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The Ultimate Guide to Canadian Bank Accounts

There’s a lot of resources online about the best credit cards, broken down by every category imaginable. You have blog posts detailing the best cashback cards, the best travel cards, the best cards for roadside assistance – there are even Top 10 lists for the most exclusive black cards.

There are a million and one ways to spend your money, and just as many people telling you the best way to spend it. But there’s almost no one talking about the best ways to save your money.

It’s not that Canadians don’t like banks. Canada has an “unbanked” population of only about 6% (the number of people who don’t have any bank accounts) which is about 2.2 million people. That number pales in comparison to the nearly 2 billion people that are unbanked globally.

Not only that, but most Canadians actually have a favourable impression of their banking institution of choice. The average Canadian has banked at the same place for 15 years, despite 40 per cent of people being upset at the how high their bank fees are.

While the Big Five banks in Canada offer pretty much every service you can think of, they’re not a one-stop-shop for all your banking needs. In fact, big banks are more likely to have lower interest rates and higher fees than smaller banks, online-only banks or credit unions.

 

The Big Bank Advantage

Like I said earlier, big banks have pretty much everything you’d need from a financial institution. Mortgages, credit cards, home equity lines of credit, chequing accounts, mobile apps, Interac eTransfers, ATMs… the list goes on.

In exchange for that full suite of services, you’re paying a premium. Whether that’s high monthly fees for chequing accounts, lower interest rates in savings accounts, or higher interest rates on your mortgage, big banks cost you more, on average.

Banks like RBC offer a multi-product rebate, where you get your monthly fees paid back if you have multiple accounts open with them (usually with a substantial amount of money invested). Take a look at the RBC VIP Banking account.

Monthly Fee

$30

Number of transactions

Unlimited

Interac eTransfers

Unlimited

Bank Drafts

12 free/year

Personal Cheques

Free

Out-of-network ATM fees

None

Fuel Savings

3¢/L at PetroCanada

Safety Deposit Box

$60 discount

Credit Card Annual Fee Rebate

Up to $120

 

There is an impressive amount of stuff you get, but it comes at a hefty price of $30 per month, or $360 per year. With a multiproduct rebate, the fee drops to $19.95 per month, or $240 per year.

The 3¢ saved per litre on gas is better than a 2% cashback credit card (assuming an average price of $1.30/L) so if you usually fill up at Petro you can save some money there.

But every advantage that this product has is all about trying to break even on the initial $240/year cost. With other bank accounts, you can just not pay any fees and save money that way.

Getting free personal cheques whenever you want seems like a good value, especially if a book of cheques cost you $50 from your bank. That’s a $50/year savings right there! But how often do you really use cheques? Do you order a full book every year? If so, then you’ll get a good value out of this. If not, you’re overpaying for the privilege.

 

Are the big banks any different from each other?

Yes and no. They will all generally offer everything you’d need from a bank, like:

-        Chequing accounts for youth, seniors, and students

-        Secured and unsecured lines of credit

-        Debit and credit cards

-        Online banking and an app

-        Mobile wallet support (some have only Google or Apply Pay exclusively)

-        Mortgages

-        Mutual funds

-        Safe deposit boxes

And that’s only scratching the surface. There are a lot of things that could be useful for you as a customer. Smaller banks may have only a few of the things you need, and online-only banks tend to be very specialized (in other words, they don’t have a lot, but what they do have is really good).

If you’re trying to decide between one of the five big banks for your next account, you’re probably wondering how they differ, if at all. Let’s look at how each bank handles student bank accounts differently – or the same!

The Best Student Chequing Account in Canada

 

TD

CIBC

RBC

BMO

Scotia

Monthly fee

$0

$0

$0

$0

$0

# of transactions

Unlimited

25

25

30

Unlimited

# of e-Transfers

Unlimited

Unlimited

Unlimited

Unlimited

Unlimited

Out-of-network ATM withdrawals

$2

$2

$1.50

$1

$3.50

 

None of them have a monthly fee, so the only differences are how many transactions you can make a month and what you get charged for ATM withdrawals.

At first, it looks like TD is the clear winner – unlimited transactions and e-Transfers and an average ATM withdrawal fee. But how much does having unlimited transactions really matter?

In 2017 there were 4.2 billion debit card transactions. The number of Canadians over the age of 18 in that same year was 29.2 million. Doing a little bit of math, we can see the average number of debit card transactions for 2017 was 142 per person for the year, which is an average of 12 transactions.

12 transactions is half of what you get from the student accounts that do have transaction caps. Unless you’re making more transactions than the average Canadian, the number you get shouldn’t influence your decision.

Instead of going through the hassle of proving your enrollment to your bank, then having to switch accounts once you graduate to an account with a monthly fee, why not sign up for an online-only bank account right now? They also have no monthly fee, but don’t require you to be a student.

 

Online-only banks: Everyday Banking

There are two relatively large online-only banks in Canada: Tangerine and Simplii Financial.

Both offer pretty much everything brick-and-mortar banks do.

 

Product

Tangerine

Simplii

Big 5 Bank

Chequing Account

Yes

Yes

Yes

Savings Account

Yes

Yes

Yes

Debit Card

Yes

Yes

Yes

Credit Card

Yes

No

Yes

TFSA

Yes

Yes

Yes

RRSP

Yes

Yes

Yes

Mortgage

Yes

Yes

Yes

Unsecured Line of Credit

No

Yes

Yes

Secured Line of Credit

Yes

Yes

Yes

GICs

Yes

Yes

Yes

Managed Investments

Yes

Yes

Yes

Physical Locations

No

No

Yes

 

There are only a couple things missing from them, the chief among them being physical locations. But they do have online and phone support available. If that isn’t enough for you, then there’s nothing wrong with going to a brick-and-mortar bank, but you’ll have to pay for their overhead (building rent and maintenance, paying tellers, etc.).

The best part about Tangerine and Simplii is they don’t charge a monthly fee for having a chequing account, no matter how much is in it. You can have an account with $0 and there would be no problems. You can even open several savings accounts for different savings goals and none of them will ever charge you a monthly fee.

Another benefit of online-only banks is that transfer between accounts at the same institution are instant. You can keep your money in your savings account earning higher interest than your chequing, and just transfer over the amounts you need as you need them. They’ll go through instantly and you can even do it from your phone just before making a purchase. Because savings account interest is calculated daily, it’s best for you to keep as much money as possible in your savings account (as long as you remember to move it out when it’s time to pay your bills).

But the instant transfer isn’t limited to your account. At Tangerine, you can send money to another Tangerine user for free and have them receive it instantly. This is good if you have friends that also bank there, as normally you have to pay $1 for Interac eTransfers. Simplii allows unlimited free eTransfers, so transfer to your friends and family are also instant.

 

High-interest savings

While Tangerine and Simplii are great alternatives for your everyday banking needs, their savings interest rates, while better than big banks, are not the best in Canada. Simplii offers an everyday rate of 1.25% and Tangerine offers the same after an introductory 6-month rate of 2.75%.

1.25% is a great rate when compared to rates at the Big Five, but there are still much better rates available. The best savings rate available in Canada right now is 2.35% at Hubert Financial, a credit union based in Manitoba. You can open an account with Hubert from anywhere in Canada except in Quebec, and it’s entirely online.

One thing that the best high-interest savings accounts in Canada have in common is that they are not suitable as your only bank account. They often lack basic necessities like debit cards, free and easy online transfers, mobile apps, direct deposit, and ATM access. In exchange, you get rates that are up to 88% better than Tangerine or Simplii, and up to 11,650% better than ScotiaBank.

That isn’t a typo.

One of the worst savings accounts in Canada (ScotiaBank Money Master Savings account) offers only 0.02% interest. On a deposit of $10,000, you would only earn $2/year. At 2.35%, you would earn $235 – over 11,000% more.

Amount Earned on $10,000 after 1st Year

 

 

The best thing to do for your savings would be open a Tangerine account, deposit your money for 6 months, and then move it to Hubert Financial (if you’re in Quebec, you’ll have to settle for AcceleRate or MAXA Financial, who offer 2.25%).

Benefits of online-only savings accounts

The biggest (and perhaps, only) advantage of these savings accounts is their great rate. Ideally your savings shouldn’t be touched too often. That’s the whole point of savings. Whether it’s your emergency fund or you’re saving for a specific goal like a down payment, you probably won’t be withdrawing this money too often. It can be worth it to be missing out on some features for a great rate.

However, if you can’t give up things like bill paying or Interac e-Transfers®, then the EQ Bank Savings Plus Account is a fantastic runner up with an everyday interest rate of 2.30%*. Currently only 0.05% behind Hubert Financial, EQ Bank offers the following features missing from Hubert:

·        Unlimited Bill Payments and Transactions

·        Direct Deposit and Free Mobile Cheque Deposit Capabilities

·        Convenient award-winning mobile app

·        Unlimited free Interac e-Transfers®

 

·        10 Free Linked Accounts

For those features, I'd say that’s a fair trade.

 

EQ Bank is a trademark of Equitable Bank, which is a member of the Canada Deposit Insurance Corporation (CDIC), so your money at EQ Bank is eligible for deposit insurance, while Hubert is a membe of the Deposit Guarantee Corporation of Manitoba (DGCM). You can read more about the differences between the CDIC and DGCM here.

 

 *Interest is calculated daily on the total closing balance and paid monthly. Rates are per annum and subject to change without notice

TFSA Savings Accounts

The Tax-Free Savings Account is the best way to grow your money tax-free. Not only can you withdraw at any time with no tax implications, unlike an RRSP, but any withdrawals are then added back to your available contribution room the next calendar year. Learn everything you need to know about TFSAs by clicking here.

What’s cool about withdrawing from your TFSA is that any amount withdrawn is added back to next year’s contribution room in addition to that year’s allotted space. If you aren’t able to maximize your TFSA deposits, it can be beneficial to use it to store your savings, as they will grow tax-free. When you’re ready to start investing, you can either use the funds already in your TFSA to purchase investments, or withdraw the money as you need to.

We put together a list of the best TFSA savings accounts in Canada for you to check out. It’s a little different than the best savings accounts listed here because not every bank offers a TFSA account.

RRSP Savings Accounts

Putting cash into an RRSP isn’t the worst idea in the world, but it’s not the best. The difference between your TFSA and RRSP is that you’re not penalized for withdrawing from your TFSA. Since you have to pay an immediate withholding tax on RRSP withdrawals, and then perhaps more at tax time, you don’t actually get much money when you’re forced to withdraw from your RRSP.

If you put cash into your RRSP, you’re earning paltry amounts of interest. If you withdraw that cash, you’re paying exorbitant taxes on it. There’s no real winner here. You may be tempted to make a cash deposit in order to get a tax refund, but it’s almost always better to either invest that money in your RRSP or put it in a non-registered savings account instead.

 

Credit Unions

Credit unions operate differently than banks. Unlike banks, credit unions are member-owned non-profit organizations. They pride themselves on customer service and actually have pretty great rates to boot!

If you’re worried about storing money at a credit union, remember that many are insured by their provinces credit union deposit corporation. That means that, even if they fail, your money is still safe. There’s no danger in saving your money with a credit union as opposed to a bank.

Which credit unions are available near you depend on where you are. There are a couple national credit unions, but there are many, many more local ones. Some even serve only certain communities, such as the Police Credit Union which only allows police employees and their families to become members.

Some people prefer credit unions because of the personal connection they foster with the union’s employees. Credit unions are more likely to genuinely care about you as a customer than a big bank or online-only bank would be. You can read more about the differences between credit unions and banks here.

 

Mobile Banking

Are you worried about how secure mobile banking apps are? Don’t be – they’re very safe. Not only that, but they all also have fraud protection, so you’ll be reimbursed for any fraudulent purchases made.

 

Are you a fan of digital wallets like Google Pay, Apple Pay, and Samsung Pay? Read our guide on mobile wallets in Canada and see which bank supports which platform.

 

To find the best bank account for you, you’ll have to compare each of them. On your own, that might have taken awhile. No worries – we’ve already done the hard work. You can compare every bank account in Canada on our site in just a couple clicks. Happy saving!

 


Chris Chris 01/26/2019
Canadian personal finance buff and all-around writing enthusiast, Chris loves breaking down complicated money ideas to show that they're really not so complex. 
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