Online banks – While they are still evolving and improving, they are no longer “the future.” Three in every four Canadians rely upon online banking, and online banking transactions already dwarf paper-based transactions.
Even the most traditional banking consumers had to switch to online banking during the pandemic.
But if you are still unsure about online banking or are trying to change banks, learning about the best online banks Canada has to offer can help you make an informed decision.
My online banking journey began when it was a small segment of conventional banking, and I’ve experienced its evolution first-hand. And I’ve prepared this list of the best online banks in Canada to help you on your banking journey.
Online Banks In Canada: What Do You Need To Know?
Nowadays, there is relatively little difference between “online banking” and banking because most banking activities are effectively online. But there is still a significant difference between banks that are purely online and conventional banks that offer online banking.
The reason is that even though these conventional banks do offer most services online and the number of people who visit physical bank branches has been steadily declining, they are still there. Maintaining a network of bank branches is a costly business, and this overhead cost gets transferred to the consumer, i.e., you.
Online banks, on the other hand, don’t suffer from this problem and tend to be no-fee in most cases.
Different Terms For Online Banks
Nowadays, you might see several different terms associated with online banking, and many of them are used interchangeably (even when they shouldn’t).
Online Banks: Ironically, online bank is not a very accurate term. Any financial institution (bank, Fin-Tech, credit union, etc.) that offers online banking is usually considered an online bank. By this definition, an online bank is a super-set of few other types of banks).
Direct Banks: Direct banks started in the 90s with the concept of removing the overhead costs associated with running a brick-and-mortar banking network. The concept was to revert this saving back to the consumer in the form of lower fees and better interest rates. They used telephones in the early days, and now they rely on online banking.
Digital Banks: Digital banks are usually what people mean when they say online banks, i.e., banks created solely to function as online entities. They usually offer full-service banking and a broad spectrum of banking products and services.
Fin-Tech: A Fin-Tech company can be an online bank, but usually is something completely different. It’s simply an amalgamation of finance and technology, and several different types of businesses (like investment firms, trading platforms, crypto banking, etc.) fall under the umbrella term of Fin-Tech.
For this article, we are considering the broadest definition of Online banks.
Strengths And Weaknesses Of Online Banks
Online banks are not automatically better than conventional banks (though, in most cases, they are), and they have their limitations. Understanding the strengths and weaknesses of online banks compared to conventional banks can help you make a more informed choice. A few strengths of online banks are:
- Online banks are more accessible. If you rely on online banks for most of your banking needs, you can take care of most of your banking tasks easily with your cellphone, and they are available to you 24/7. But you can only visit a conventional bank during working hours, which also takes time and energy.
- Low-to-no-fee banking is another gift of online banks. Since they have very limited overhead costs, they usually don’t charge their customers a fee for basic banking service, which means you can save anywhere from $48 to $360 a year in banking fees (based on the typical fee spread of $4 a month to $30 a month of the big fee).
- Online banks offer better interest rates. This is another by-product of minimal overhead costs, and they can share the profits with the consumer.
- In a way, online banks are more secure compared to conventional banks. You don’t have to move money around in cash (when you are withdrawing or making a deposit), and almost all deposits are insured, usually by CDIC. You can make your online banking even more secure by adopting certain cybersecurity habits.
- With online banking, you feel more in control of your finances. When you have your funds at your fingertips, and you can move money around using your mobile phones (that includes making investments and putting away money for saving), financial management seems more personal compared to when your money is handled by a banker.
Online banks also tend to offer features that trigger good financial habits, like automatic savings and easy investing. That said, they also have their share of weaknesses:
- Online banks usually have a limited range of financial products. Few online banks offer decent loan products and mortgages, and even fewer issue credit cards to their users.
- Online banking might seem impersonal to individuals who are used to the more “human-centric” style of banking, where they would meet their banker every month or so.
- More online banks are geared towards savings, and there are limited choices when it comes to chequing accounts.
Best Online Banks In Canada
If we take the big picture approach to online banking, we will have to include both the pure online banks in Canada as well as the big five because even though they are essentially “conventional banks” with online services, there is still a significant overlap.
Best all-around online bank in Canada: Offers all your banking needs
How to sign up: Website here
Tangerine is the fully-owned subsidiary of Scotia Bank, and it’s often considered one of the largest online banks in Canada with over two million users. It’s a pure online bank with no brick-and-mortar overhead costs that result in high banking fees. It offers no-fee accounts and a full spectrum of banking products, including registered accounts, two credit cards, mortgages, and a line of credit.
Tangerine has relatively “pure” roots as an online bank, even though it didn’t start out as one. Its predecessor, ING bank, was Canada’s first telephone-based direct bank that was created with the aim to reduce overhead costs associated with the brick-and-mortar model and revert part of those saving back to the users.
It started with a savings account, but later more banking products were added to it and later evolved into a full-service online bank.
A few things that make Tangerine one of the best online banks Canada has to offer are:
- No-fee chequing account which earns interest and has unlimited transactions
- Full range of banking products
- Two credit cards with a great reward system
- Competitive rates on savings account and products (but not the best)
- A decent range of business and US accounts
- Loan products like mortgage, HELOC, and Line of Credit
- Investment funds that are cheaper than mutual funds but more expensive than robo-advisors
Tangerine’s weaknesses include lower interest rates for chequing account (compared to some other online banks) and no personal or vehicle loan. Read my full review on Tangerine here.
2. EQ Bank
Best Online Bank for High-Interest Savings: 1.25% per year
How to Sign up: Website here
EQ bank serves about a quarter of a million Canadians, i.e., 250,000. It’s slightly different than most online banks in Canada because it’s not a subsidiary of an established financial institution. EQ bank is a financial institution by itself, and that reflects in its relatively small range of financial products.
But the bank makes up for it with its power interest rate, i.e., 1.25%, which is practically heads and shoulders above most other banks (online or conventional).
The catch is that EQ bank doesn’t have a chequing account at all. This interest rate is offered on their savings plus account. This account allows you free Interac e-transfers, free EFTs and has no monthly fee. You can even pay your bills for no surcharge with money in your EQ savings account.
But there is no debit card or online payment options for POS. For most of your banking needs, you might have to move your money to a different bank.
There are a few other things you should know about EQ bank, which, thanks to its powerful interest rates, definitely holds a place among the best online banks in Canada.
- The bank offers four “everyday accounts,” including a USD account, but thanks to their limitations, they might be considered savings accounts.
- TFSA and RRSP savings accounts.
- Its investment products are composed of GICs and two registered accounts
- The bank doesn’t offer a credit card or any loan products
- It has its own mortgage marketplace but doesn’t offer mortgages itself
If you are adamant about keeping a portion of your savings as cash (and not invest it), EQ bank offers a much more potent option than most other conventional and online banks. But if you have to move your money around, use a debit card, require a credit card, or want to borrow money, EQ might not be for you.
Read my full review on EQ bank here.
3. Simplii Financial
Another online bank with almost 2 million users is Simplii, a fully-owned subsidiary of the Canadian Imperial Bank of Commerce (CIBC). It’s also considered CIBC’s direct banking front. It used to be a PC financial, but in 2017, it became Simplii, with the full weight and power of one of the big five behind it.
Like Tangerine, Simplii has quite a sizeable clientele for an online bank, and the CIBC backing might be the reason for that.
The association with big-five lends it more solidity and credibility. The 3,000+ ATM network and the range of banking products Simplii is equipped to offer as an online subsidiary of one of the big five also endorse its position.
Simplii also offers a full range of financial products and banking services.
- A no-fee chequing account with interest rates on all account balances
- High-interest savings accounts
- One credit card (with a cash-back system)
- Three loan products, including personal loan
- It also offers GICs and registered accounts
- It offers even mutual fund portfolios with MERs ranging from 0.95% to 1.12%
There are very few differences between Simplii and Tangerine, and both are very similar online banks. Simplii doesn’t offer great interest rates compared to some more generous alternatives, but it does offer personal loans. It’s not available in Quebec.
4. Motus Bank
Motus bank isn’t backed by one of the big five, rather by the second-largest credit union in the country: Meridian Credit Union. Meridian’s Motus Bank is a fully functional online bank that boasts over 380,000 members.
Like most other online banks, Motus offers a no-fee chequing account for your everyday banking needs, and it comes with interest on every single dollar in the account.
It has many commonalities with the other online banks like you don’t have to maintain a monthly balance to keep the account “no-fee,” and you can avail unlimited debit and Interac e-transfers for free.
While you don’t have access to a single bank’s ATM network, Motus members do get to use the EXCHANGE network of surcharge-free ATMs (over 43,000 units in North America).
Other things you need to know about Motus are:
- It offers three savings account, including TFSA and RRSP
- The savings account interest is quite high compared to other online banks.
- No credit cards
- Only one loan product (HELOC)
- Mortgage rates are a little lower compared to Tangerine and Simplii
- It offers multiple investment options, including a direct trading platform and low-cost professional portfolio management
Motus bank clearly trumps several other larger online banks with it comes to the interest rates for a savings account, but it also offers a relatively limited range of financial products. The absence of a credit card also weakens the case for this online bank.
5. Motive Financial
One online bank that can give EQ a run for its “interest rates” is Motive financials. It offers high-interest rate on one of its savings accounts (the Motive Savvy Savings Account) for amounts lesser than $5 million.
But the account has its limitations. While it’s a no-fee account, you only get two free withdrawals a month, and every Interac e-transfer costs $1.
Another area where Motive Financial shines is the interest rates of its no-fee chequing account. There are two:
- Cha-Ching Chequing Account: Unlimited withdrawals, free Interac e-transfer, and interest on the account.
- Motive Chequing Account: Unlimited withdrawals, $1 per Interac e-transfer, and you can earn interest on the account.
This Alberta-based bank is a division of Canadian Western Bank; however, this association doesn’t reflect in Motive’s product line-up. For investments, it offers registered accounts, GICs, but that’s where its banking prowess ends. You don’t get any credit cards or loan products. The bank doesn’t offer services in French, so it can’t officially operate in Quebec.
6. Alterna Bank
Alterna is another online bank/direct bank worth considering. It’s a wholly-owned subsidiary of Alterna Savings, an Ontario-based credit union that caters to about 186,000 members and has about $10 billion in assets under management.
As an online bank, Alterna isn’t bound by its parent credit union’s geographic reach. However, you may have access to physical locations in Ontario and Quebec, thanks to Alterna Savings’ branches.
It offers a no-fee chequing account with unlimited transactions and Interac e-transfers. The interest rate it offers, however, is quite low, i.e., 0.05%. The high-interest savings account offers a 1% interest rate and comes with unlimited free Interac e-transfers, debits, and bill payments. The rate is the same for TFSA and RRSP accounts.
One major difference between Alterna and the other online banks (except Tangerine) is the presence of a business bank account. A few more things about Alterna are:
- The chequing account comes with a debit card, but there is no credit card
- It offers mortgage loans at competitive interest rates
- The online bank offers multiple investment methods, including direct investing via QTrade, but the fixed stock/ETF trading fee is quite high
7. Oaken Financial
If your primary focus is a savings account and GICs, Oaken financial might be the online bank for you because these are the only two things this online “bank” offers. The bank is a trademark of Home Bank, which is a wholly-owned subsidiary of Home Trust Company. The two financial products Oaken offers are:
- Oaken Savings Account: It’s a no-fee account without any minimum balance requirements. It’s covered under CDIC and offers a powerful interest rate of 1.15%. It also offers unlimited free transactions.
- GICs: The GIC rates range from 1.4% for a one-year GIC to 2.2% for a five-year GIC, and they require a minimum investment of $1,000.
Saving is basically all this online bank is good for.
8. Manulife Bank
Manulife, the largest insurance company in the country, also has a digital bank subsidiary called Manulife bank.
Thanks to the backing of a major financial entity, Manulife offers a broad array of financial products and services that few other online banks do. But there is a catch and the reason why Manulife Bank is all the way down here. It doesn’t offer “true” no-fee banking.
It offers four different accounts: an All-in-one banking package, combined high-interest savings and chequing, TFSA, and US$ High-Interest Savings Account.
- The all-in-one banking package comes with a $10 a month fee, which is very uncharacteristic for an “online” bank. You can get a rebate on this fee if your funds in the account are $100 more than the preceding month. It offers a 0.15% interest rate and additional perks like $10,000 travel insurance, virtual financial assistance, unlimited debits, and Interac e-transfers, and secured overdraft.
- The combined high-interest savings and chequing account (or Advantage account) is no-fee if you maintain a balance of $1,000 or more, and the Interac e-transfers cost $1 each.
Other important banking features of Manulife Bank include:
- Two credit cards
- Several mortgage products and services
- Three loan products (RRSP Loan, investment loan, line of credit)
- Five different investment accounts (including RRSP and TFSA)
It’s important to note that there is a difference between online banks and conventional banks that offer online services. If you only stick with one subset, i.e., online/digital banks with almost no physical branches (and consequently better interest rates and lower fees), your choices would be limited.
But if your primary concern is online banking, then you can broaden the pool to include online banking services of the big five.
9. The Royal Bank Of Canada
As the largest bank in the country and a major financial institution in North America, the Royal Bank of Canada offers a very comprehensive range of financial products, including six chequing and four savings account.
You can access all your accounts online. Chequing accounts monthly costs vary between $4 and $30, and there are rebate options available.
The cheapest chequing account ($4/month) comes with only 12 free debit transactions but 999 Interac e-transfers. And even the best savings accounts don’t go beyond the 0.5% interest rate. But you get a lot of variety in other banking products: 20+ credit cards, multiple personal and vehicle loans, several different ways to invest, etc.
10. TD Bank
Toronto-Dominion is just as expensive and restrictive (if not more) than RY. It offers five different chequing accounts, the cheapest one is $3.95 a month, and the most expensive one is $29.95 a month.
There are three savings accounts, and even the best interest rates don’t exceed 0.1%. It offers a broad range of credit cards, mortgage, and loan products. The bank also offers multiple investment options.
As one of the big five, CIBC offers a modest range of financial products. It only offers two chequing accounts. If one of the accounts, you can enjoy no-fee banking if you can maintain a minimum balance of $4,000, otherwise you would pay $16.95 a month. The second one costs $29.95 a month.
There are four savings account, but they have their own problems. They usually charge you per transaction. But the interest rates are 0.05% at max, which is hardly worth the cost. It offers a range of credit cards as well as several loan products.
12. Bank Of Montreal
BMO follows nearly the same pattern as TD and RY when it comes to banking fees. The cheapest chequing account costs $4 a month. The interest rates are typically 0.05% at best.
It also offers several different credit cards, mortgages, and multiple loan products. One area where BMO shines is its range of investment products. It has mutual funds, ETFs, mutual funds made up of ETFs, etc. But from an online banking perspective, it’s just as expensive as the other conventional banks.
13. Scotia Bank
Scotia bank offers a similar price range for its six chequing accounts. Youth and student accounts are free of cost, and others cost between $3.95 and $30.95 a month. The regular interest rates for savings account hover around 0.05%. It offers multiple credit cards, loan products, and investment options.
How To Choose The Best Online Bank In Canada For Your Banking Needs
When it comes to the best online banks in Canada, the “best” is subjective. We can rank order them based on different criteria, like the interest rates of savings account and the number of banking products they offer, but the banking needs of different people are bound to be different, and the factor that’s important for one person might not be as crucial for another.
Still, it’s important to understand a few crucial traits of different online banks to identify which one might be the best for you.
- Fees: Most online banks offer no-fee banking, but some require you to pay a monthly fee. Usually, rebate options are available, but you have to identify whether the monthly fee is worth it in the first place.
- Chequing/Savings Interest Rates: If you are not actively saving and whatever you earn mostly stays in your chequing account, it’s a good idea to consider the interest rate the online bank is offering on that account. But it’s often small enough not to be a deciding factor. However, interest rates in the vicinity of 1% for a savings account can make a considerable difference, assuming you put away a decent amount in your savings account each month.
- Banking Service You Need: You need to identify your banking needs, like access to ATMs, paper cheques, Interac e-transfers, foreign-currency transfers, etc. If you regularly use an ATM, it’s a good idea to go with an online bank with a sizeable network. If you need to move money around, free EFTs and Interac e-transfers are important. Identify your banking needs and compare them to what the online bank is offering.
- Range Of Financial Products: You might not need access to the full range of financial products, but a few might be important to you, like a credit card or personal line of credit. Few online banks offer these products, so you should vet your choices accordingly.
- Service Quality And Customer Support: It’s a good idea to go through the reviews of the online bank you are considering. You’ll find out about the common problems, like delayed Interac e-transfers, connectivity limitations, and how responsive the customer service is. No online bank is likely to be perfect, but if you identify a major persistent issue, you may consider looking at the alternatives.
When you are choosing an online bank in Canada, keep your expectations realistic. The perks of no-fee banking are often accompanied by limited products or some other issues, which is one of the reasons that millions of Canadians are still stuck with the big five for most of their banking needs.
Which Canadian Bank Has The Best Online Banking?
Ans.: For conventional banks, Scotia Bank and TD probably have the best online banking. Among online banks, Tangerine and Simplii probably offer the best online banking experience.
Is Online Banking Safe In Canada?
Ans.: Yes. Online banking is quite safe, and most of the problems, i.e., password leaks and hacks, usually stem from users’ own bad cybersecurity habits. By adopting good practices like using strong passwords and opting for 2FA, you can make online banking even safer in Canada.
Are Online Banks Worth It?
Ans.: Yes, if they have all the financial and banking products you need. They usually offer no-fee banking, which can save you a significant sum every year, making online banks a smart financial decision. But if no online bank in Canada offers the services or products you need (which is unlikely), they might not be worth it for you.
Can I Open A Bank Account Online Without Going To The Bank Canada?
Ans.: Yes. If you have the right identification and you are eligible to open an account with an online bank in Canada, you can do so from the comfort of your home. Most online banks don’t have any physical branches or head offices, and the process of opening a bank account is completely online.
What Is The Best Savings Account In Canada?
Ans.: From purely an interest rate perspective, savings accounts offered by EQ bank and Motus bank are probably the best savings accounts in Canada.
Choosing the best online bank in Canada can be a bit overwhelming. But if you identify your banking needs and read through similar lists and articles that summarize the features and offerings of different online banks in Canada, you might find it easier to make a decision.