Did you know Canadians are among the most likely in the world to have a bank account? According to World Bank Group, 99.7% of Canadians have a bank account, compared with only 93.1% of Americans and 69% worldwide.
But how many Canadians have the best bank account? It turns out that a lot of us haven’t changed banks in the last few years – and some are still loyal to one bank because their parents signed them up for a children’s account years and years ago. Chances are there’s a better option available.
Whether you’re getting a bank account for the first time, or you’re thinking about making a change, here is what you should look for in a bank account.
A chequing account is a typical bank account you use for everyday transactions. You can have your pay deposited in your chequing account, then use the account to pay bills and withdraw cash.
The best chequing accounts are the ones that let you do as much banking as you want for the lowest monthly cost. Look for:
Transactions – how many transactions does the bank account let you make each month? These include cash withdrawals, bill payments, and transfers to other accounts. Some accounts set a limit and then charge a fee for additional transactions. Others are unlimited.
Branch access – if you need to do your banking in person, do you have the option? Canada has six big banks with branches from coast to coast. There are also smaller regional banks and credit unions that have as few as one or two locations. Then there are digital banks that don’t have branches at all.
ATM network – banks usually have a network of automated banking machines (known as ABMs or ATMs) that you can use for free to withdraw cash and deposit money. But if you need to use another bank’s machine, you might have to pay fees to the other bank and your own bank – sometimes adding up to $5 just for a cash withdrawal. Look for a bank account that gives you access to a big ATM network for free.
E-Transfers – sending money online has made cheques obsolete, but there are sometimes service charges. Many banks have chosen to include unlimited free Interac e-Transfers with their premium accounts. Others charge anywhere from $1-$2 for the service.
Monthly cost – this is more than just the monthly fee. You need to consider all the transactions you do in a month (withdrawals, bill payments, transfers, Interac e-Transfers) and consider their cost together with the monthly fee. If you send a lot of e-Transfers for example, you might find it’s better to pay the price for an account that includes them for free, rather than one that charges you for each transaction.
A good option to look for is a no-fee chequing account. These accounts are offered by digital banks like Tangerine and Simplii Financial, and offer unlimited transactions for no monthly fee.
A savings account is a place to keep your money saved. Unlike a chequing account, which is good for making lots of deposits and withdrawals, it’s best to leave your savings account alone, and only take out money when you need it.
It’s better to use a savings account than cash because savings accounts pay interest on the money you save, so it can grow. But like chequing accounts, some are better than others. Look for:
Interest rate – this is how much the bank pays you for your money, usually expressed as an annual interest rate. For example, if your savings account has $1,000 and pays 2% interest, you’ll earn $1.67 per month ($1000 x 2% = $20 / 12 months = $1.67). The big banks usually don’t pay as much interest as others. Some big bank savings accounts pay as little as 0.05% interest, but the best savings account in Canada currently pays 2.3% interest.
Transaction fee or transfer fee – this is how much it costs you to withdraw money from your savings account and move it to your chequing account. Some banks charge anywhere from $1-$5 for this service. That can be a good incentive not to withdraw your cash, but it can also eat up all the interest you earn. Look for a savings account with no transaction or transfer fees.
Your bank won’t offer up this information without being asked, but you don’t have to use the same bank for your chequing and savings accounts. In fact, you can have any account or product from any bank, regardless of who you use for chequing. The best savings account is the one that pays the most interest and doesn’t charge any fees, period.
If you’re using the wrong bank accounts, you could be wasting a lot of money on fees.
For example, the most expensive premium bank accounts in Canada cost as much as $30 per month. If you’re using one of those accounts, you’re spending $360 per year for banking. But you might be able to switch to a no-fee chequing account and get most of the same services for free. Some even offer free services to move over all of your bill payments so the process is dead simple.
Likewise, with savings you could be missing out on higher interest payments. If you have $10,000 in a big bank’s savings account paying 0.05% interest, you’ll only earn $5 per year on that investment. A high interest savings account could pay you an extra $225 per year for the same investment.
If you’ve been using the same bank since childhood, chances are your needs have changed. Take some time to compare bank accounts online and see if there’s a better deal out there for you. I think you’ll be pleasantly surprised.
Ratehub.ca empowers Canadians to search smarter and save money by comparing mortgages rates, credit cards, high-interest savings accounts, chequing accounts, and insurance.