TFSA vs HISA: what is the difference? (Canada)
This is one of the most common mix-ups in Canadian money. People ask which one to pick, but the real answer is usually both at once.
The one-line version
Think of a TFSA as a lunchbox and a HISA as the sandwich. The lunchbox decides how the food is protected (tax). The sandwich is what you actually eat (what earns interest).
| TFSA | HISA | |
|---|---|---|
| What it is | Account type | Savings product |
| Main benefit | Tax-free growth | Higher interest than a basic account |
| Limit | Yearly contribution room | None, except deposit insurance limits |
| Interest taxed? | No | Yes, if held outside a TFSA |
When to use which
Hold a HISA inside a TFSA when
You have unused TFSA room and want your savings to earn tax-free interest. This suits an emergency fund or a short-term goal.
Use a regular HISA when
Your TFSA is full, or you want a separate pot for something unrelated. Just remember the interest is taxable.
Use the TFSA for investing instead when
The goal is many years away and you are comfortable with market ups and downs. That is a separate decision from where to park cash.
Check your room first
Your TFSA room is not just this year's limit. It builds up from when you first became eligible, minus what you have put in and plus what you took out in earlier years. Look at your balance in CRA My Account before contributing. See the TFSA contribution limit guide.
Also compare rates carefully. A headline promo rate that falls away after a few months is not the same as an ongoing rate, so read the fine print. How to compare HISAs in Canada.
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