How to Choose the Best Online Bank in Canada 2024

Are you looking for the best online bank in Canada? You are not alone!

I have passed through your current situation and I know what it means to choose from the dozens of online banks out there.

Whether you are a Canadian resident looking to open your first bank account or you’re a newcomer to Canada, there are many things to consider when trying to get the best deal from online banks.

Since mbanx set the pace as the first online bank in 1996, ING Direct Canada (now Tangerine Bank) followed in 1997, there has since been a rapid increase of online banks in Canada.

Due to their low banking costs, competitive interest, and convenience, online banks are now the best alternative to traditional banks in Canada.

But as we continue to see the increase of more and more online banks in the country, it becomes more difficult to choose the best one.

To help you make an informed decision, this article discusses everything you need to know about online banks in Canada and how to choose the best one for your banking need.

What are Online Banks?

Online banks are financial institutions that offer banking services online. That means they don’t have physical branches you can visit, as all banking services are accessed through the Internet.

Also known as neobanks or digital banks, online banks serve as the ultimate alternative to traditional banks due to their:

Low banking fees
Competitive rates on savings and investing accounts
$0 minimum balance
Unique perks
Easy access
Convenience

That said, online banks vary by the services they offer. Some online banks offer full banking services, including chequing and savings accounts, credit cards, and investment products.

However, other online banks offer only certain banking services that may limit their access.

As a result, it is important to know how to choose the best online bank that suits your banking needs in Canada.

How Do Online Banks Work?

Online banks function the same way as traditional brick-and-mortar banks. They offer checking accounts, savings accounts, credit cards, and mortgages, among others.

What makes them different is that they don’t have physical locations as they operate completely online.

Accordingly, you need to open an account with your chosen online bank to access the banking services.

Like traditional banks, you need a minimum of a government-issued ID to open an online bank in Canada.

After signing up with an online bank, you may need to verify your account to start banking. The interesting thing is that you can finish everything within minutes.

Like traditional banks, online banks are also insured by the Canada Deposit Insurance Corporation (CDIC). This protects your deposit of up to C$100,000 on each insured category.

What are the Pros and Cons of Online Banks?

Like traditional banks, online banks have their pros and cons discussed below:

Pros

Easy to set up: With no paperwork, you can open an online account in minutes and make instant deposits via Interac e-Transfer, wire transfer, or mobile check deposit.
Low fees: Online banks often have lower fees than traditional banks because they don’t have the overhead costs of maintaining physical locations.
Higher interest rates: In addition to keeping costs low, online banks offer customers higher interest rates on savings, credit cards and mortgages because they don’t have the same maintenance costs as traditional banks.
No-minimum balance: Most online banks don’t have minimum balance requirements. So you can start banking with as little as a $1 deposit without any penalty.
Convenience: Since everything is done online, it’s easy to access your account anytime via your smartphone or computer. Some online banks offer mobile check deposit capability and other convenient features that you can use anywhere.
Perks: You can access special perks through an online bank that helps you save costs and earn rewards while banking. This includes competitive welcome offers, and reward credit cards among others.

Cons

No physical locations. Since online banks don’t have physical locations, they may not be ideal for you if you’re looking for a one-on-one banking service in Canada.
Not suitable for complex transactions: Due to their limited balance limit, online banks may not be efficient for handling complex transactions.
Security issues: While most online banks use advanced encryption to protect your personal information, your account may be hacked. You may also experience downtime if the bank is undergoing maintenance.

What are the Best Online Banks in Canada?

When shopping for the best online bank in Canada, the following are some of the top options you will encounter.

1. EQ Bank

EQ Bank is the online-only bank of Equitable Bank that sets itself apart with its high-interest savings account.

Founded in 2016, EQ offers Canadians competitive banking solutions ranging from high-interest registered and unregistered savings accounts, USD accounts, and GIC accounts, international money transfers and a prepaid Mastercard.

Like other online banks, EQ Bank has no monthly fees, no minimum balance required, no Interac e-Transfer fees, no bill payment fees and no mobile cheque deposit fees.

Its USD account allows you to save US dollars and enjoy a low conversion rate for US and international money transfers.

In addition, EQ Bank has CDIC protection and advanced encryption, giving you peace of mind.

~~The drawback of EQ Bank is that it has no credit card unlike other online banks in Canada. This makes it less suitable for individuals looking for a full banking solution.~~

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2. Tangerine Bank

ING Direct Canada, being the second digital bank in Canada was rebranded to Tangerine Bank in 2014 after being acquired by Scotiabank in 2012.

As one of the pioneers of online banks in Canada, Tangerine Bank sets itself apart from other online banks in terms of low-cost banking solutions with competitive interest and fees.

The bank offers full banking solutions ranging from a savings account, a no-fee chequing account, reward credit cards, mortgages, HELOC, registered and unregistered accounts and business accounts.

Unlike other online-only banks in Canada, Tangerine used to have cafes across different locations in Canada but the pandemic led to their current closure.

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3. Simplii Financial

Simplii Financial is the online bank division of the Canadian Imperial Bank of Commerce (CIBC).

The bank has been giving Canadians low-cost banking solutions since its inception in 2007.

Currently, Simplii is a leader in terms of high promotional interest rates on savings accounts in Canada.

What I also like about Simplii is its broad range of banking solutions and investing making it a one-stop shop. The bank offers:

Savings account (with a 6% high promotional rate)
USD savings account
No-fee chequing account
Cashback credit cards
Loans
Mortgages
Investment account

In addition, Simplii has $0 monthly fees, $0 transaction fees, $0 minimum balance and low interest on loans.

READ ALSO: Simplii e-Transfer Limit

4. Neo Financial

Neo Financial is a newcomer in the online banking industry having been established in 2020. But despite its recency, Neo Financial has set itself apart by offering competitive banking solutions.

The bank offers high-interest savings account with a 4.00% interest rate and a credit cashback card with up to 5% back on eligible purchases

With these two products, Neo Financial has positioned itself as one of the best online banks in Canada.

As the bank grows, it’s gradually expanding its offerings to include mortgages and a managed investing platform.

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How to Choose the Best Online Bank in Canada?

From the above, you can see that even the best online banks differ considerably in Canada. But how do you choose the perfect one?

With online banks having different features in Canada, you need to first determine your banking needs before comparing the best options.

Once you determine your banking needs, follow the steps below to choose the perfect bank that suits your needs.

1. Accounts

As mentioned previously, some online banks offer full banking services, while some offer partial services. As a result, you want to choose a bank that supports the account you want to open.

Depending on your needs, you should consider whether the bank has a savings account, chequing account, USD account, credit card, mortgage, HELOC, GICs, and registered accounts like TFSA, and RRSP.

When looking at the supported accounts, consider your future banking needs so that you don’t end up opening different banking accounts when your situation changes.

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2. Fees

While most online banks don’t charge monthly fees, Interac e-Transfer fees, bill payment fees, and other fees, some online banks do.

However, those that do have varying fees you need to consider when choosing one. In addition to free withdrawals and deposits, you should also consider inactivity and overdraft fees.

Ultimately, choosing an online bank with lots of freebies will save you more in the long run.

3. Interest Rates

Different online banks offer different interest rates on savings accounts, chequing accounts, credit cards, loans, mortgages and investment accounts. The better the rate, the more money you’ll earn or save.

However, you need to be critical when considering the interest rates as most online banks in Canada lure new customers with attractive promotional rates.

As a result, it’s essential to consider the standard rate to know what you stand to gain after the promo expires.

4. Promotions

Online banks often offer promotions to attract and maintain their existing customers. This usually comes in the form of a welcome bonus, promotional interest rate on savings accounts, special perks and rewards on credit card purchases.

As expected, the promotions vary as the competition among online banks continues to grow. So taking advantage of an online bank with competitive promotions will help you save and earn more in your first year of opening an account.

While some online banks have no eligibility, others require you to meet certain requirements before qualifying for the promotions.

The requirements usually include a minimum deposit, and credit card purchases, among others.

5. Eligibility

Not everyone can open an online bank account in Canada. This is because different online banks have different requirements ranging from credit score, income eligibility, and location.

However, the common requirements for opening an online bank account in Canada are:

Be a Canadian citizen or permanent resident
Reach the age of majority in your province or territory
Have a government-issued ID, such as Social Insurance Number (SIN).

That said, some online banks cover all parts of Canada while others are not available in every province, most especially Québec.

Knowing the requirements beforehand will save you the disappointment of application disapproval.

6. Accessibility

Since online banks have no physical location, it’s important to choose the one that’s more accessible anytime, anywhere.

Some online banks are only available through web portals. However, others are both available on web portals, mobile apps, and desktops.

Choosing a bank that’s accessible on different devices will give you the ultimate convenience that comes with online banking.

7. Security and Coverage

Finally, it is important to consider the security and coverage of your bank account when choosing the best online bank in Canada.

The security of your bank account is determined by the encryption used to protect your personal information. An online bank with 2 Factor Authentication will also help keep your bank account secure.

While most online banks in Canada are insured by CDIC, it’s important to consider other additional coverage such as purchase protection and extended warranty on credit cards.

Over to You

With the above seven tips, now you are confident in making an informed decision when choosing the best online bank in Canada.

Simply consider your banking needs and use the above factors as a checklist when comparing the best online banks out there.

If you need more clarification on how to choose the best online bank in Canada, kindly let me know in the comment section.

The ball is now in your court to join the online banking industry of Canada.

FAQs on How to Choose Best Online Bank in Canada

Which Canadian online bank is the best?

There’s no single best online bank in Canada as different banks specialize in different aspects. Depending on your banking needs, choose:

EQ Bank for a high-interest rate on savings accounts
Tangerine Bank for promotional interest on savings accounts
Neo Financial for cashback credit card

Are online banks in Canada safe?

Yes, online banks in Canada are safe because of the advanced encryption they use to protect users’ personal information on their websites.

Besides being regulated, most online banks in Canada are members of the CDIC which insures up to $100,000 deposits in every insured category.

Can I open a bank account online without going to the bank in Canada?

Yes, that’s the convenience online banks have over traditional banks. You can simply open an online bank using your smartphone within a few minutes without any physical appearance.

Why do online banks offer better rates?

Online banks offer better rates because they don’t spend on building and managing physical branches. So their overhead costs are lower than those of traditional banks.

Is it better to open a bank account online or in-person?

It depends on your banking needs. But unless you have a complex banking need or situation, you will likely save more using an online bank than a traditional bank.

Have more questions? Kindly drop them in the comment section below.