All You Need to Know About Online Banking in Canada
As we increasingly live our lives online, it’s not too surprising that fully 68% of Canadians use online banking each week, compared to only 16% that step into a branch. Online banking in Canada is for consumers of all ages who enjoy the convenience of being able to carry out banking tasks whenever they’d like, 24/7.
Why Online Banking?
- Convenience: Online accounts are open all the time. There’s no need to wait in line or hurry to get there before the branch closes, and you can carry out most banking transactions in your pyjamas.
- Customer Service: When visiting a traditional bank, you might have to wait in line for a long time before you’re able to talk with a personal banker. Online banks frequently offer a dedicated personal banker who is available for much longer hours through live chat, email, or telephone support. On top of this, you can access non-personalized banking support around the clock for general questions and assistance.
- Features: Online banks support new finance tech tools that brick and mortar banks do not. Features like mobile cheque deposit, free online bill payments, and person-to-person payments are made possible via online banking.
- Pricing: As always, the bottom line is a major incentive. Although it is possible to find a no-fee chequing account with a credit union, many consumers who are fed up with paying for banking transactions on top of monthly fees are switching to online banks. Most everyday banking customers can get all of the same services they need from an online bank, but without the fees, and enjoy higher interest rates as well. The average Canadian pays $200 a year in banking fees, a large portion of which can be saved by choosing the right online bank account, or by moving to an online-only bank.
Online-Only Banks vs. Brick and Mortar Banks with Online Banking
Online banking can be divided into two categories:
- Traditional brick-and-mortar banks that support online banking
- Online-only banks without brick-and-mortar branches
Virtually all traditional brick and mortar banks offer some form of online banking today, though the scope of online banking capabilities varies from one bank to the next. Traditional banks like Scotia do offer low-fee chequing accounts, which enable you to make transfers, check your account balance, and pay bills online, just like with online-only banks.
The biggest difference between online-only and traditional banks is that online-only banks frequently charge no monthly fee at all and have minimal transaction fees for their chequing accounts, while offering high interest rates for savings accounts. This is because online-only banks save on the overhead of running physical branches and can pass those savings on to the customer.
On the flip side, you can’t chat face to face with a personal banker through an online-only bank. This lack of personalized interaction may be off-putting to some Canadians, and if you feel that you might fall into this category we advise you to explore the online banking platform of a traditional brick-and-mortar bank.
Types of Online Bank Accounts
You can access as many types of bank accounts online as you can in a traditional brick-and-mortar bank, from savings to daily chequing accounts.
Basic savings accounts are widespread – you’ll just need to link your online savings account with either an online or brick-and-mortar deposit account so as to manage deposits and withdrawals. Many online savings accounts offer mobile cheque deposit to make deposits faster and easier. Some online banks also offer kids’ and youth savings accounts, money market accounts, CDs and high-interest savings accounts.
As the name suggests, high-interest savings accounts are accounts that pay a higher rate of interest than regular savings accounts. Interest rates for high-interest savings accounts vary widely, from little better than regular savings accounts at 0.5%, all the way up to 2.5%. Again, you’ll often find higher interest rates from online-only banks than those offered by brick and mortar banks.
Most online high-interest savings accounts don’t have any monthly fees, although you’ll find that some have minimum balance requirements. The cost for transfers differs between banks, as well. Generally, you’ll get free transfers to other accounts that you have within the same bank.
You can get all of the same basic features when you open an online chequing account including a debit card, use of ATMs, and paper cheques as well as extended options for making transfers and paying bills online, mobile cheque deposit, and better rates for international transactions. Online-only chequing accounts don’t usually charge any monthly fees and charge only minimal or zero transaction fees.
Online-only banks also offer high-yield chequing accounts with higher interest rates than equivalent accounts with a traditional bank. Like at traditional banks, you’ll be restricted about how often you write a cheque or use a debit card if you take out a high-yield chequing account.
Tax-Free Savings Accounts (TFSAs) can be managed online as easily as in a brick and mortar bank, as long as you use your TFSA for approved investments. Online TFSAs can be used to invest in the same range of investments like those in a traditional bank, and deposits can be made through Interac e-transfer, mobile cheque deposit, or transfer from a linked bank account.
Hybrid accounts, like EQ Bank’s Savings Plus Account, combine the features of a high
interest savings account and chequing account so that customers don’t need to have multiple accounts. The only downside is that they currently do not offer a debit card.
Online youth accounts include both savings and chequing accounts, and are designated for Canadians up to the age of 19. Many youth chequing accounts come with unlimited free transactions and no monthly fee. Free Interac e-transfers are usually included too, and many online youth chequing accounts pay interest on the balance in the account.
Online student accounts tend to have some restrictions on the number of free transactions, but far fewer than for adult chequing accounts and without any minimum balance requirements. You’ll usually find valuable rewards for online student accounts such as earning points for movie tickets. Youth online accounts generally offer contactless payments through Apple Pay or proprietary digital wallets.
Online banking can be a great solution for seniors, especially those who are mobility-challenged. Online senior accounts cover all of the chequing and savings needs of older customers. Seniors can access low or no-fee chequing accounts that provide a debit card and chequebook, online transfers, online statements, online bill payments, and more.
Like senior accounts in brick-and-mortar banks, most online senior chequing accounts offer unlimited transactions and discounted fees on actions that are charged, such as Interac e-transfers. Senior savings accounts usually don’t charge any monthly fees and offer higher interest rates than the equivalent accounts in brick and mortar banks.
The only downside to taking out a senior chequing or savings account online is that there is no one to speak with face to face about your options and you need to be reasonably technologically savvy to set up a senior account online. Some older customers might prefer to stick to a traditional senior account in exchange for the familiarity of dealing with a known banking system, or they might opt to go for the online-only senior account if they enjoy technology or have a close friend, family member or caretaker that can assist them in their use of the online-only account.
What You Don’t Get from Online Banks
No counter service – Since online banks don’t have any physical branches, you won’t be able to walk-in to get assistance from a person face-to-face. If you have a customer service issue, quite often dealing with someone in-person helps resolve your issue quicker.
Safety deposit boxes – Again, due to a lack of physical branches, you won’t be able to get a safety deposit box.
No access to in-person advice – Banks employ various financial experts with different areas of expertise including mortgage brokers and investment advisors. Although some online banks offer mortgages and investments, you won’t be able to speak to someone in person about those products, which can be oddly unsettling when you’re making major decisions about your money.
The Safety of Online Banks in Canada
All of the banks listed are credible financial institutions and are well established in Canada. The odds of them failing are extremely unlikely, but in the event that they do, you’re covered up to $100,000 thanks to the Canada Deposit Insurance Corporation (CDIC).
This insurance applies to eligible deposits in your own name, joint accounts, trust accounts, TFSAs, RRSPs, and more. However, it does not cover your investment products such as stocks, bonds and mutual funds.
As for the safety of your online account, security breaches are rare. Nonetheless you should take steps to protect your information, which includes ensuring your password and PIN are not easy to guess.
Best Online Banks in Canada
To get a sense of how the online banking options in Canada stack up against each other, we looked at the platforms of the Big Five banks, plus one newer online-only bank and one credit union. We compared the account types each bank offers, their interest rates for savings accounts, monthly fees, minimum account balance required to negate those fees, and other important features.
You can find more details about each bank beneath this table.
|4 types||1 types||1||4 types||5 types||5 types|
|5 types||5 types||3||4 types||5 types||3 types|
|2 types||None||0||3 types||None||1 type|
|1 type||None||0||None||None||1 type|
|$3.95-$15.95. Free for students, $4 discount for seniors||None||None||$4-$30||$4 - $30; special rates for youth, students, seniors, and ex-defense forces||$5.99 to $25. Free for students|
Min. Account Balance to Waive Monthly Fees
|$3,000-$4,000||0||N/A||N/A||$2,000 to $6,000||$100 to $2,500|
Max Savings Interest Rate
|1.8%||1.15% (Special Offer: New Clients earn 2.75%* interest for the first for 6 months**.)||2.50%||0.9%||1.4%||0.7%|
Brick and Mortar Branches
Scotia chequing and savings accounts offers competitive monthly fees compared to its Big 5 brethren, and offers a wide variety of transaction types, including online bill pay, Interac e-transfers, Western Union international transfers, pre-authorized payments, debit transactions, and cheques.
Tangerine offers a single chequing account and multiple savings accounts to its members, all of which bring excellent value. The Tangerine chequing account generates interest of:
- 0.15% for $0-49.499.99
- 0.55% 50,000.000-99,999.00
- 0.65% 100,000+
As well as unlimited online and offline debits without any fees. With 24/7 phone support, access via smartphones and tablets, and Apple Pay, it’s one of the most convenient ways to access your money.
Tangerine’s savings accounts fit multiple consumer profiles, including accountholders who are saving for retirement, frequently in the US, or want to defray their taxes. The standard Tangerine Savings account provides members with 1.15% interest (Special Offer: Become a new Client and earn 2.75%* interest on your first Tangerine Savings Account, TFSA or RSP Savings Account for 6 months**.), no fees or minimum balance, and the ability to link a Tangerine credit card and accelerate savings further. There are also tax-free savings accounts, retirement savings plans, US dollar accounts, and more available.
*Please note this product is currently not available for residents of Quebec.
motusbank is a part of Meridian Credit Union, making this online-only bank a CDIC member that insures member deposits, but also offers easy connectivity to other institutions and a high-rate, low-fee model. motusbank customers with the popular High-Interest Savings account will earn 2.25% on their deposits without any monthly fees, transaction fees, or minimum balances. The motusbank TFSA offers 2.50% interest, and the digital bank also has GIC accounts, RRSPs and one chequing account with similarly appealing rates and features.
RBC’s ‘high interest’ savings accounts are not particularly high interest when compared to its competition. There might not seem like a bit difference between 0.9 and 2.3% interest, but it’s quite significant when compounded over time. RBC offers online bill pay, bank transfers, Interac e-transfers, debit cards, cheques, and US bank account transfers.
Though RBC does not waive monthly fees for customers that keep a minimum account balance, it does offer reduced monthly fees for those that ‘package’ their bank accounts with an RBC credit card, investment and/or mortgage.
Transaction types permitted by BMOs accounts include online bill pay, Interac e-transfers, debits, cheques, contactless payments, mobile cheque deposit and online direct deposit. You can earn bonus interest with their Savings Builder Account with a competitive 1.45% rate.
Like BMO, TD’s savings account interest rates are relatively unimpressive, but its account balance thresholds for waiving monthly fees are relatively low. TD supports online bill pay, bank transfers, debits, cheques and mobile cheque deposit.
CIBC offers a wide variety of account types, high interest rates for savings accounts, and low monthly fees. They support online bill pay, Interac e-transfers, mobile cheque deposits, debits, contactless payments, money orders and cheques.
First Ontario Online
First Ontario is a credit union, and its accountholders pay no monthly fees while enjoying relatively high interest rates on savings. First Ontario supports online bill pay, debits, bank transfers, Interac e-transfer, and personal cheques. It permits unlimited transactions each month, and up to 5 free Interac transactions.
Simplii may appear new, but they’re actually the rebranded name from when PC Financial customers were transferred over to CIBC. Simplii offers a no-fee daily banking account which includes unlimited free Interac e-Transfers and a high interest savings account. Since Simplii is owned by CIBC, account holders can use their provided debit card to withdraw money for free from their network of 4,000 automated banking machines across Canada. You can access other ABMs, but one-time fees would apply.
Who Should Use an Online-Only Bank?
Since there are no fees to have an account with online-only banks in Canada, I believe that all Canadians should try them out, at least in combination with a traditional bank.
The higher interest rate offered from an online bank account makes it the perfect place to park your money for the short term. Another byproduct of having low overhead costs is that online banks invest a lot of money in regularly developing new products for their customers.
Despite the fact that online banks seem to be disrupting traditional banks, you won’t see brick-and-mortar locations disappearing anytime soon. Competition from online banks has actually forced the big traditional banks to adapt to customer needs and offer better services. Their branches now serve as showrooms of the products that they offer.
There have never been more banking options available in Canada. So instead of just settling for a banking brand that you’re familiar with, give it some thought/research and figure out if an alternative account type might help you save more money.