The Case for Internet Banks

Disclaimer: I’m currently a Tangerine client but I am not being compensated by Tangerine for writing this.

What does it cost you to be a client of one of the big 5 banks? What are the potential savings of banking with an internet bank?

If you bank with one of the big 5 banks (TD, Scotiabank, RBC, BMO, or CIBC), odds are you’re paying either monthly account fees between $11-16, or, you’re maintaining a minimum balance of a couple thousand dollars to have that monthly fee waived.

With the developments of internet banking and smartphone banking apps the last 5-10 years especially, it is now possible to do all of your banking without ever needing the assistance of a teller or going into the bank. Today, the only find I find myself going to the bank is if I need cash, and even then, I find myself using a bank machine instead of a teller. I am able to regularly check my account balance, transfer money, pay my bills all from my computer or phone. In the last couple years, if not the last year, mobile banking apps have added and refined a cheque deposit feature integrated with phone cameras that is, in my opinion, now functional (My recollection is that my big bank app had the mobile cheque deposit feature but that there were enough bugs in the system that I had to fight with it to the point that it was no longer convenient.  The mobile cheque deposit function seems to work great now.) With a banking app, you can deposit cheques by taking pictures of the front and back of the cheque.

With internet banking and mobile banking apps, physical brick-and-mortar branches are no longer necessary the way they were even 5 years ago, and internet banks have become a much more viable option for everyday banking. Tangerine and Simplii are the two digital banking options out there for Canadians right now that this post is focused on.

What do you give up and what do you get with an internet bank?

The most obvious difference is that you don’t have any physical branches to go do your banking. The internet banks cover this shortcoming through other options.  As I mentioned earlier, internet banking, mobile apps and telephone banking are the focal points for typical banking needs. However, in the event that a client needs assistance or consultation, you can talk to a representative over the phone 24-7 or chatting through instant messaging.

Internet banks are able to significantly save on overhead costs by not building and operating physical branches, and they pass on a portion of their savings on to their clients. They offer everyday banking services for free with no minimum account balances or conditions needed for a fee waiver. Tangerine and Simplii also allow unlimited free transactions. They also tend to offer much high-interest rates on both their chequing and savings accounts. And fear not, if, or when you need cash, you can still withdraw from ABMs just as you would if you were a big bank client. Tangerine is owned by Scotiabank and offers free access to the Scotiabank ABM network. Likewise, Simplii is owned by CIBC, and Simplii clients can use the CIBC ABM network without any fees. Naturally, switching from Scotiabank to Tangerine or CIBC to Simplii are easier transitions, because you’re likely to already know where all the ABMs and branches are already, but for new clients switching from any other banks can use the ABM locator within the apps.

How much money can you keep for yourself by switching to Simplii or Tangerine?

There are two ways that you can get More Bang 4 Your Buck by banking with Tangerine or Simplii: saving on your monthly account fees and the higher interest rates on both the chequing and savings accounts.

Monthly account fees with Canadian big banks range from $4/month for a barebones basic account to $30/month for a premium account. Standard everyday bank account fees are between $14.95/month and $15.95/month while premium bank accounts cost $30/month.  Typical savings on monthly account fees range from $179 to $191 a year!  I noticed that Tangerine has a fee calculator that helps you figure out your costs over the years.

Standard savings account interest rates at Simplii and Tangerine are 1.1%, which is significantly higher than the big banks.  Even chequing account interest rates are tangible.  Tangerine’s chequing account interest rate goes from 0.15% to 0.65%, while Simplii’s ranges from 0.05% to 0.5%.  In both cases, the interest rate on both Simplii and Tangerine chequing accounts are competitive with some of the interest rates on savings accounts at the big banks.

Between the savings on monthly account fees, the increased interest you’d earn on deposits and the fact that you’ll never have any extra charges for extra transactions (both Simplii and Tangerine offer chequing accounts with unlimited transactions), it’s quite reasonable that you could end up with an extra $200 in your pocket every year by switching to an internet bank.  (Granted, you may be paying less with a rebate or a lower cost basic account.) You would have to be using a ton of $1 Interac e-Transfers at Tangerine to notice a difference in your savings on bank fees.  (At Simplii, Interac e-Transfers are free.)


Does Switching to an Internet Bank make sense for you?


Internet banks are not for everyone. Access to your bank account requires dependable access to the internet, be that through a home internet network or the data plan on your cell phone.  You would need to be fairly comfortable using your cell phone and confident with doing your banking online for the monetary savings of switching to an online bank to be worthwhile.

I’ve grown up with internet banking and it was my primary interface for my banking needs, even when I was with one of the big banks. I found it to be so much easier to make a bill payment online. I only ever needed to go into a branch when I needed to deposit cheques. Even cheques are becoming less common though, with more and more Canadians opting for the convenience of Interac email money Transfers.

There are certain things that the internet banks don’t give you. For example, you aren’t able to rent a safety deposit box. That being said, some Canadians don’t need that physical bank branch, and for those that don’t, I encourage them to calculate or consider the potential savings of switching to an internet bank. I’ve switched my everyday banking to Tangerine, and I’ve been quite happy with my new bank. The savings are significant and real, and I’ve found that it’s even more convenient. I haven’t missed needing to go to a bank for the services that aren’t accessible through regular internet banking. It’s been quicker and more convenient to use the mobile cheque deposit, and the few questions that I’ve had have more convenient to have answered, once through the online chat and the other over the phone. I loved being able to solve those problems without having to leave my house.

Considering a switch to an internet bank makes sense if:

  • you’re comfortable using computers and smartphones and you have dependable access to the internet.
  • you already do most of your banking over the internet or with your smartphone and find that you don’t go into the branch very often.
  • you already know where CIBC or Scotiabank’s ABMs are or are comfortable with the inconvenience of having to find them.
  • you want to save on banking fees!

If you’d like to read more about my experience with Tangerine, read my review here! If you plan on opening an account with Tangerine, my writing has been helpful, and you’d like to support, feel free to use my Tangerine Orange Key (51773898S1) when you register and we’ll each receive an extra $50 once you open your account and deposit a minimum of $100 into your new account.

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