nterest rates are heading down. But you can find rates as high as 3.75 per cent on the new tax-free savings accounts.

Better hurry, though, because some bonus rates won't last past this winter. They're short-term specials to lure new customers to open a TFSA.

The best rates are from online banks. President's Choice Financial, Canadian Tire Bank and HSBC all pay 3.75 per cent on tax-free savings accounts.

Manulife Bank pays 3.5 per cent, while ING Direct pays 2.7 per cent.

Even the Big Five banks are getting into the act.

CIBC and BMO pay 3 per cent, Scotiabank 2.6 per cent, RBC 2.5 per cent and TD Canada Trust 1.75 per cent.

Banks are using high interest rates to attract customers to this new product – hoping the money will stick around for a while.

Starting this year, you can put up to $5,000 a year in a TFSA and not pay tax on the growth.

"It is likely that customers will have long-term loyalty to the TFSA they first open," says David McVay, an analyst who follows the retail deposit market.

"It will take several years to build balances to the point where competitive shopping (or more aggressive investment strategies) would be material for most clients."

It's smart for banks to focus on tax-free savings accounts because of their wide appeal.

"The market for TFSAs is much broader than for RRSPs," McVay says.

"While RRSPs offer tax deductibility, which is a significant advantage, TFSAs offer penalty-free liquidity. This means they will be an ideal account for any savings program."

You can withdraw money from a TFSA at any time and put it back again the following year.

A registered retirement savings plan isn't as flexible. Once you withdraw contributions, you can't replace them.

(The only exceptions are if you take money out of an RRSP for the home buyer's plan or the lifelong learning plan.)

You can hold common and preferred shares, funds, income trusts and bonds in a TFSA and never pay tax on the interest, capital gains or dividends generated.

However, high-interest savings accounts will be a popular choice after the stock market meltdown that began last July.

Banks are targeting the baby boomers saving for retirement, who have seen their net worth shrink substantially.

"Many of these people are delegators. They're not interested in being proactive in their investing and have relied on advisers," says McVay.

"They're disenchanted right now. No one anticipated the kind of volatility we've just experienced."

If you're planning to open a TFSA, ask the bank how long the high interest rates will apply. All are subject to change without notice, but some have deadlines.

HSBC pays 3.75 per cent until March 16, while Manulife Bank pays 3.5 per cent until March 30.

Also, ask the bank in question if there are fees – such as annual administration fees, withdrawal or transfer fees – similar to what they charge for RRSPs and RRIFs.

I searched the banks' websites, but found few details about fees for the new tax-sheltered product.

ING Direct says it has "no fees, no service charges and minimum balances."

But CIBC says: "There are no fees unless you transfer all or part of your TFSA funds to another financial institution, in which case a $100 fee will apply."

High fees can erode the savings in a TFSA. So ask for a guarantee fees won't be applied in the future.

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