RateSupermarket.ca displays, for a deposit of $50,000 CDN, high-rate savings accounts (abbreviated as HRSA) that yield as highly as 1.75% from Implicity Financial, 1.50% from Scotiabank, and 1.05% from Tangerine.

These returns transcend those of Canadian money market funds (abbreviated as MMF); this article from Jul 22 2013 lists the highest annual percentage return as 0.98% from Steadyhand Savings.

Also, MMFs are riskier than high-rate savings accounts (eg: Scotiabank and Tangerine belong to large banks in Canada, and so are relatively safe).1

How does the superiority of HRSAs still not negate and exterminate MMFs?
Why would one invest still in MMFs? What have I misapprehended or neglected?

1Source: p 147, Investing For Canadians For Dummies, 3 Ed (2009) by Tony Martin, Eric Tyson

The lack of CDIC insurance on a money market fund shouldn’t trouble you. Mutual fund companies can’t fail because they have a dollar invested in securities for every dollar that you deposit in their money funds. By contrast, banks are required to have available just a fraction of every dollar that you hand over to them.

A money market fund’s investments can decline slightly in value, which can cause the money market fund’s share price to fall below a dollar. In a few cases, money market funds have bought some bad investments. However, in each and every case except one, the parent company running the money market fund infused cash into the affected fund, thus enabling it to maintain the $1-per-share price.

  • 1
    Are those HRSAs actually guaranteed or could the rates vary at any moment? MMFs may be easier to invest in brokerage accounts where money market sweeps would be common in contrast to switching back and forth with accounts.
    – JB King
    Commented Aug 30, 2015 at 20:39
  • @JBKing Those HSRAs' rates could vary.
    – user10763
    Commented Sep 4, 2015 at 18:20

1 Answer 1


There are two reasons you would get a higher yield for savings accounts: either because it is not guaranteed by a national deposit insurance fund (CDIC I presume in Canada), or you have to hold it for a longer term.

Money Market Accounts are insured in the U.S. and are also very liquid since you can debit from it any time. Because of this, they offer much lower rates of interest than comparable products.

If you look at the savings products such as the 1.50% momentum savings account offered by ScotiaBank, you actually have to hold a $5000 balance and not make any debit from it for 90 days in order to get the extra 0.75% that would get you to 1.50%. Essentially this is roughly equivalent to offering you a 1.50% GIC with a 0.75% withdrawal penalty fee, but simply presented in more "positive" terms.

As for the Implicity Financial Financial 1.75% offering, it looks like it is not insured by the CDIC.

You must log in to answer this question.