I’ve received a lot of questions lately about the best chequing and savings accounts in Canada.
The questions are timely because I just did an analysis of the market for my daughters, both of whom are setting up their own systems and they’re looking to optimize their dollars.
Let’s start with my #1 Rule when it comes to banking:
Don’t use the Big 6 Banks for any of your day-to-day banking.
I’m talking about:
- TD
- RBC
- BMO
- CIBC
- Scotiabank
- National Bank
These are the brick-and-mortar establishments that are traditionally associated with chequing and savings accounts.
In 2021, I wrote a blog post called Why I’m Now Choosing Tangerine and EQ Bank Over Simplii And Koho for Chequing And Savings Accounts.
Two years later, I published this article: The EQ Bank Card: Another Reason To Ditch Big 6 Bank Accounts.
In these two articles, you’ll find a long list of reasons why you should avoid dealing with traditional banks.
It boils down to this: they cost you money for no good reason and they pay you a paltry amount on your savings.
In this day and age, there are many better online options for your money.
Let’s look at some of the best options and the key considerations.
EQ Bank, WealthSimple, Simplii or Tangerine?
When it comes to online banks, you have a range of options.
I’m going to consider the top four in Canada: EQ Bank, WealthSimple, Simplii Financial, and Tangerine.
Here’s an overview of what each offers:
Simplii and Tangerine
I’ve had an account with Simplii Financial for more than twenty years. The good news is that in all that time, I have not paid a dime in banking fees. 🎉
The bad news is that they offer dismal interest rates for their accounts – even their so-called High Interest Savings Accounts.
They’re paying 0.30% for something they call a high interest savings account. They either need to up the amount of interest they pay or change the name of the account to a Paltry Interest Savings Account. 😞
Five years ago, I wanted to see what Tangerine was like, so I opened an account.
Tangerine has more bells and whistles than Simplii with their rounding up and budgeting tools, but these aren’t really deal makers or breakers for me.
You can easily automate savings with any online account – it’s not a huge win.
What I don’t like about Tangerine, in addition to their terrible interest rates, is their log-in process.
You put in your username, and then they ask you for this:
A 4 to 6 digit banking PIN is wholly inadequate at a time when the recommended length for a secure password is at least 16 characters.
The password manager I use, 1Password, generates 21-character passwords for all my sites.
The only thing in Tangerine’s favour is that they have added 2-factor authentication to the process.
Still, not a great choice.
WealthSimple
WealthSimple started as an online investing platform aimed at Millennials. It has quickly grown its range of offerings to include a Cash account, which operates as a combination chequing and savings account.
PROS:
While you can’t get your hands on paper cheques with a WS account, you can nonetheless do pretty much everything else you need on a day-to-day basis:
- pay bills
- send e-transfers
- receive e-transfers
- automate the transfer of funds
- set up automated payments
- download a VOID cheque
The best part about WS is that ALL your money earns at least 2.25% (at the time of writing) while it sits in your cash account(s).
You earn more if you set up a Direct Deposit for your paycheque.
That’s 225 times more than you earn in either Simplii or Tangerine for their chequing account, and 7.5 times more than their savings accounts.
While you’re in WealthSimple, you can easily set up an RRSP or a TFSA and invest your money, given that they offer discount brokerage services.
WS currently offers a limited range of fixed income products, but you can purchase any equities you have your eye on.
{If you’re in my Investing Made Simple Program, you can access all of the low-cost, broadly diversified funds we discuss.}
They also provide a hybrid debit card that can be used like a credit card for online purchases. You currently get 1% cashback for all your spending.
NB This is not a real credit card; it’s a hybrid debit card, which means you won’t build up your credit with this card.
Still, it’s a handy card to have as a back-up to your regular credit cards.
CON:
The one thing you can’t do with a WealthSimple account is deposit cash.
You can withdraw cash from any ATM and they’ll reimburse fees charged by the bank up to $5.
EQ Bank
PROS:
Like WealthSimple, you can do the vast majority of your daily banking via EQ Bank.
EQ Bank has always offered competitive interest rates for its Personal accounts and for the wide range of non-registered and registered GIC options it provides.
What I love about EQ Bank is that it’s a one-stop shop for all your cash and short-term investing needs.
✅ They have two Notice Savings Accounts – 10-day and 30-day – that currently offer up 3.00% and 3.05% interest, respectively.
If you’re willing to give them 10 or 30 days notice before withdrawing your money, you get one of the highest amounts of interest available on the market currently.
✅ If you set up a Direct Deposit for your paycheque, you’ll earn 3.5% on all the money in your Personal accounts. This even outperforms their Notice Savings Accounts!
This is brilliant for an Emergency Fund in addition to your daily operating fund.
✅ If you’re saving money for a trip, you can park it in a GIC inside a TFSA for the short term, assuming you have contribution room for your TFSA. You’ll benefit from a higher rate of interest tax-free.
They, too, have a hybrid debit card, though the EQ card works a bit differently than the WS card. The latter works like a standard debit card: you use it and it debits money from the operating account it’s linked to.
In the case of EQ Bank, you have to “load” money onto their card. You can set the card to automatically reload with an amount of your choosing (minimum $50) whenever the balance drops below a certain level. I’m not sure why they set it up this way, but the bottom line is that it operates much like the WS debit Mastercard with the same caveat: It won’t build up your credit score.
CONS:
You can’t deposit cash because there is no physical outlet, like WealthSimple.
Also, EQ Bank does not offer discount brokerage services, which means you can’t buy index funds through them. You’ll need to open up a separate discount brokerage account.
Finally, they offer 0.5% cash back on their EQ card, which is half the cash back offered by WealthSimple on their card.
The winner
For me, the advantage goes to EQ Bank.
I’ve set up a Direct Deposit for the salary I pay myself, which means that I’m earning 3.5% (currently) on all my dollars. That beats WealthSimple by 0.75%.
I also like the broader range of short-term investing options. I make great use of their TFSA GIC options for money I’ve set aside for trips and other large purchases.
It’s not a big deal to me that I can’t access the markets through EQ Bank, because I have a Questrade account for that. The latter offers me in-depth reporting and trading services.
For my girls, the advantage goes to WealthSimple.
They don’t have a paycheque to deposit automatically into their account, which makes WealthSimple’s 2.25% interest on their Cash account a lot nicer than EQ Bank’s 1.75% for its Personal account.
They’re also just starting to invest and I’m teaching them how to automate the purchase of funds. Having all of that available in one place makes it easier.
WealthSimple is a great place to start for young adults who are just getting into investing.
That said, both my girls have EQ Bank accounts as well which they use for parking earnings that are earmarked for university. They’re using the EQ Bank Notice accounts and TFSA GICs to earn as much interest as they can until they need to use those funds.
What to do about Simplii and Tangerine
Their accounts are free to set up and to maintain, so I recommend having one on hand in case you need some of the broader banking services that aren’t offered by WS or EQ Bank – like the ability to deposit cash.
I’ve kept my Simplii account as my back-up. I keep a small number of dollars there just in case. I’ll revisit this choice next year when I do my next annual review.
For now, the majority of my banking is done through EQ.
My daughters each have a Tangerine account and they’re keeping those as back-ups as well. Doesn’t hurt. The rest of their banking is done through WealthSimple.
I hope this helps you to reevaluate your banking needs and choices. Whatever you do, I encourage you to stop paying the big banks. They already earn billions without your monthly fees!
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