Online banks in Canada. Which should you go with?
If you’re older, you remember very well standing in long lines on a Friday afternoon to cash your paycheque or pay a bill. Those days are long behind us.
Today we are all accustomed to the convenience of online banking. And online banking has been around long enough that even the most suspicious among us trust banking online. As a matter of fact, according to the Canadian Bankers Association, more than 75% of Canadians now use online and mobile banking.
And banks recognize the advantage of steering their customers towards an online option. It means they can have fewer branches and smaller branches aiding their bottom line across the country.
During this pandemic you’ve probably noticed branches are run with skeleton staff and when combined with online banking, it’s still a doable option.
Some of the money being saved by banks is being fed back to the consumer through lower fees or no-fee banking options. But it’s interesting to note there are newer bank options that have come onto the scene who have no physical branches whatsoever.
This requires a fair amount of trust on the part of the consumer. But, as mentioned above, people are becoming much more inclined to trust an online only option. And banks are putting many resources towards educating consumers on fishing tactics and online espionage to prevent digital grifters from obtaining information and funds illegally from unsuspecting consumers.
So, is an online only bank the right option for you? Here are some definite advantages.
1. Better Rates: Online-only banks do not have the overhead costs of the traditional bricks and mortar bank. They’re able to pass some of these savings along to attract customers who are dissatisfied with their legacy bank (bank they’ve been using since the pre-digital era).
2. Fees: Online-only banks are often able to attract new customers through low or no-fees. One attractive feature is a no-minimum balance account.
3. Convenience: Anyone who has discovered the ease of online banking are slow to go back to the line-ups. And with the additional of a mobile app, you can bank anywhere, anytime.
4. Flexibility: If you use programs like Paypal, you’re able to easily transfer funds in and out to give you even more flexibility to make your life easier. This is especially helpful if you are a small business owner. Your bank account merges with your accounting programs like Quickbooks so you can do everything without even visiting your bookkeeper.
5. Safety and Security: Any money you deposit in an online-only bank is protected by Canada Deposit Insurance Corporation (CDIC). This is the same safety you’ve come to expect with traditional bricks and mortar banks.
Of course, as we all know, it can’t all be rainbows and roses. Here are a few disadvantages on an online-only bank.
Some considerations before going with an online only account
1. Human contact: Quite often, older Canadians make banking part of their social routine. They build part of their day around dropping into the bank and chatting with their favourite teller or bank manager. This obviously is not an option with an on-line only bank.
2. Some service limitations: An online bank doesn’t offer features like a safety deposit box. And bank drafts or wiring money overseas is not possible at the time of this writing.
3. Shortage of Total Services: Some banks offer a pretty substantial list of services to tie all your financial requirements together. Some banks like, Tangerine, for example, allow you to keep your investments, savings, chequing and mortgage accounts all with them. But not all on-line banks provide as complete a menu of financial options.
4. Automated Bank Machines: If the online only bank has an agreement with the big banks, you can still use banking machines everywhere, but you will pay a convenience fee. Otherwise, if you do need to deposit cheques or other ATM options often, this is a deterrent to going with an online bank.
Disadvantages of online only banking
When you choose a digital bank, here are some of what you may miss:
1. Less Personalized Service: If you prefer to interact with a person face-to-face every time you make a deposit or withdrawal, a virtual bank does not provide this perk.
2. Fewer ATMs or Automated Banking Machines (ABMs) as they are now referred to: Depending on your choice of an online bank, they may not have as many ATMs available in your area like the resident traditional banks.
When you use ATMs tied to other networks, you may have to pay. That being said, the online banks in this post are either owned by a bank or are related to an established credit union which makes this issue less of a problem.
3. Transaction Limitations: If you routinely conduct “complicated” banking transactions e.g. bank drafts and wiring money abroad, or need a safety deposit box, an online bank is not for you.
4. Lack of an All-in-One Package: Online banks like Tangerine provide an all-in-one solution so that you can easily hold your investments, chequing, savings, and mortgage accounts with them. Some online banks only offer a savings account which means you will need to source additional services from another bank if required.
So what are you options for an online only bank in Canada?
5 of the most popular Online banks
- Tangerine. This bank has proven to be a very popular choice among Canadians. Learn more
- Scotia OnLine. The offshoot of Bank of Nova Scotia gets high marks for their easy of use and digital interface Learn more
- EQ Bank. This is a unique option. EQ Bank has no branches or ATMs. All banking is done online and through their mobile app only. Learn more
- HSBC. This online bank has a reputation for expertise in global banking. Learn more
- FirstOntario. If you’re in Ontario and prefer the culture and approach of a credit union, FirstOntario is for you. Learn more
- Simplii Financial. Many like this online option because of their free internet e-transfers. Learn more
- RBC OnLine. RBC is known for their bundles. Learn more
- BMO OnLine. This online choice is know for being very senior and student friendly. They have appealing military discounts as well. Learn more
- CIBC OnLine. A huge benefit of this choice is the efforts they put towards appealing to seniors. Learn more
- TD OnLine. TD gets praise regularly for their mobile app. Learn more
Online banking is not for everyone. But with life becoming busier and busier, it only makes sense that we all look for ways to make banking more convenient. And Covid-19 has also raised the bar on how much human non-bubble contact we want to expose ourselves to at this time.
No matter which option you choose, we caution you to exercise caution in setting yourself up with online banking. Follow the set up prompts and if anything doesn’t feel right, stop the process, pick up the phone and speak with someone who can guide you in the safest way possible.
Once your online banking account is verified and ready to go, you may wonder why you waited so long to go this route.