3 Reasons It's Finally Time to Switch Banks

When it comes to financial institutions, many Canadians feel tremendous loyalty toward familiar brands. But banking habits may be slowly changing.

Seventy-seven percent of Canadians use digital channels like online banking (47%) or a mobile app (30%) to conduct their everyday transactions, according to a 2024 survey commissioned by the Canadian Banking Association.

Likewise, the banking landscape has been shifting over the past decade. A growing number of smaller, often online banks are emerging — and offering compelling products and rates.

As uncomfortable as it might feel to think about switching, some of these lesser-known banks might be a better fit with your evolving financial goals — or the way you bank.

Here are a few situations where it makes sense to consider a non-traditional bank.

1. You already do most of your banking online

Thirty-seven percent of Canadians think they will stop in-person banking over the next five years, according to the CBA survey.

If you can’t remember the last time you were inside a branch, it may be a cue to consider a financial institution that has also ditched brick-and-mortar locations in favour of a digital approach.

Many new banks are branchless — they don’t have a physical location you can visit. Without branches to staff and maintain, these banks often pass their cost savings on to customers in the form of lower fees and more competitive interest rates.

Nerdy Tip: If you enjoy meeting with an advisor in person, or regularly need things like bank drafts, certified cheques or money orders, an online bank may not be the best fit. But if you haven’t visited a bank branch in years, and are comfortable with web chat-based or phone assistance, switching to an online-only bank may yield lower costs and higher earnings.

2. You’re tired of paying high fees

Many Canadians pay bank service fees of up to $15 a month, according to research by the Canadian Bankers Association. Find yourself nodding? It’s time to take stock of your banking habits. Check if you still need that account you chose years ago for features and services you no longer use. These may include branch banking or safety deposit box services.

Alternative or online banks routinely offer no-fee chequing accounts as a standard option. With online banks, you’ll not only get to keep more of your money, but are freed up to open multiple accounts that can be used for different savings or spending needs.

3. You want to earn more interest

If you’re looking to park your savings in an account that pays a decent rate of interest, unfamiliar banks may be worth a look. Because they have fewer costs than traditional banks, the savings accounts and guaranteed investment certificates offered by online-only institutions often offer better rates.

Larger banks may offer higher interest rates for promotional periods but after the promotional period ends, your balance will be subject to the regular interest rate, which is often substantially lower.

How to compare and vet lesser-known banks

If you’re considering a new bank, ask yourself these questions before committing to an account or purchasing a financial product.

Is the bank CDIC-insured? Check whether the institution is a member of the Canada Deposit Insurance Corporation (CDIC), which would ensure that eligible deposits are insured up to $100,000 per insured category. While some fintech or neobanks may not themselves be insured by the CDIC, many are owned by or affiliated with CDIC-insured banks, so deposits are eligible for coverage.
What are the fees? With no physical branches or ATMs of their own, some online banks charge fees for withdrawing or depositing cash using ATMs. Others have partnerships with larger banks to offer customers access to certain ATMs free of charge, or offer to reimburse ATM fees. While online bank accounts may not charge monthly fees, make sure that services like debit transactions or e-transfers don’t cost you extra.
What products are available? Product offerings vary by bank. Explore the products and services the bank offers to ensure the range meets your needs. Does it have chequing and savings accounts? Investment offerings? Mortgages or other types of loans?
How do the rates compare to similar options? For savings accounts, GICs and high-interest savings products, compare the promotional and regular rates offered by online banks to those at your current financial institution to find an option that works with your time horizon and goals.

About the Authors

Siddhi Bagwe

Siddhi Bagwe is a content management specialist at NerdWallet Canada. Treating content marketing as an educational medium for readers, Siddhi believes in empowering them with the knowledge of personal finance…

Helen Burnett-Nichols

Helen Burnett-Nichols is a freelance writer specializing in news and feature articles on a variety of business, legal and investment topics. Her work has appeared in publications such as The…