The banking industry in Canada has been ranked the world’s soundest by the World Economic Forum; in fact, it has been the leader for the last 7 years.
The Big Five banks in Canada continue to be very profitable, beating analyst expectations in the second quarter this year. RBC, BMO and Scotiabank saw profits jump 14 percent, 8 percent, and 2 percent respectively. CIBC tripled its profits. TD grew an earnings adjusted 5 per cent. It appears that times are good for Canadian banks. Canadian banks have found a way to weather the challenging economic environment and, in some cases, rake in record breaking profits. An increasingly large component of their ongoing success comes at the expense of their customers - higher service fees.
Bank fees and service charges are a lucrative profit center for big banks. The Big Five all increased their fees in 2015. The increases range from rising monthly account and transaction costs to reductions in seniors’ and veterans’ discounts. This has led to increased consumer frustration.
Sure, many Big Five accounts offer free services with the caveat that a monthly minimum balance is maintained, but this ties up money that could otherwise be growing as an investment or in a higher interest savings account. Outside the Big Five, there are alternative institutions that offer accounts with unlimited transactions and no fees. Are you still paying fees or keeping a minimum monthly balance for free everyday transactions where alternatives exist?
Banks with Free Accounts
There are two popular alternatives that offer free accounts for everyday banking: President’s Choice (PC) Financial and Tangerine Bank. PC Financial is a personal banking service provided by Loblaw Companies (owner of Superstore) in partnership with CIBC. Tangerine Bank, formerly ING Direct, offers their banking services as a subsidiary of Scotiabank. In both cases, deposits are insured with the Canadian Insurance Deposit Corporation.
PC Financial and Tangerine offer 24/7 customer support for services provided online, by telephone, mail and mobile banking. Both banks operate without any branch network, but do offer in-person customer interactions at a limited number of pavilions or cafés. By eliminating the substantial cost of brick-and-mortar branch locations, they are able to pass along the significant overhead savings to clients in the form of higher interest rates and lower service charges.
Both banks offer free chequing and savings accounts with unlimited transactions and no minimum balances. They offer the same conveniences as the Big Five such as direct deposit, pre-authorized bill payments, fund transfers, and Interac e-Transfers. These accounts also have a few other interesting differentiating features:
The Tangerine Chequing Account is a no fee daily banking account that earns interest, calculated daily and paid monthly. The account comes with a free book of 50 cheques; subsequent books will cost an additional $12.50. Mobile deposits can be made via the smartphone app. Deposits and withdrawals can be made at one of 3600 Scotiabank ATMs.
Unique features of this account:
- Free Email Money Transfers: Similar to Interac e-Transfers, in that funds can be emailed to any desired recipient. While Interac e-Transfers incur a fee and happen instantaneously, Free Email Money Transfers take 2-3 business days to get processed.
- Orange Key Referral Bonus: Tangerine’s referral bonus is simple to use. When you open an account you are assigned a code called the Orange Key. When your friends or family sign up using your Orange Key with a minimum deposit of $100, both parties will receive a bonus of $25 deposited to your account. Keep an eye out for promotions, the bonus sometimes doubles up to $50 for the referrer and the referred.
- Automatic Savings Program (ASP): Tangerine is running a current promotion that will give you a $25 cash bonus if you set your savings account up with their Automatic Savings Program. All you need to do is set an ASP of $100 or more when you first open your savings account, and keep it going for 6 months.
Here's My Orange Key: 41502230S1
In addition free daily banking with no monthly fee, PC Financial’s No Fee Bank Account earns interest on balances calculated at the end of each day and paid to the account monthly. Mobile deposits can be made via the smartphone app by taking pictures of cheques. Deposits and withdrawals can be made at 1 of 3800 PC Financial or CIBC bank machines.
Unique feature of this account:
- Unlimited Free Cheques: Account holders can enjoy the benefit of writing an unlimited number of cheques.
- PC Plus Rewards Program: Transactions can be used to earn PC Points towards free groceries. Each dollar spent using the bank card at participating stores earn 5 PC points. Setting up a direct deposit for a paycheque or a pension will also net a one time bonus of 10,000 PC points. Card holders can start redeeming once 20,000 PC points have been earned – the equivalent of $20 in free groceries.
The Credit Union Alternative
Banks are for-profit financial institutions that provide products and services in order to maximize earnings for shareholders. When a bank makes money, the profits are distributed in the form of dividends to their shareholders. Credit unions, on the other hand, are member owned, not-for-profit organizations that provide financial services aligned with the interests of their membership and not a group of shareholders. When credit unions make profits, the extra money is returned to its members in the form of lower loan rates, fewer fees, better service and sometimes, even bonus cheques.
To become members, potential account holders are generally required to purchase membership shares to become part owners of the credit union. This purchase is often refunded when accounts are closed. While banks have branches nationwide, credit unions focus primarily on local communities and can offer advice and services specific to the geographical location.
ATM services are provided nationwide either on 1 of 2,500 ATMs through the EXCHANGE Network, or one of 1,800 through the ACCULINK Network. ATM locator tools are easily accessible online or via mobile apps. Credit Union deposits are insured provincially in accordance with the Credit Unions and Caisses Populaires Act., 1994. Many credit unions in provinces across the country offer free chequing accounts to their members which are often overlooked by those seeking free banking options.
Free Bank Account Comparison
Here’s a head to head comparison of some free banking options.
Please note this table scrolls horizontally by using the slider at the bottom.
|Mobile Cheque Deposit|
|Foreign ATM (Inside US/Mex)|
|Foreign ATM (Outside US/Mex)|
|Proprietary Email Money Transfer|
|Cheque Image Return|
|PC Financial||Tangerine||Coast Capital Savings||First Calgary Financial||Conexus Credit Union||FirstOntario|
|Bank||Bank||Credit Union||Credit Union||Credit Union||Credit Union|
|No Fee Bank Account||Tangerine Chequing||Free Chequing, Free Debit and More||No Fees for Me||FreeStyle No-Fee||Be Free Chequing Plan|
|Loblaws Supermarkets or CIBC||Scotiabank||EXCHANGE and ACCULINK||ACCULINK||ACCULINK||EXCHANGE|
|Conversion rate + 2.5%||$2.00||$5.00||$4.00||$4.00||$3.00|
|NA||Free (2 Business Days)||NA||NA||NA||NA|
|$1.50||$1.00||$1.50||3/mth + $1.50||Free||$1.50|
|* Free unlimited cheques
* PC points toward Free groceries
|* First 50 cheques free
* 1 free stop payment per year
|* First 20 cheques free|
Choose the Account that Best Meets Your Needs
Free everyday banking can bring in savings close to or exceeding $200 a year when compared to the fees of an unlimited chequing account offered by a Big Five bank.
Free banking can offer similar, if not better services, than conventional banking accounts with monthly fees. Choosing one of the free banking options can also free up money tied up in minimum balance requirements, allowing savings to grow faster either through higher savings rates or investments. Ultimately, the right account is the one that best suits your individual needs, but if you are not fully using the features of a monthly fee account, there are many compelling alternatives that are worth looking into.
What’s Your Current Banking Arrangement?
Answer the short 3 question quiz below and let us know how you bank. After you complete the quiz, you will see a summary of responses to you can compare your situation to that of other Canadians.
Do You Think the Fee is Worth it?
Don't forget the Orange Key: 41502230S1
What can you do with your monthly fee bank account that you couldn’t with one of these no fee alternatives?