Why are Interest Rates so Low on Savings Accounts?

Most regular savings accounts pay very little interest because they’re designed more for convenience than for helping your money grow.

Banks know many people will leave their cash where it is, even if the rate isn’t great, so they don’t have to compete very hard on basic savings accounts.

KOHO High Interest Savings

If your everyday bank’s savings account pays almost nothing, you don’t have to leave your money there.

With KOHO High Interest Savings, you can:

• Earn a high interest rate on the money you’ve set aside

• Keep your cash flexible and accessible in the app

• Use it as your main place to park savings for goals and emergencies

Why Traditional Savings Rates Tend to Be Low

Here are a few big reasons:

1. Banks Make Money on the “Spread”

Banks earn money by:

• Taking in deposits (like your savings)

• Lending that money out (mortgages, loans, credit products) at higher rates

The difference between what they earn and what they pay you is their profit margin. Keeping savings rates low helps protect that margin.

2. People Don’t Move Their Money Often

A lot of customers:

• Open a chequing and savings account at the same bank

• Let their money sit there for years

• Don’t actively compare rates

Because of this “inertia,” banks don’t need to offer high rates on basic savings accounts to keep many customers.

3. You’re Paying for Convenience and Extras

Traditional savings accounts are often bundled with:

• Branch access

• Call centre support

• Lots of account options and add-ons

All of that costs money to run, and part of the trade off is a lower interest rate on simple savings.

4. Overall Interest Rate Environment

When overall interest rates in the economy are low, banks and other institutions:

• Earn less on the money they lend and invest

• Often pass that on as lower rates on savings accounts

Even when rates move up, basic savings accounts don’t always keep pace—especially if the bank knows customers aren’t rate shopping.

What You Can Do as a Saver

You can’t control how banks set their rates, but you can control where your money lives:

• Compare rates instead of leaving savings in a near-zero account

• Use a high interest savings account for your emergency fund and short-term goals

• Keep just enough in chequing for bills and spending, and move the rest to something that actually earns

Even a small difference in rate can add up over time, especially as your balance grows.