Canada's biggest branchless banks are making a splash to attract your cash. Pitching its no-fee chequing account, President's Choice Financial's TV ads feature CEO Galen Weston Jr. asking pointedly: "Why do so many Canadians have to pay bank fees?" Meanwhile, on the web, ING DIRECT is trumpeting its THRiVE Chequing account.
These two leading branchless banks may be bit players in the broader financial-services landscape next to banking's Big Five. Nonetheless, each has attracted a sizeable following of customers who are much more interested in low fees than in bricks and mortar. President's Choice Financial now boasts about three million customers, and ING DIRECT has more than 1.5 million.
Along with saving money on fees, branchless banks may offer other perks. For instance, President's Choice clients earn five "PC points" for every dollar spent at stores where President's Choice products are sold. Points can be redeemed for free groceries once a customer has 20,000 points, which equals $20.
For consumers who aren't swayed by these types of offers, branchless banks offer another advantages that traditional banks don't: They pay you interest on deposits held in your basic chequing accounts without forcing you to hold a minimum balance in the tens of thousands of dollars. The President's Choice account has a five-tiered interest schedule that starts at 0.05% if you hold $1,000 or less, going up to 0.5% if your minimum balance is greater than $25,000. ING DIRECT's THRiVE account pays 0.25% if you hold less than $50,000.
One thing you don't need to worry about is the safety of your branchless-bank deposits. ING DIRECT and President's Choice Financial are monitored by the same banking regulator and are subject to the same capital requirement that apply to all banks in Canada. Deposits at branchless banks are insured by Canada Deposit Insurance Corp. (CDIC), subject to the same limits as apply at other deposit-takers.
Incidentally, President's Choice Financial is affiliated with CIBC, so your money actually ends up being held by a much larger institution. But the bottom line is that your money will be safe with a branchless bank.
Online bank fraud might be another of your concerns, as it is for the vast majority of Canadians. But there's no particular reason why your account with a branchless bank would be more vulnerable than one with any other financial institution.
Regardless of which bank you deal with, take precautions to protect yourself. Keep your account information and password secret. Never create a password using your name, phone number, address or date of birth. And if you're away from your computer, sign out.
Assuming that you're satisfied that your deposits are safe and that online banking is secure, should you go branchless with your banking business? There are undoubtedly benefits, but also drawbacks, to switching.
If you need to use an automated banking machine, branchless banking may not be convenient. For example, ING DIRECT uses an ABM exchange network. You can go online to search for ABMs in your area. This should be easy if you have a smart phone, but might be a hassle if your only online access is via your desktop computer at home or at work.
If saving money on fees or getting special offers are your reasons for wanting to switch, be aware that branchless banking is far from the only game in town. Your current banking-services provider may have comparable offers.
All of the big banks in Canada offer a low-fee, no-frills packages that can be combined with their basic chequing account. In some cases, those fees can be waived if you keep a specified minimum balance or if you have other products at the same bank. For instance, RBC will waive the fee if you have two or more eligible products such as credit cards or investments.
Scotiabank also has an added perk with its Scene debit card, which enables you to earn points to qualify for free movies at Cineplex cinemas.
For some, one of the most important consequences of going branchless is the loss of a personal connection to their local financial institution. For many people (myself included) there is something comforting about having a local branch to go to and to be able to meet someone face to face to discuss your needs.
My advice: You could always switch one account over to a branchless bank and see how you like it. There's nothing to lose, and you can actually earn something on your savings.
| Branchless banks versus traditional banks | ||||
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| Low-fee chequing accounts | Monthly fee/min. to avoid | Number of transactions allowed |
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| TD Canada Trust Value Account | $3.95/$1000 | 10 transactions | ||
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| RBC Day to Day banking | $4.00/ multiproduct rebate | 15 transactions | ||
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| Scotiabank Basic Banking Account | $3.95/fee can't be waived | 12 transactions | ||
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| CIBC Everyday Chequing Account | $3.90/$1000 | 10 transactions | ||
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| Bank of Montreal Practical Plan | $4.00/$1000 | 10 transactions | ||
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| National Bank Accessible package | $3.95/50% discount for gold card holders | 12 transactions | ||
| Laurentian Bank Ultra Saver | $3.50 | 8 transactions | ||
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| Desjardins Economy package | $2.95/$1000 | 7 transactions | ||
| ING DIRECT THRiVE Chequing Account |
No fee | Unlimited | ||
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| President's Choice Financial No fee bank account |
No fee | Unlimited | ||
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