Canada’s online banks are growing not only in number of competitors, but also in services offered, and ease of use as well. This is great news if you:
- Hate driving to a bank branch.
- Can’t stand waiting in lines.
- Don’t enjoy paying ever-increasing fees to access your own money.
- Would rather interact with a screen than a person who started last week and doesn’t know the difference between a birthday card and a credit card.
If you’ve dismissed Canada’s online banking options up to this point, while clinging to the traditional “warm embrace” of your local bank branch, let me give you a few good reasons to stick around:
- The world’s largest ride provider owns no cars (Uber).
- The most valuable retailer doesn’t own any inventory (Alibaba).
- Our biggest nightly accommodation service doesn’t own any real estate (Airbnb).
Banking Disruption in Canada – Right Here, Right Now
You think it might be time to consider changing a personal banking model that hasn’t really changed all that much since they wrote about money lenders in relation to Jesus? When history looks back at the current decade, it’s likely to be remembered by a single world: Disruption.
Now don’t get me wrong, that tech-driven buzzword is getting a little oversaturated at this point. When every new business claims to be disrupting something and that it will change the world as we know it, things can get a bit tiresome. Taylor Swift and Kim Kardashian emojis are not shifting any paradigms ok? Your app idea that explains how to tie your shoes is NOT, “A change agent that uses innovative disruption to become an empowering game changer.”
That being said, if ever there was an industry that could use
a little considerable change, it’s the Canadian banking sector. Look, I love bank dividends in my investment portfolio as much as the next guy, but I’m pretty sure that shaking things up has been – and will continue to be – a very good development for most Canadians.
While online banking has been around in Canada for a while, I think a solid argument can be made that branch-less financial services are about to enter a golden age. With more and more people comfortable handling their banking needs on a screen as opposed to waiting in line, and new competitors entering the market every year, the world of mobile banking is ripe for innovation.
This competition is leading to:
- Decreasing fees
- More varied forms of customer support
- More online services
- Higher interest rates on savings accounts
- Lower interest rates on credit options
- Easier to use and more aesthetically pleasing platforms on your computer, tablet, and phone
While the number of brick-and-mortar bank branches has already begun to ebb, I don’t think the traditional bank teller will be relegated the pages of a history ebook anytime soon. That being said, if you’re looking to cut down on your monthly banking costs and enjoy the any-time-any-place freedom that comes with online banking, read on to see what option will fit you best. Keep in mind, we’re not considering traditional banks that also have an online presence, (Big 6 banks, etc.) we’re looking at banks that are NOT tied down by any brick-and-mortar locations at all – and consequently are in a position to pass those savings on to you.
Comparing Tangerine and PC Financial – The Kings of the Online Mountain
When former online superstar Ally Bank was purchased by RBC and then promptly erased from existence, there was some fear that fellow virtual banking brethren ING Direct and PC Financial might follow suit. While Scotiabank’s purchase of ING has left more than a few customers feeling a bit nostalgic for the good old days, the re-named Tangerine is still a major contender for our Canadian online banking heavyweight title. While Tangerine is the new orange, PC’s online-only bank keeps chugging along into its third decade of existence. In case you thought that these online-only Canadian banks were a niche product with limited room to grow, each of our big fish are proving to be swimming in a very large pond as they boast over two million customers each.
Both Tangerine and PC Financial put their best foot forward with no-fee daily chequing account options. These accounts essentially allow the average person to handle their normal banking needs for FREE! While brick-and-mortar competitors might claim to give you great value for the monthly fee they charge you to use your chequing account, it’s tough to beat the value of free. Tangerine will even pay you $100 to open one of these accounts with them.
Here’s what else you get when you sign on to no-fee chequing with either PC or Tangerine:
- Unlimited monthly transactions including interact purchases, and transfers between accounts.
- Unlimited manual & automated bill payments.
- Unlimited withdrawals from the ATM networks of their respective parent companies (CIBC and Scotiabank).
- Mobile cheque deposit (use your phone to take a picture and deposit your cheque).
- 24/7 customer support.
- Account switch services to get you set up quickly and easily.
- A relatively meagre interest rate on your balance (still better than the 0% rate that most big banks offer on chequing accounts).
- View cheque images for free.
- PC allows you to collect points toward free groceries at Loblaws locations.
- PC has an unlimited number of free cheques, whereas Tangerine gives you your first 50 cheques for free, but charges you $12.50 per 50 after that.
- Tangerine offers slightly cheaper Interac e-Transfers at $1.00 vs PC’s $1.50.
- Tangerine allows you to transfer money by email for FREE, whereas PC Financial currently has no such option. This feature is separate and different from the Interac e-Transfer, even though it can be easy to confuse the two options. (Essentially, Interac allows payments to be processed instantly, whereas email transfers can take 1-2 business days to process.)
- Several online commenters have noted that Tangerine allows you to instantaneously shift money between accounts, whereas PC can take one business day to process these transactions.
Verdict on PC Financial vs Tangerine No-Fee Chequing Accounts
It makes sense that as the two time-tested options within the Canadian online banking space, PC and Tangerine would offer similarly great value in their no-fee packages. While a couple of years ago I might have given Tangerine the unqualified nod due to the easy access of their turn-key investing portfolios, this advantage has been negated by the rise in robo advisor options available to all Canadians. While the Tangerine portfolio options still exist, are still super easy to use, and are still much better than traditional mutual fund options, the robo advisor offerings are just better and are nearly as easy to access (plus they come with some degree of advising attached).
Both PC Financial and Tangerine also offer a bevy of other banking-related options that you can find with many other online-only entities. If you want to apply for a mortgage, make us of a line of credit, or take advantage of a branded Tangerine credit card, either of these companies can do that for you as well.
For the time being, here are the difference makers for me when it comes to choosing between these two market leaders:
Go with PC Financial if you:
- Prefer the CIBC ATM network to Scotiabank’s ATM network.
- Like earning a few bucks in free groceries.
- Use several cheques per month.
Go with Tangerine Financial if you:
- Prefer the Scotiabank ATM network to CIBC ATM network.
- Will make good use of the free email transfers.
- Don’t use that many cheques.
- Often have to transfer money between accounts immediately.
- View full Tangerine Bank review here (written by us).
One popular strategy with folks that really want to maximize their chequing account benefits is to switch back and forth between Tangerine and PC Financial depending upon whoever is offering the best promotions or teaser rates.
PC Financial Became Simpii Financial
In August 2017 President’s Choice Financial (aka PC Financial) let Canadians know that their 2 million-ish members will be spun off into a new online platform named Simplii Financial. At the current time, it doesn’t appear that CIBC is abandoning the product or looking to put it on the backburner at all as they will continue to control the new spun off entity.
Many have speculated that this will be more than just a name change as the brand re-fresh could include an updated features list. For example, as you can see from our above comparison, the old PC Financial had a real drawback when looking at eTransfer offerings. More and more young consumers find themselves using apps or eTransfers far more often than cheques, so chances are that Simplii will look to remedy that comparison point specifically.
If you are a current PC Financial customer it appears that there is no need to panic (but opening a Tangerine Account in order to grab the free bonus and compare overall platforms couldn’t hurt). It will be a gradual changeover and CIBC has stated that they will be sending out new debit cards to Simplii account holders
Customers will be able to continue to access CIBC’s 3,400 ATM locations across Canada for free – just as before said Mike Boluch, CIBC’s executive vice-president of direct banking, innovation and payments.
“The offer is very similar out of the gate to what they have today. That’s by design — certainly our intent,” Boluch said. “We want to minimize any impact of change on our clients.”
Users of the President’s Choice Mastercard (which allowed users to claim rewards at Loblaw’s PC Plus loyalty program) can use their previously accrued rewards points whenever they wish – but cannot earn any new points through Simplii after Oct. 31st. The overall credit card will continue to operate as before.
The biggest immediate change for most account holders is the dissolving of the partnership with Loblaw’s locations. For example, Simplii users will no longer be allowed to withdrawn money for free from Loblaw’s ATMs. We await other changes eagerly.
Personally, I’m hoping that CIBC takes the opportunity to come with a really well polished product that is easy to use across all platforms, offers us some great introductory and long-term rates, and includes an updated features list that raises the bar for all of Canada’s online banks!
**It’s also interesting to note that as 2017 progresses, EQ bank has been making real noise about branching out in terms of services offered and challenging our current market leaders when it comes to all-around-account offers. They have aggressively marketed their high-interest savings accounts, and continue to be extremely competitive in that area.
EQ Bank and Zag Bank: New Guys on The Block
While Tangerine and PC Financial look to be the dominant online players for some time to come, a couple of young guns have made a big splash in 2016. EQ Bank is the online-only arm of Equitable Bank (an established bank with over $14 billion in assets under administration). Zag Bank represents an attempt by the Desjardins Group to garner a share of the online pie.
Both EQ and Zag caught a lot of eyeballs earlier this year when they offered incredible interest rate opportunities in order to grab some initial momentum. EQ was shelling out 3% (roughly four times what PF and Tangerine were offering at the time), and despite claiming that this was not a teaser rate, have since lowered their rate to a still-impressive 2.25%. (Did anyone not see this coming?) Zag wasn’t far behind at an initial rate of 2.5%, before dropping down to their “long-term rate” of 1.65% in June. While these rates certainly accomplished their goals of putting these young upstarts on the map, they might have set an unreasonably high bar for themselves in this low interest rate environment. Time will tell if they are able to pay this much more interest than the chequing account/high-interest savings account options offered by other financial institutions.
To be honest, while EQ and Zag are marketing themselves as competitors to Tangerine and PCF I just don’t see this as a reality. At this point, both banks are ideally positioned as high-interest saving account companions to one of Canada’s two full-service online banks or a traditional banking option. They are committed to offering excellent savings rates, but are missing some key features such as:
- The ability to write cheques.
- No ATM withdrawal capability.
- No debit card or credit card options.
Now, they do have some pretty cool stuff:
Clearly EQ and Zag have some catching up to do if they hope to compete with the full utility of Tangerine and PC Financial. I have heard rumours about possible debit card options becoming available soon, but at this point, the services offered are not really comparable. I am thankful for the two new entries into the market however, because they bring some great rates to the table and are forcing our two big fish to give some good promotions in order to stay competitive.
The Credit Unions and Other Canadian Online High-Interest Savings Accounts
Once you get past the two giants and new blood, you enter into some interesting options that not many Canadians are particularly familiar with. These financial services companies have some unique aspects and there are certainly differences between them, but what they have in common is that they exist in purely online format, come with no monthly fees, and compete to offer these best high-interest savings account rates in Canada. If the interest rate on a high interest savings account is the only thing that is important to you, comparison updates are posted regularly here.
In addition to being absolutely free in terms of having no monthly fees and access to high interest savings accounts, all of these financial institutions offer easy TFSA options, and free transfers in and out to other bank accounts. While Canadian Direct Financial, Outlook Financial, and Implicitly Financial offer a somewhat broader range of services, the Manitoba-based credit union options have their fans as well. (*Note: even though these Manitoba options are affiliated with brick-and-mortar credit unions they are ran completely separately and almost none of the services “crossover” from what I’ve read.) None of these other options have the range of products that the two market leaders do; however, they often pay higher rates of interest (likely due to the fact they don’t have as many expenses as PC and Tangerine, because they offer so many fewer services).
3 Steps to Getting the Most from Canada’s No-Fee Online Banks
Many Canadians will always prefer the face-to-face nature of traditional branch banking, but there is no denying the fact that no-fee online banks are providing big time competition by saving customers hundreds of dollars per year – and providing a ton of convenience at the same time. (2017 Update: Online lenders are now moving into the world of quick, non-collateral loans as well – see our Borrowell Review for more information) With new participants putting pressure on the two behemoths of Canada’s online world, things are only going to get better going forward. For the time being, here is how to get the most out of the current banking scene without too much hassle:
1) Compare Tangerine’s and PC Financial’s offerings to those of your usual bank. Ask your bank if they will price match the no-fee structure or give you a deal you can live with. Sometimes banks will give you a sweet deal to keep you around.
2) If you are ready to “cut the cord” when it comes to your traditional bank and want an online banking account that is quite versatile in what it can offer, then scroll up to our Tangerine vs PC Financial comparison. Keep an eye on EQ Bank as it grows as well, I believe they may continue to aggressively improve their platform.
3) Use everyone else as a simple high interest savings account. In researching for this article I found a lot of people that have accounts set up at several of the options we listed. They use a Tangerine or PF Financial as their “home base” and then – because shifting money in and out of all of these accounts is relatively easy and completely free – they simply jump their savings from bank to bank depending on who is having a promotion at the time and/or who has the best high interest savings account option. Be careful when doing this with TFSAs however, because your withdrawal and re-depositing actions can have tax consequences.
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