Is Now the Time to Start Using an Online Bank Account?


Since the early 1990s, financial institutions have been hard at work leveraging the surging popularity and ever-increasing sophistication of the internet to expand their business and grow their customer base. Nowhere is this trend more evident than in the explosive growth of the online banking industry. 


According to a 2019 report from the Canadian Bankers Association, 76% of Canadian banking customers admit to regularly using digital channels to check their bank account and perform banking transactions. More importantly, in the same report, 53% of respondents selected online banking as their most common banking method. 


If you’re thinking of transitioning away from a traditional bank, read on for a brief breakdown of the contemporary online banking landscape. Alternatively, if you’re just looking for the equivalent of an EQ bank review, we’ve also listed what we believe are the top 3 online banking options in Canada. 


What Are Online Banks?

An online bank, also known as a direct bank, is a type of financial institution that only supports online banking services. While traditional banks rely on a bloated network of brick-and-mortar bank branches, online banks use a more lightweight business model, prioritizing online-only bank accounts and virtual customer service. 


Why Should You Be Using an Online Bank in 2020?

The first—and arguably most well-known—benefit of online banks is that they typically offer a relatively affordable fee structure. In comparison to traditional banks, online banks spend significantly less money on day-to-day overhead costs. This means that online banks are much more likely to waive account keeping fees, discount direct deposit fees, and rebate debit card surcharges. Additionally, online banks rarely require their customers to maintain minimum balance or contribution conditions. 


If the low-cost fees haven’t convinced you to use an online bank, we’ve also broken down three additional benefits to banking with an online financial institution.


Secure Service Access

Because digital security is so central to the online banking business model, online banks use multiple layers of redundancy to protect your bank deposits from scammers, fraudsters, and hackers. In addition to using cutting edge data encryption and monitoring transactions for suspicious activity, online banks also employ multi-factor authentication and strictly regulated information and cyber security protocols when sending and receiving banking data. 


In addition to their robust digital security countermeasures, online banks are also protected by conventional deposit guarantees. In Canada, federally incorporated online banks are protected by the Canada Deposit Insurance Corporation (CDIC), an entity established and backed by the Canadian government to protect banking customers in the event of insolvency or liquidity issues at major financial institutions. Thanks to CDIC protection, deposits in a Canadian online bank are insured to up to $100,000. Please note, if an online bank is connected to a credit union, personal deposits can be protected by either the CDIC or the Deposit Guarantee Corporation of Manitoba. 


Superior Online Banking Experience 

Thanks to the stunning growth of smartphones and computer technology, more and more retail banking customers are shifting to online-only bank services. Unable to compete with rival banks in the online banking industry, traditional banks have since rushed to create their own online-only services and accounts. 


Unfortunately, when it comes to online banking via a traditional bank, brick-and-mortar platforms have a tendency to lag behind the more established online bank offerings. As a result, online banks rank better for everything from transaction speed and interface simplicity to multi-platform support and connection reliability. 


Higher Interest Rates

By focusing on the provision of low-cost online services over an expensive dedicated branch network, online banks are able to offer significantly higher interest rates on chequing accounts, saving accounts, and certificate of deposit products.  


What are the Top 3 Best Online Banks in Canada?

  1. Equitable Bank

As Canada’s premier online bank, there’s a lot to like about EQ Bank. The most obvious attraction is the fact that EQ Bank is currently offering 1.70% on their basic Savings Plus Account. What’s more, EQ Bank has no monthly account keeping fees, no bill payment levies, no overdraft charges, and no dormant account fees.   


  1. Tangerine Bank

With 5 different savings account products, Tangerine Bank stands out for its flexible approach to online banking. Although its basic interest rate could use a bump, new customers with Tangerine Bank can benefit from a hefty 2.5% bump on their high interest savings account rate. If you require the use of an investment account, Tangerine Bank has you covered, offering RRSP, TFSA, RRIF, and non-registered accounts. 


  1. Alterna Bank

Like EQ Bank, the main drawcard of Alterna Bank is the Alterna Bank High Interest Savings Account. On top of its no-fee chequing account and generous 2.35% high interest eSavings rate, Alterna Bank also offers surcharge-free withdrawals from any ATM in THE EXCHANGE Network

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