All About Interest
On accounts that pay interest, there are two important facts that you should consider so you can choose the account that will earn you the most interest.
1. When Interest is Paid
There are two times when interest is paid to accounts: once a month to some accounts or once every six months to other accounts.
- Interest may be paid at the end of the month.
- Interest may be paid twice a year, that is, once every six months. This semi-annual interest is paid on April 30 and October 31.
2. How Interest is Calculated:
Interest is calculated in three ways: daily, monthly, or every six months.
- Daily means that the interest is calculated on the balance in the account every day. The bank adds up the interest from all those days and pays the total to you on the last day of every month.
- Monthly means that the amount of interest is calculated on the last day of the month. Interest is usually calculated only on the lowest amount you had in your account all month. This is called your minimum monthly balance.
- Every six months means that the amount of interest is calculated twice a year. It is based on your minimum balance during the six-month period ending April 30 and October 31.
Service plans and fees
When you open an account, there are many different services you can use. While some services are free, many of the bank's services are paid for by customers on a user pay basis.
A service charge is the fee you pay to buy a service provided by the bank. Service charges vary from bank to bank.
Most banks offer service plans or packages that allow you to use a number of the most common services for one monthly fee. All banks provide brochures that describe the different accounts they offer and the charges for all those accounts and other commonly used services.
How to Pay the Least Amount of Service Fees
Shopping for the best service fees
If you have access to a computer and the Internet, Industry Canada has a Financial Service Charges Calculator which helps consumers input their monthly transactions, calculate their service fees and compare them to those of other financial institutions. It is available at: http://strategis.ic.gc.ca .