Online bank accounts in Canada

You can do just about anything online – shopping, dating, sports betting, anonymously bidding on vintage lampshades — and banking is no exception. Online-only banks offer chequing and savings accounts, TFSAs, RRSPs, investments, loans and mortgages – basically everything except physical branches and in-person service. Online banks (also called virtual banks or direct banks) have a self-service vibe, but there’s a positive trade-off: most offer no-fee or low-fee chequing accounts and may offer higher interest rates on savings accounts.

These days, online banking is pretty universal: 89% of Canadians reported using online banking in the last year, according to a 2022 survey by the Canadian Bankers Association. If you’re considering opening an online bank account, keep reading to learn more about how online banks work, pros and cons and what features to look for in an online bank account.

Online banking features

With virtual banks, there’s no local corner branch – everything happens online, from the sign-up process to all of your day-to-day transactions. When you open an online chequing account, you’ll receive your debit card in the mail and can immediately access your account via online banking or the bank’s mobile app. If you need to withdraw cash, online banks do offer access to certain ATM networks at no charge.

Several online banks in Canada are subsidiaries or divisions of big banks and credit unions – for example, Tangerine is a subsidiary of Scotiabank, Simplii Financial is a division of CIBC, EQ Bank is a division of EQ Financial, Alterna Bank is a subsidiary of Alterna Savings, and Manulife Bank is a subsidiary of Manulife.

Online banks are regulated exactly the same as other financial institutions. If your online bank or credit union is a member of the Canada Deposit Insurance Corporation (CDIC), your deposits are covered up to $100,000 per insured category at each member institution. You can search the CDIC website to see if your bank is a member institution.

Pros and cons of online banking

Depending on your personal preferences, the type of transactions you do and how tech savvy you are, there are a few things to consider before opening a chequing or savings account with an online-only bank.

Pros to online bank accounts:

• Easy access and 24/7 availability. Whether you’re sitting on your couch at midnight, taking a midday break at work or walking your dog after dinner, you can use online banking or the mobile app at any hour to check your account balance, deposit cheques, pay bills, open new accounts, transfer money between accounts, and send and receive Interac e-Transfers.

• No-fee or low-fee accounts. Canada’s most popular online banks offer chequing and saving accounts with no monthly fees and unlimited transactions, plus other features including free Interac e-Transfers and the option to open investment accounts (RRSPs, TFSAs).

• ATM access. When you need cash, most online banks offer access to certain ATM networks at no charge. For example, Tangerine customers can withdraw money at Scotiabank ATMs, Simplii Financial customers can access CIBC ATMs, Alterna Bank customers can use Alterna ATMs or ATMs within the EXCHANGE® Network, and EQ Bank reimburses customers for out-of-network fees or surcharges from other providers in Canada.

Cons to online bank accounts:

• No face-to-face human interaction. Remember, online banking is all about no frills and self-service. If you like to stroll into your local branch and get a more full-service experience with bank tellers and advisors, if you regularly do more complicated transactions, or if you just generally prefer in-person, same-day service, fully transitioning to online-only banking might not be for you.

• Online banking is instant – mail is not. If you damage or lose your debit or credit card and need a replacement, or if you need to order a book of cheques or a bank draft, you can’t walk into the nearest branch sort out the issue that same day. You’ll have to contact customer service or put in a request online and wait for your card or documents to arrive in the mail.

• Beware of online scams. Unfortunately, online banking creates opportunities for online scams. Be ****vigilant about protecting your passwords and being aware about telephone, email and text scams. ****Don’t click on suspicious links via email or text, and don’t provide personal or banking information to random callers over the phone. In case of an emergency, make sure you know how to contact customer service or use your mobile banking app to report your card as lost or stolen.

What to look for in an online bank account

No monthly fees: If you want to open an online chequing or savings account, many prominent online banks in Canada offer no-fee chequing accounts (or hybrid chequing/saving accounts) with no minimum account balance and unlimited self-serve transactions.

Higher interest rates: There is a benefit to DIY online banking – the overhead savings are passed on to the customer in the form of attractive interest rates on savings accounts. Compare the interest rate on savings accounts and see if what online banks offer are comparable to the interest rate you currently have. Make sure to read the fine print – some rates are promotional and may expire after a period of time.

Customer service: With no bricks-and-mortar locations, it’s important to know how you can contact your online bank if you have a question or need assistance from a real live human. All banks and credit unions offer customer service via telephone, email or live chat. Check out what customers are saying in reviews and on social media about wait times, responsiveness and customer satisfaction.

Free Interac e-Transfers: Interac e-Transfer is a popular way to send and receive money to and from anyone with a bank account and an email address or phone number. If you frequently need to send or receive money for things like splitting household expenses, paying rent or splitting the bill at dinner, check to see if the online bank offers free unlimited Interac e-Transfers.

Spending and saving with KOHO

If you’re looking for an online-only spending and savings account, another option is KOHO. KOHO isn’t a bank, but offers a no-fee spending and saving account that comes with a reloadable prepaid Mastercard. You can load money into your KOHO account by Interac e-Transfer from your regular bank account, through an existing Mastercard or Visa debit, or via direct deposit from your work paycheque.

KOHO draws from the money in your account, but the prepaid reloadable Mastercard gives you the spending power of a credit card and can be used anywhere Mastercard is accepted.

How you use KOHO is entirely up to you, whether you treat it as a secondary account for spending or use it as your main chequing account for your day-to-day banking transactions. You can open a personal account with KOHO and can sign up for direct deposit, make purchases and pay bills. KOHO’s budgeting app also offers real-time updates and spending insights. As with other financial institutions, your deposits with KOHO are insured by the CDIC up to $100,000.

You don’t have to switch all of your personal bank accounts, loans and investments to a virtual bank, but online chequing and savings accounts are good options for straightforward everyday banking transactions if you’re somewhat tech savvy and rarely need to visit a bank branch. Before signing up, compare the pros and cons, fees, customer service options and ATM access to find the right fit for your needs.