EQ Bank and Tangerine are two of the most popular online-only banks in Canada.
More Canadians are choosing to go digital with their banking, with recent stats showing that more than three-quarters of Canadians now use online and mobile interfaces for conducting their banking transactions.
This increasing adoption of online banking is a boon to relatively newer entrants into the banking industry i.e. online banks.
Not many people like to pay the ever-increasing banking fees charged by traditional brick and mortar banks. Forget about ATM fees, NSF, overdraft, account transfer, transaction fees, and so on. What usually irks me is the monthly chequing account maintenance fees.
I am simply unable to rationalize paying to keep money in my account when the bank is already making money off of it. Canadians pay in excess of $200 per year on average in banking fees!
Online-only banks come with their own pros and cons. A major differentiating feature between them and traditional banks is that they usually offer a no-fee, no-minimum balance chequing account and/or a high-interest savings account. They also offer very little in the way of in-person assistance.
In this post, I compare the services offered by two of the most popular digital banks in Canada – Tangerine and EQ Bank.
Tangerine is a subsidiary of Scotiabank and was formerly known as ING DIRECT.
It does not have branches, however, in addition to having access to a 24/7 call centre, you can walk into Tangerine pop-up locations, cafes, and kiosks around the country if you must speak to someone in person.
As a customer, you also have access to over 44,000 ATMs around the world through Scotiabank’s Global ATM Alliance.
Tangerine Bank offers a suite of financial products including:
1) Savings and GICs
2) Spending: No-Fee Chequing Account and Tangerine 2% Money-Back Credit Card
3) Investing: Tangerine Investment Funds, TFSA, RRSP, and RRIF
4) Borrowing: Mortgage, HELOC, and RRSP Loans
General features you can expect on their savings and chequing accounts include:
- Zero monthly bank fees
- Interest earned on chequing account balance (up to 0.10%)
- Free and unlimited debit transactions, bill payments, and pre-authorized payments.
- No minimum account balance
- Automated Savings Program
EQ Bank is the online-only arm of Equitable bank – a Schedule I bank with total assets of approximately $34 billion.
The bank operates strictly online and they have no brick and mortar branches you can walk into. It is the overhead saved from not having to pay for building and other maintenance costs that they pass on to customers through higher savings interest rates.
Although it is without a physical location, you can always reach someone to talk to via phone if you have any questions.
- No monthly fees
- No minimum balance
- High-interest savings rates (1.25%*)
- Free unlimited electronic fund transfer
- Unlimited bill payments
- Unlimited FREE Interac e-transfers per month
- Free mobile cheque deposits
- Joint accounts available
- Cheap international money transfer
Tangerine vs. EQ Bank Comparison
1. Savings Rate: As of today (April 28, 2021), EQ Bank offers a 1.25%* non-promotional interest rate on its general savings account, while Tangerine is offering a 2.10% promotional rate for 5 months and 0.10% after.
Let’s drill down into the numbers using a savings account with $10,000 and a 1-year term:
EQ Bank: $10,000 x 1.25%
Interest earned = $125 per year.
Tangerine ⇒ First 5 months ⇒ $10,000 x 2.10% x 5/12 year
Interest earned during the first 5 months: $87.50
Remainder of year (7 months) ⇒ $10,000 x 0.10% x 7/12 year
Interest earned during the last 7 months = $5.83
Total interest earned for Year 1: $87.50 + $5.83 = $93.33
EQ Bank wins this round by offering a significantly higher interest rate overall. If we assume rates stay the same in Year 2, EQ Bank will still pay $125 interest on a $10,000 savings, while earnings on a Tangerine account drops to $10 (no promo rate in second year).
The same scenario also plays out with GICs, with EQ Bank offering higher rates. Compared to the pittance offered by the major banks, these rates are good.
2. Convenience: Both banks generally do not have a brick and mortar presence, however, depending on your location, you may be able to find a Tangerine location if meeting people in-person is a requirement for you.
Both banks have mobile apps that are accessible on both android and iOS devices.
If you are looking for an online-only bank that handles everything from chequing and savings to general investing, TFSA, RRSP, and RRIF, Tangerine is the better option. With Tangerine, you can realistically move all your banking needs over.
EQ Bank has no chequing account, however, its savings account works like a hybrid account since you can deposit cheques into it and make bill payments. You can connect up to ten accounts from other banks and transfers are FREE. EQ Bank now also offers TFSA and RRSP accounts.
With regards to ATMs, Tangerine customers have access to over 44,000 ATMs worldwide. EQ Bank does not currently issue a debit card, therefore all transactions are completed online.
Tangerine Bank wins the round on convenience.
3. Safety of Funds: Both EQ Bank (via Equitable Bank) and Tangerine are insured by Canada Deposit Insurance Corporation (CDIC). What this means is that your deposits are insured by CDIC up to $100,000 per account category (i.e. Savings, Chequing, and GICs).
EQ Bank = Tangerine for this feature.
The factors that individuals take into consideration when choosing a digital bank will vary based on their needs and expectations. For some people, any monthly banking fee is anathema, and they want an online bank that can handle all their day-to-day banking needs – such as with Tangerine.
If you are looking for the best savings rates for your money or are looking for high interest rates GICs, TFSA or RRSP savings accounts, EQ Bank is an excellent choice.