Online banks have disrupted Canadian banking by offering no fees and higher interest rates. But are they right for everyone?
What Are Online Banks?
Online banks (also called digital banks or direct banks) operate entirely online with no physical branches. They offer banking services through websites and mobile apps.
Top Online Banks in Canada
- Tangerine – Owned by Scotiabank, full chequing/savings, no fees
- EQ Bank – Highest savings rates (3%+), no chequing account
- Simplii Financial – Owned by CIBC, free chequing, CIBC ATMs
- Motive Financial – High interest rates, limited features
- Alterna Bank – Online arm of Alterna Savings credit union
Side-by-Side Comparison
| Feature | Online Banks | Traditional Banks |
|---|---|---|
| Monthly Fees | $0 | $10-$30 |
| Savings Interest | 2.5-5% | 0.05-0.5% |
| Physical Branches | None | Hundreds |
| ATM Access | Partner ATMs only | Own ATMs everywhere |
| Mobile App | Excellent | Good |
| Customer Service | Phone/chat only | In-person + phone |
| Mortgages | Limited or none | Full service |
| Investments | Limited | Full service |
| Cash Deposits | Difficult | Easy |
Pros of Online Banks
- ✓ No monthly fees – Save $120-$360/year
- ✓ Higher interest rates – Earn 10-50x more on savings
- ✓ Better mobile apps – Modern, user-friendly interfaces
- ✓ No minimum balance – No requirements to avoid fees
- ✓ 24/7 access – Bank anytime from anywhere
- ✓ Fast account opening – Open an account in 10 minutes online
Cons of Online Banks
- ✗ No physical branches – Can't talk to someone in person
- ✗ Limited ATM access – Must use partner ATMs (Scotiabank for Tangerine, CIBC for Simplii)
- ✗ Cash deposits are hard – Some don't accept cash at all
- ✗ Fewer services – No mortgages, limited investment options
- ✗ Customer service by phone/chat only – No face-to-face help
- ✗ Cheque deposits take longer – Mobile deposit can have delays
Who Should Use Online Banks?
Online banks are perfect if you:
- ✓ Are comfortable with mobile/online banking
- ✓ Rarely deposit cash
- ✓ Want to avoid monthly fees
- ✓ Want higher interest on savings
- ✓ Don't need in-person customer service
- ✓ Already have a mortgage/investments elsewhere
Stick with traditional banks if you:
- • Prefer in-person banking
- • Deposit cash regularly
- • Need a mortgage or investment services
- • Want all services in one place
- • Travel frequently and need ATMs everywhere
- • Are not comfortable with technology
The Hybrid Approach (Best of Both)
Many Canadians use both online and traditional banks to maximize benefits:
Recommended Setup
- Traditional Bank (RBC, TD, Scotiabank):
- • Mortgage
- • Investment accounts (RRSP, TFSA)
- • Credit cards
- • In-person services when needed
- Online Bank (Tangerine, EQ Bank):
- • No-fee chequing for daily spending
- • High-interest savings for emergency fund
- • Save $200-$400/year in fees
Switching to an Online Bank
It's easier than you think:
- Open your online bank account (takes 10 minutes)
- Set up direct deposit with your employer
- Update pre-authorized payments (bills, subscriptions)
- Transfer your balance from your old account
- Close your old account (or keep it with minimum balance if needed)
Pro Tip: Keep both accounts open for 1-2 months during the transition to ensure all payments and deposits have switched over.
For most Canadians, online banks offer unbeatable value. If you're comfortable with technology and don't need in-person service, switching can save you hundreds per year while earning more interest on your savings.