Have you ever wondered why the cash sitting idle in your brokerage account earns little to no interest? The reason is simple: brokers use that cash at minimal cost to them, leveraging it for their financial operations. This practice allows brokers to offer low trading commissions, but it leaves your savings underutilized.
Fortunately, there’s a way to make your idle cash work for you—Investment Savings Accounts (ISAs). These specialized accounts are often overlooked but can be an excellent tool to earn guaranteed interest on uninvested cash. Here’s a detailed guide to help Canadian investors understand and make the most of ISAs.
Executive summary
Here’s the executive summary in a table format for quick reference:
| Category | Details |
|---|---|
| What Are ISAs? | High-interest savings accounts available through brokerage platforms for idle cash. |
| Key Features | CDIC-insured, traded like mutual funds, settle on T+1 basis, available in CAD and USD. |
| Advantages | – Higher interest on idle cash. – Flexibility for short-term fund parking. – Dual currency options (CAD & USD). – CDIC insurance for security. |
| Considerations | – Stay within CDIC limits ($100,000 per issuer). – Watch out for fees and minimum investment amounts. – Monitor interest rates regularly. |
| How to Get Started | – Check ISA availability with your broker. – Compare interest rates across institutions. – Place an order using the broker’s fund code. |
What Are Investment Savings Accounts?
An Investment Savings Account (ISA) is a high-interest savings account offered through brokerage platforms, designed to provide better returns on idle cash. They function differently from standard savings accounts and are specifically tailored for brokerage clients.
Here’s how they work:
Available in Canadian and U.S. Dollars
ISAs are available in both CAD and USD, providing flexibility to earn interest on cash held in either currency.
CDIC-Insured for Security
Most ISAs are eligible for Canada Deposit Insurance Corporation (CDIC) coverage, offering protection for deposits up to $100,000 per account type per issuer.
Traded Like Mutual Funds
Unlike regular savings accounts, ISAs are purchased and sold through your brokerage account, similar to mutual funds. Each transaction is considered a “trade.”
T+1 Settlement
Trades for ISAs settle on a T+1 basis, meaning the transaction is finalized one business day after the trade date. This is faster than the T+2 settlement timeline for stocks and ETFs.
Series A and Series F Options
ISAs are offered in two series:
Series A: Typically for individual investors, with slightly lower yields.
Series F: Higher-yielding but generally restricted to clients working with financial advisors.
Competitive Interest Rates
ISAs often provide interest rates comparable to—or even better than—those of savings accounts offered directly by the same financial institutions. Remarkably, USD-denominated ISAs tend to offer significantly higher rates than regular U.S. dollar savings accounts.
Advantages of Investment Savings Accounts
Investment Savings Accounts (ISAs) offer several benefits for investors. They provide higher returns on idle cash, allowing you to earn interest on funds that would otherwise remain unused in your brokerage account.
ISAs are highly flexible, making it easy to move between cash and investments as needed. This feature makes them an ideal choice for short-term parking of funds.
Another advantage is security, as many ISAs are covered by CDIC insurance, offering an additional layer of protection for your savings.
Lastly, ISAs often offer dual currency options, making them a practical solution for investors managing both CAD and USD holdings.
Important Considerations
Stay Within CDIC Limits
Ensure your deposits don’t exceed the $100,000 CDIC coverage limit per issuer. Diversify across multiple banks if necessary to maintain full insurance coverage.
Watch Out for Fees
Some brokers may impose fees or minimum balance requirements for ISAs. However, many waive these fees for ISAs offered by their affiliated banks. Always check the terms before committing.
Pay Attention to Minimum Investment Amounts
ISAs often have minimum purchase amounts. Ensure that your available cash meets these thresholds to avoid unnecessary delays.
Monitor Rates Regularly
Interest rates and account details can change frequently. Staying informed ensures you continue to get the best rates available.
How to Open an Investment Savings Account
Check Availability with Your Broker
ISAs are offered by most Canadian brokerages, including RBC Direct Investing, Desjardins Disnat, TD Direct Investing, and others. Look for products affiliated with major banks.
Compare Interest Rates
Rates vary between institutions and currencies. Compare offerings across multiple brokers or banks to find the best returns.
Place an Order
Purchase an ISA as you would a mutual fund. Search for the fund code provided by your broker, specify the amount, and execute the trade.
List of Fund accounts
Canadian Dollar Investment Savings Accounts
| Account (Fund Code) | |
| B2B Bank (BTB100 – A Series; BTB101 – F Series) | Click here for more information |
| BMO (BMT104, BMT109, BMT114) | Click here for more information |
| CIBC (ATL5000 – A series; ATL5001 – F series) | Click here for more information |
| Desjardins (DJQ1000 – A series; DJQ1100 – F series) – available only to residents of Quebec | Click here for more information |
| Equitable Bank (EQB1000 – A Series; EQB1001 – F Series) | Click here for more information |
| HomeBank (HOB100 – A Series; HOB101 – F Series) | Click here for more information |
| Home Trust Company (HOM100 – A Series; HOM101 – F Series) | Click here for more information |
| ICICI Bank (IBN100) | |
| Manulife Bank (MIP510 – A Series; MIP610 – F Series) | Click here for more information |
| Manulife Trust (MIP710 – A Series; MIP810 – F Series) | Click here for more information |
| National Bank (NBC100, NBC6100, NBC8100 – A Series; NBC200, NBC6200, NBC8200 – F Series) | Click here for more information |
| RBC (RBF2010, RBF2020, RBF2030, RBF2040 – A Series; RBF2011, RBF2021, RBF2031, RBF2041 – F Series) | Click here for more information |
| Scotiabank (DYN6000, DYN5000, DYN3064, DYN3074, DYN3054 – A Series; DYN6004, DYN5004, DYN3065, DYN3075, DYN3055 – F Series) | Click here for more information |
| TD Bank (TDB8150, TDB8155, TDB8157, TDB8159 – A Series; TDB8151, TDB8156, TDB8158, TDB8160 – F Series) | Click here for more information |
A Final Word of Caution
While ISAs are a great tool for earning higher interest on idle cash, they are not a substitute for long-term investments like stocks, ETFs, or bonds. They are best suited for short-term savings or as a safe place to park funds while deciding your next investment move.