly. Assuming you leave the $10,000 alone, by the end of the year – your account would earn roughly $232* in interest.
If you did the same thing with a 0.05% savings account, you would earn about $5 in interest by the end of the year.
Which savings account is right for you?
Put simply, it depends on your unique financial needs. Savings accounts with traditional banks have typically lower interest rates because they offer conveniences to customers. If you like walking into a bank, receiving excellent customer service, and having access to ATMs anywhere – then sticking with a low-interest savings account may be a good idea.
However, if you’re looking for a higher interest account to put away some savings in to watch your money grow, with no monthly fees or minimum balance, then an online bank such as EQ Bank may be the better option.
If you’re ready to start earning more on your on your savings, then opening an account with EQ Bank, it’s time to get started!
Do you know your credit score? Find out for free (this won’t affect your credit score).
*In order to increase clarity in this post, the figures have been slightly rounded.
Doing these 5 things can help you get an excellent credit score, according to a new Borrowell study.
Nov 01, 2019
Welcome to The Ultimate Guide To Personal Finance For College And University Students, by Borrowell! In this five-part guide, you’ll learn about important personal finance concepts that will prepare you for the next few years of school and beyond.
Aug 07, 2019
Today is an exciting day for all of us at Borrowell! We’re pleased to share that over a million people have signed up to Borrowell as members. This is an important milestone. It means that one in every 25 adult Canadians uses our free credit monitoring service! By that measure, this makes Borrowell Canada’s largest fintech company.
Apr 02, 2019
Borrowell® is a registered trademark of Borrowell Inc. All Rights Reserved. The Equifax credit score is based on Equifax’s proprietary model and may not be the same score used by third parties to determine your credit profile. The score provided to you for educational use is the Equifax Risk Score.
2014-2020 Borrowell® | The Credit Is All Yours!