The hardest job in Canadian business is getting people to break away from the big six banks to try an alternative.
In good times and bad, customers cling to the big banks like insects on a windshield. Alternative banks now offer significantly better rates on savings and guaranteed investment certificates in many cases, but people have flocked to the big banks.
“In tough times, there’s a flow to quality,” said banking industry consultant David McVay. It seems we need a broader definition of quality.
What the big banks offer is size, stability, longevity and a national branch network. For a quality alternative, consider the EQ bank card launched on Wednesday. Think of it as what happens when a high-interest savings account combines with what we should now call a transactional account – the term “chequing account” seems outdated.
EQ is the online banking division of Equitable Bank, which describes itself as the seventh largest national bank in Canada. EQ has been a leading innovator in its seven-year history, though its aggressiveness in offering the best rates has waned.
The No Fee EQ Bank Card is a prepaid Mastercard that connects to an EQ Savings Plus account, elevating it to something more useful. “Our goal is to transform the Savings Plus account into a current bank account or a checking account alternative,” said Mahima Poddar, Senior Vice President and Group Head of Personal Banking at Equitable Bank.
There is a bit of finagling required for this account, mind you. You need to transfer money from your EQ savings account to the new bank card online or via the EQ mobile app. Once you’ve done this, you can pay for purchases anywhere Mastercard is accepted and withdraw cash from any ATM – that’s huge. EQ will reimburse you for all fees charged at ATMs in Canada.
Whether your money is in your EQ savings account or loaded onto the card, you earn the usual EQ interest rate – 2.5% mid-week. This is what makes EQ stand out in alternative banking right now – you get a pretty high interest rate and fee-free transactions combined in one account. Note: Savings Plus already offers free wire transfers and bill payments, even without the new bank card.
The transfer of money from your account to your EQ bank card happens in real time, so you can do it while waiting in line for a coffee. If that still sounds boring, consider the benefits.
One is 0.5% cash back on every purchase – the money is deposited into your account every month. The other is the absence of foreign transaction fees for purchases and ATM withdrawals outside of Canada. When paying with a credit card outside of Canada, you will typically pay a 2.5% fee in addition to converting foreign currency into Canadian dollars at a wholesale rate.
Ms Poddar said she used a pilot version of the EQ bank card exclusively when traveling to the United States. “It’s a lot cheaper than using any of my rewards credit cards.”
A fintech app called Koho already offers a prepaid Mastercard combined with a savings account and cashback offer, but interest rates were lower than EQ earlier this week. Koho also asks you to subscribe for up to $9 per month to get the best rates and cash back.
Several online banks offer no-fee transactional accounts and high-interest savings accounts, but these are separate products and require you to transfer money between them if you want to take advantage of today’s high interest rates. today. As for the big banks, their all-inclusive transactional accounts cost around $15 a month and pay only crumbs of interest at most.
EQ is a member of the Canada Deposit Insurance Corporation through parent bank EQ, so eligible deposits – up to $100,000 in principal and interest – are protected against bank insolvency. The big downside to using the bank for your day-to-day banking isn’t the risk of losing your money, it’s giving up the chance to earn better interest from savings accounts offered by others. alternative banks.
About 13 alternative banks had rates of 3% or more midweek, including Oaken Financial at 3.4% and Saven Financial, offering 3.75% to Ontario residents.
Why are these and other alternative banks failing to attract customers? Mr. McVay, the banking consultant, cited the flight to quality and the fact that none of the different players stood out.
EQ may have busted that nut by offering a no-fee transactional account that earns respectable interest. If you’re stuck with a big bank, take note.
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