# considering setting up a HISA with my bank



## the-royal-mail (Dec 11, 2009)

I am considering setting up a HISA with my bank (RBC) and have just been reviewing their fees and rules about this type of account. The purpose for this is to hold some of my non-invested emergency fund money and be able to collect the prevailing HISA interest rate of the day. The practice would be to regularly deposit sums of cash into this account (from my POSA) and make the odd withdrawal as well. So I imagine I would be moving money between my POSA and HISA about 10x per year in total. I do not wish to do this with any other bank. I want to see this in the list when I log into online banking, for ease of movement of cash between the two accounts with minimal fuss.

Are there are pitfalls or fees or "gotchas" I need to be aware of with this type of a setup? Has anyone here been through it?

POSA = Plain Old Savings Account
HISA = High Interest Savings Account


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## jamesbe (May 8, 2010)

I have this with Royal it just works like any other account I think it's 1.25% right now?

It is instant transfer which is nice.


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## Koala (Jan 27, 2012)

The e-savings account was one of the few things I never had a problem with at RBC. Obviously, there are higher interest rates out there, but if you are transferring money between the e-savings and a RBC chequing account, it's pretty much immediate IIRC.

You cannot hold this account as a TFSA though. Their HISA TFSA equivalent is a 'savings deposit' not an account.


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## HaroldCrump (Jun 10, 2009)

I have a similar setup at Scotiabank.
Both the accounts show up on my online profile and I can move funds back and forth.
Also, when moving funds between accounts, it doesn't count as a debit against the max. debit transaction allowed.
Should be pretty easy to set up with all the 6 banks and the online ones, I'd think.


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## Daniel A. (Mar 20, 2011)

For 1.2% it seems like a waste of time good deal for the bank.
Even an emergency fund I'd rather have a 7% return that dividend stock offers.
When people talk about emergency fund is that something where you take all the cash today or something that can be drawn over time.


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## jamesbe (May 8, 2010)

dividends are great but if the stock tanks and you need the money tomorrow that's not a good place for emergency cash.

Note on the e-savings at RBC if you pay a bill or transfer money to another royal account besides your chequing you will be charged a $5 service fee.


IE: if you have a royal DI account or say a TFSA and want to move some money there. You must move the money to the chequeing then move the money to the other account or incur costs.


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## crazyjackcsa (Aug 8, 2010)

Emergency fund: "Oh no! my roof caved in! I need cash right this minute, and it needs to be there"

Stocks: Not a good place for an emergency fund. 
HISA or TFSA: Good place for an emergency fund.


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## Daniel A. (Mar 20, 2011)

I've never seen anything that required a pile of cash in less than a week.
I look at my trading account and if the need were there I'd sell one of the better play's three days to settle.

I question in this day & age if the term is redundant, I can access 5,000.00 to 10,000.00 within a few days or more if needed.


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## Sampson (Apr 3, 2009)

I use the RBC e-savings account also and it is integrated perfectly with my chequing, normal savings accounts, and RBC Direct Investing Accounts.

I keep cash in my non-registered accounts here between transactions.

The downsides are limited # of transactions (if you withdraws directly from this account, lack of service/support etc, but that's not what it is meant for anyway, your chequing account should cover those needs.


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## Sampson (Apr 3, 2009)

Daniel A. said:


> I've never seen anything that required a pile of cash in less than a week.
> I look at my trading account and if the need were there I'd sell one of the better play's three days to settle.


what about the 5-15% dips in the equities markets that have been happening over the past 3 years?

3 days for a trade to settle, or one week to get $5k is far too long.

What about the flash crash back in 2010? - in some instances, people only had 5 minutes to react.


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## marina628 (Dec 14, 2010)

Well I have experienced a medical emergency in my immediate family which required us to book last minute expensive tickets ,rental cars ,etc so I prefer to keep emergency cash in my HISA.Also imagine middle of winter the furnace breaks and you need to buy new one.I am sure plenty of other examples where every should have cash on hand.


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## Daniel A. (Mar 20, 2011)

I'll assume you don't have credit and only deal in cash.
What did you do before the emergency fund?


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## marina628 (Dec 14, 2010)

Yes I do have credit cards and I have a large amount of cash but credit cards won't pay for everything.You are talking to somebody who slept on the floor for 2 years in a bachelor apartment so I would have a savings account lol.That was 26 years ago but I still like the security of cash in it's physical form


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## Square Root (Jan 30, 2010)

I wonder if your idea of " emergency cash" is a little conservative. We keep plenty of cash in a HISA but if we had to we have several credit cards with credit limits totalling around $150k, undrawn home equity lines of credit totalling $1.5 million, and if really desperate could draw on margin loan accounts of over $5million. We hate debt but I don't know why you couldn't use some as part of your "emergency cash"?


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## Daniel A. (Mar 20, 2011)

I'm just playing with you now.


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## Sampson (Apr 3, 2009)

jamesbe said:


> IE: if you have a royal DI account or say a TFSA and want to move some money there. You must move the money to the chequeing then move the money to the other account or incur costs.


This is not true. e-transfers within the RBC family, even RBC DI are FREE. I've done this dozens of time and never been charged.


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## jamesbe (May 8, 2010)

They charged me to DI. And when transfered to an rbc tfsa account.

This was about 6 months ago.


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## JustAGuy (Feb 5, 2012)

maybe it's because I don't own a house or anything that would require immediate access to money in case of an emergency... but I too don't understand why you'd keep "emergency" money in a low interest account if you have access to credit. My credit card will take care of an emergency and the time it would take to withdraw the money from high interest earning places it would not be accululating interest on the credit card... I'm just a little skeptical on the need to be able to access *cash* on short notice..


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## marina628 (Dec 14, 2010)

Maybe I like that lump in the mattress


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## the-royal-mail (Dec 11, 2009)

justaguy, relying in credit as your first line of defence against the adversity life throws your way is one of the reasons we are spending at 153% of our income. Using credit means you are creating debt. Everyone needs emergency cash, regardless if they live in their own house or not. Everyone can become disabled, lose a job, get a divorce etc at any time and it's very possible to take a long time to recuperate from these things. The point of an emergency fund is NOT to invest it and take equity risk. It's to protect you and your family in case of adversity. The TFSA, POSA and HISA all provide easy access to the cash on short notice, thus my thread.


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## Ihatetaxes (May 5, 2010)

I use ING for spare cash and those transfers back to my RBC account do take a few days but if I truly needed a large amount of cash instantly I would just tap into my HELOC whic takes seconds and then pay it back once the ING transfer settles in my chequing account.


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## Jungle (Feb 17, 2010)

+1 for ING. We just locked in two short term, 90 day GICs @ 2.5% interest. TFSA of course. 

2.5% TFSA gic ends Feb 28. 

Was going to do People's Trust for 3%, but they don't have an online banking. Everything is snail mail.


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## Square Root (Jan 30, 2010)

the-royal-mail said:


> justaguy, relying in credit as your first line of defence against the adversity life throws your way is one of the reasons we are spending at 153% of our income. Using credit means you are creating debt. Everyone needs emergency cash, regardless if they live in their own house or not. Everyone can become disabled, lose a job, get a divorce etc at any time and it's very possible to take a long time to recuperate from these things. The point of an emergency fund is NOT to invest it and take equity risk. It's to protect you and your family in case of adversity. The TFSA, POSA and HISA all provide easy access to the cash on short notice, thus my thread.


OK I agree that you need cash on hand. In my case it is more to even out short term cash flows than for emergencies. I already have had most of the emergencies you mention. Since I am living off dividends and pensions, I view cash required to be something like one year's worth of portfolio dividends. This way if every stock in my portfolio cut it's dividend in half (highly unlikely), I would have 2 years of cash to cover this without reducing expenditures (which I certainly would) or selling any stock.


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## Daniel A. (Mar 20, 2011)

the-royal-mail said:


> justaguy, relying in credit as your first line of defence against the adversity life throws your way is one of the reasons we are spending at 153% of our income. Using credit means you are creating debt. Everyone needs emergency cash, regardless if they live in their own house or not. Everyone can become disabled, lose a job, get a divorce etc at any time and it's very possible to take a long time to recuperate from these things. The point of an emergency fund is NOT to invest it and take equity risk. It's to protect you and your family in case of adversity. The TFSA, POSA and HISA all provide easy access to the cash on short notice, thus my thread.



All of the things you state for an emergency fund pretty much throws your life plan out the window. EI is in place for job loss. Long term disability, divorce, requires a complete rethink of the way forward.
I know many people who had a plan for retirement divorce killed the plan and in their late 50s are now working till 65.
Most of the folks spending at 153% do so for any reason but emergency.
Those folks really should be on forums such as this one but as you know there is no sign of them.
If one can use short term credit no interest till they pull cash it works.
There really is only so much an individual can do in life making a plan is fine.

I'm retired and lived through the ups and downs.


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## marina628 (Dec 14, 2010)

Maybe because I had a serious car accident that left me disabled is why I like to keep high cash position.I had $78,000 in expenses that the insurance did not cover immediately for my home care and various medical bills , that is the reality of trauma.I was a passenger in a vehicle and three insurance companies were fighting over who was at fault.My parents and my husband's brother helped us out and took 31 months before I seen a dime from any insurance company.
BTW I worked for a large company and had short and long term disability and they were one of the companies fighting over who should pay my wages.I have three credit cards and my husband has two and total limits are $32,000 .We do have a credit line with about $200,000 free but my husband and i always carry about $1000 cash between us and most times when we shop we will pay cash out of habit.


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## Daniel A. (Mar 20, 2011)

When I worked I also had short & long term disability wages continued, and insurance settled among themselves after the fact.

Did your life plan change after the experience ie view life in a different way.


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## the-royal-mail (Dec 11, 2009)

Relying on EI for job loss? You have GOT to be kidding. Your posts seem to be downplaying the impact these emergencies can have on a person. Sometimes people screw up on the job or make mistakes (we're all human and make mistakes and bad decisions along the way) and may not have EI. Further, EI does not kick in immediately. As well, it only covers a % of your salary and not the whole amount. When I was 16 years old my high school economics teacher taught us that we can't trust the govt to take care of us and he was right. Yes, I will fight for EI if I lose my job (touch wood) but it's still not enough. Need to cash to make up the balance, working at a gas station won't cut it either and the unemployment could be prolonged. Please do not minimize the seriousness of these situations and suggest that relying on govt and credit to take care of you during your darkest times is a good thing to do. Frankly, that's terrible advice.


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## Koala (Jan 27, 2012)

TRM, I don't see the need for IMMEDIATE cash. I do have a decent emergency fund with an online bank. It would take about 3 days to access the money. I can't think of a reason why I would need to access it immediately, a credit card is sufficient for most immediate needs, which can then be paid off before it accrues any interest. This way, I am able to get a higher interest rate on the money that I probably won't have to touch, but it's there if I need it.


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## marina628 (Dec 14, 2010)

Daniel everything about my life changed after that but it happened many years ago so we have adjusted and after all things considered what I thought was the worst thing to happen in my life was probably the best thing.


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## Sherlock (Apr 18, 2010)

I relied on EI for a few months when I got laid off a few years ago and I don't see why people can't rely on EI? It's there, it's easily accessible, and it's adequate for most people.

IIRC it kicks in 2 weeks after your last day of work, unless you receive severance pay in which case it is delayed by a few days or weeks depending on severance size.

My EI was around $750 every two weeks which was more than enough to pay all my bills. Now obviously if you need $5000 a month to pay all your bills then EI won't cut it but if you need that much money to live then you should have a huge emergency fund saved up.

I also disagree that the TFSA is a good place to carry an emergency fund in cash. It is a waste of precious TFSA space to keep cash in there. Your entire TFSA should be in equities. Keep your emergency fund in a non-registered HISA. THis is assuming you have enough money to max your TFSA, if you don't then there's no harm in keeping your emergency fund in cash in there.

And this is the first time I'm hearing about a "POSA", what exactly differentiates it from a HISA?


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## Daniel A. (Mar 20, 2011)

the-royal-mail said:


> Relying on EI for job loss? You have GOT to be kidding. Your posts seem to be downplaying the impact these emergencies can have on a person. Sometimes people screw up on the job or make mistakes (we're all human and make mistakes and bad decisions along the way) and may not have EI. Further, EI does not kick in immediately. As well, it only covers a % of your salary and not the whole amount. When I was 16 years old my high school economics teacher taught us that we can't trust the govt to take care of us and he was right. Yes, I will fight for EI if I lose my job (touch wood) but it's still not enough. Need to cash to make up the balance, working at a gas station won't cut it either and the unemployment could be prolonged. Please do not minimize the seriousness of these situations and suggest that relying on govt and credit to take care of you during your darkest times is a good thing to do. Frankly, that's terrible advice.


My view is based on a lifetime of working & living, if your focus in life is based on negative possibilities and planning for them go for it.
There are folks in the USA planning for the end of the world as well.
Not everything in life is in your control you may find this out in time.
Maybe by the time your 45 or 50 a doctor will tell you that you have cancer, that's a one in five chance.
I've known at least 15 people with perfect lives that had all the bases covered financially but lost on health between 50 & 63.
Many of them left regretting being focused on the what if's instead of living in the present.


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## JustAGuy (Feb 5, 2012)

Koala said:


> TRM, I don't see the need for IMMEDIATE cash. I do have a decent emergency fund with an online bank. It would take about 3 days to access the money. I can't think of a reason why I would need to access it immediately, a credit card is sufficient for most immediate needs, which can then be paid off before it accrues any interest. This way, I am able to get a higher interest rate on the money that I probably won't have to touch, but it's there if I need it.


This is exactly how I see it. What's the point of having credit if you are afraid to *ever* use it? In the event that you do need to use it, you're not going to owe anything extra unless you go a month without paying it... if I'm not in an emergency, I'd rather my money more interest than a HISA offers and in the unlikely emergency scenario, I'll happily get dinged a little and pull money my emergency money out of a GIC early to avoid living in a gutter.

If you wanted to strategically keep GIC's as emergency funds you could contribute to a new GIC each month so that as they start to expire/auto-renew at regular intervals. This way if you need to pull money from your emergency funds you could pay with credit immediately, then withdraw from your most recent GIC's to pay it off without interrupting everything at once but just whatever you contributed to most recently. This, to me, seems to be a reasonably flexible method that would allow higher interest to be coming your way.

But maybe such a method and extra management isn't worth the extra .5% to you... GIC's just seem more secure than say a mutual fund for this type of plan


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## JustAGuy (Feb 5, 2012)

Sherlock said:


> I relied on EI for a few months when I got laid off a few years ago and I don't see why people can't rely on EI? It's there, it's easily accessible, and it's adequate for most people.
> 
> IIRC it kicks in 2 weeks after your last day of work, unless you receive severance pay in which case it is delayed by a few days or weeks depending on severance size.


This can vary. Last time I was between contracts, I applied for EI as soon as I got my ROE. It then took two months before I received the form in the mail from the government saying to respond within 30 days to receive my EI. Problem is that 30 day time frame had already passed by the time I got the letter, and I'd already started my new job by that point.


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## jamesbe (May 8, 2010)

You'd have to go with a 5 year GIC now or maybe a 3 year just to get the 2% ally is offering in their savings account.

I had all my cash in savings at RBC until I finally clued in I could be earning about $20 more a month in ally. Sure it is slightly less convenient to get it, but even in an emergency typically 2-3 days for transfer is good enough.


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## JustAGuy (Feb 5, 2012)

Hmm... yeah, I hadn't payed *that* close attention to the various interest rates as I just moved back from overseas and have been spending most of my money on getting set-up here again... ally would seem to be the best option if you don't want to risk either having to pull money out of a GIC early, or interest rates going back up and getting locked into a low interest GIC.


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