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Healthy competition is making hybrid bank accounts better

Motive Financial, with its chart-topping 4.10% Savvy Savings Account and pending takeover by National Bank, has announced some chequing-like changes to its savings account:

• Unlimited transactions
• Free Interac e-Transfers
• No ATM fees from Motive Financial (although you might still get charged a fee by the ATM provider)

Motive Financial’s website no longer mentions its separate chequing account. This means it now offers a single, hybrid bank account that combines the convenience of a chequing account with the higher interest rate of a savings account.

If this sounds familiar, it might be because of the likes of EQ Bank and Wealthsimple, who recently improved their hybrid accounts as well.

EQ Bank’s interest rate of 4.00% if you configure direct deposit now matches Wealthsimple and no longer expires after 12 months. And Wealthsimple now reimburses fees by the ATM provider, matching a feature that EQ Bank pioneered.

Is a student account relevant for a university student?

Second-year university student Lena M has written an article reviewing her banking needs, and determined that none of her best options are labelled as student accounts. With the number of decent “standard” accounts out there, why bother with a student account that you’ll have to change after a few years? Her requirements include unlimited free transactions, a debit card, the ability to open multiple accounts, free ATM access, a good savings account interest rate, and more. That’s similar to the needs of many adults, student or not!

Lena then followed up with a comparison of bank account features which includes EQ Bank, Neo Financial, Simplii Financial, Tangerine Bank, and Wealthsimple.

Another rate cut but a surprising rate increase

The Bank of Canada made a second key interest rate drop in 2.5 months on July 24, spurring another round of corresponding decreases in savings account and GIC interest rates. Zoom out and we’re only back to where interest rates were at in May 2023, which was a high last seen 17 years ago.

We did a double take, though, when we saw Simplii Financial’s latest new customer promo, which actually got better. It now sits at 6.25% in a savings account for the first 5 months (above 5.90% from its previous iteration), which currently stands out among other promotions.

As a second-year college student, I’ve realized that managing my money can be a challenge. Over time, I’ve figured out what features are most important to me in a bank account. Defining my requirements is a key step, before I even look at what options exist.

I want to try to find an account that I get to keep even after I finish my studies. In fact, the concept of a “student bank account” is not so helpful to make. Some student bank accounts, like with TD, I can only keep until I’m 23; after that I’ll need to open another account that will most likely have monthly fees. I just want an account that meets my needs, now and in the future, whether or not it’s labelled as a “student account”.

Here’s what I’m looking for.

No monthly fees

As a student with limited income, minimizing unnecessary expenses is vital. I always look for accounts with no monthly fees or very low fees. This is important because I don’t want to be charged just for having an account, especially when I’m trying to save as much as possible for other essentials.

Some banks waive these fees if certain conditions are met, such as maintaining a minimum balance. However, I’d rather have an account that does not have a monthly fee even if I only have a few dollars in the account.

Unlimited transactions

A lot of banks limit how many free transactions you can make with their student accounts each month. Take RBC, for example — they only allow 25 free debits a month, including both in-person and online purchases. This might not be a big deal for younger students who don’t spend much, but it can be a hassle for college students.

As a college student, some months I make more than 25 transactions because I pay for transportation, get textbooks, and cover other daily expenses. These day-to-day transactions include debit card transactions, Interac e-Transfers, online bill payments, and more. I might make several small purchases, even within the same day. For example, I might grab coffee or snacks between classes, buy supplies for school projects, and occasionally treat myself to a meal out with friends. These small transactions can surpass 25 in a month quite quickly. Having an unlimited number of free transactions ensures that I don’t have to worry about counting each transaction in order to avoid fees.

If there is a transaction limit, one of the workarounds is to withdraw a large amount of cash just to avoid bank transactions. This is inconvenient as well as unsafe.

Access to ATMs

Access to a network of ATMs is important to avoid withdrawal fees. An important consideration is whether the bank has a large network of ATMs near my home, campus, and other frequently visited locations. Some banks also partner with other ATM networks to provide fee-free withdrawals. This feature is important because as a busy student, I often need quick and easy access to cash. The last thing I want is to be stuck in a situation where I can’t find a nearby ATM and have to pay extra fees just to get cash.

Online and mobile banking

I need comprehensive online and mobile banking options. This allows me to check my balance, transfer money, pay bills, and deposit cheques conveniently from my phone or computer. I rely heavily on the budgeting tools that are offered on some of the mobile banking apps, as they help me manage my finances and keep track of my spending habits. With a busy college schedule, the convenience of handling my banking online is a must. I need to be able to monitor my account in real-time, set up alerts for low balances, and manage my finances without having to visit a physical bank branch.

For example, during exam periods, I barely have time to leave the library, let alone visit a bank branch. Online banking enables me to quickly transfer money to friends for shared expenses or check my account balance between study sessions. Additionally, mobile cheque deposits save me trips to the bank. The ability to handle these tasks online saves me time and stress, allowing me to focus more on my studies.

Chequing, savings, or both

Another thing I look for in a bank account is being able to have two separate bank accounts – traditionally, this means having a separate chequing and savings account. This helps with budgeting. By not having quick access to my savings, it forces me to be conscious about moving money to my chequing account, and also gives me peace of mind in case my debit card is compromised.

I have seen some accounts that are a bit of a hybrid, where you only need one account. This could be viewed as a convenience. However, for now I prefer having two accounts. Therefore, even if I had a so-called hybrid account, I would want the ability to have multiple accounts in order to separate my day-to-day spending from the rest of my money.

Nice-to-haves

Interest rate

I haven’t mentioned interest rate yet. For sure, higher interest is better, and this should become more important over time as I save more money.

Rewards

Some banks offer rewards or incentives for opening an account. This could include cash bonuses, higher interest rates on savings (for a short period), or discounts on certain services. While these shouldn’t be the only factor in my decision, it can be a nice added benefit. For instance, a cash bonus for opening an account can provide an extra financial boost, and discounts on services like movie tickets or dining can help me save money while enjoying college life. Additionally, some banks offer reward programs where I can earn points for every transaction, which can be redeemed for gift cards, travel, or other perks. These extras not only make banking more rewarding but also help me maximize the value I get from my account.

Writing cheques

I have never written a cheque in my life, although I would bet the need will arise at some point. (Or maybe we’ll all look back and laugh at those people who needed to write cheques!) Whether I can get a first cheque book for free or not is not a major decision point for me.

Branch access

My needs don’t require a physical bank branch at the moment. I can foresee some major financial milestones requiring branch access, such as needing a money order for a down payment. However, over time, more and more of these needs can be done online. I am comfortable assessing such needs when I get there.

So… which bank should I choose?

When it comes to choosing a student bank account, it’s really important to think about what I need for my spending habits and financial goals. For me, having unlimited free transactions is a must since I often go over the limits set by some banks. Plus, easy access to ATMs and great online banking are super important.

After doing some research, I am debating between EQ Bank, Neo Financial, Simplii Financial, Tangerine Bank, and Wealthsimple. They all come with no monthly fees, a decent network of ATMs in Canada, and would be suitable for me now as a student and after I graduate. Though these are all online banks, I can still have full access to my accounts, withdraw or deposit money into my account, and access most of the features that the big banks offer. Over time, I anticipate having a relationship with multiple banks in order to access some features that I might only rarely need.

Last month, we asked readers how they feel about interest rates heading back down. 70% of respondents don’t like it, which is unsurprising, since this is a newsletter called the Savers Roundup!

The fallout from last month’s key interest rate cut has continued, with GIC and savings account interest rates continuing to drop. Ontario-only Saven Financial decreased its savings account interest rate from 4.20% to 4.05%; Wealth One Bank of Canada’s drop was from 4.00% to 3.50%. This has left Motive Financial at the top of our comparison chart at 4.10%. Neo Financial and Wealthsimple rank behind Saven Financial at 4.00%.

Will Motive Financial be affected by its new parent company?

The 6th largest bank in Canada (National Bank of Canada) is buying the 8th largest bank in Canada (Canadian Western Bank). Of particular interest (no pun intended) to savers is what will happen to Motive Financial (with the aforementioned market-leading savings account interest rate), which is owned by Canadian Western Bank. In the short term, we have received some good news, as Motive Financial’s Savvy Savings account has added some features typically reserved for chequing accounts: unlimited transactions, free Interac e-Transfers, and free withdrawals at any ATM in Canada. This makes it more similar to hybrid accounts like EQ Bank’s Personal Account and Wealthsimple’s Cash account.

Good news for Hubert Financial’s 1-year quarterly GIC

Most of the forum discussion since Hubert Financial joined Access Credit Union last year has been negative. But Hubert Financial’s popular 1-year quarterly GIC recently increased its rates (with a larger difference than before between each quarter’s rate), which is especially notable since GIC rates have been trending downward elsewhere. The simple average for this GIC is now 5.25%, or 5.35% when compounding is taken into consideration. This would easily top our GIC comparison chart, including Hubert’s own standard 1-year GIC at 4.90%. For those who are unfamiliar with the 1-year quarterly GIC, it offers a different rate every 3 months, and is cashable after each 3-month period. Its current rates are as follows:

• First 3 months: 4.50%
• Months 4 to 6: 5.00%
• Months 7 to 9: 5.50%
• Last 3 months: 6.00%

Quick hits

• Current promotions include a 5.50% 6-month GIC from DUCA Credit Union (Ontario only) and a 5.50% 120-day non-registered GIC from Motive Financial (new deposits only).
• Neo Financial no longer supports American Express bill payments through their bill payment feature

Canada’s first key interest rate cut in over 4 years – a time period that included 475 basis points of increases in 2022 and 2023 – has arrived. The Bank of Canada decreased its key interest rate on Wednesday, June 5 from 5.00% to 4.75%. It was the first central bank in the G7 to cut its rates this year, although Sweden and Switzerland made their first cuts a few months prior. The Central Bank of Europe made a similar interest rate cut the day after Canada’s.

Canada also led the US in making the first few interest rate increases in the previous cycle back in 2022, although in total the US had gone 50 basis points higher (for a total of 525 vs 475 basis points) and made one additional rate increase than Canada.

Reaction was swift in terms of rate drops for some GIC rates and brokerage investment savings accounts. GIC rates had already peaked in November and December, and we’re likely to see further decreases.

We’re also likely to see some savings account rate drops soon as well. Motive Financial had led our chart nationally at 4.10% since April 2023 (even though the Bank of Canada raised its key interest rate two more times after that). Saven Financial has led in Ontario since January 2024; its rate now sits at 4.20%.

The limit to your savings account love

In our reader poll last month, we discovered that almost 75% of respondents have at least 3 savings accounts. There are plenty of reasons to have multiple savings accounts, and we’ll just quote some of the answers here:

• “I can move funds from lowest to highest rates as promotions appear.”
• “I use various savings accounts for various savings goals, sort of like the envelope budgeting system”
• “You need more than one to get offers… they need ‘new money’ so you just transfer in and out to get offers.”
• “I have 7 savings accounts. Only a few dollars in each, except the one offering the highest rate at any given time.”

You’re doing pretty good if you have one of the savings accounts on our chart. Consider, however:

• EQ Bank offers 4.00% if you have recurring direct deposit to their account as well as up to 5.00% in their new Notice Savings Account (see the next section!)
• Laurentian Bank offers 4.00% if you have between $100K and $5M in deposits
• Wealthsimple offers 4.50% (if you have over $100K in assets with them) or even 5.00% (if you have over $500K in assets with them)
• Koho offers 5.00% if you have: recurring direct deposit to their account; or at least $1,000 in deposits every month; or if you pay them $4 per month
• Simplii Financial is offering 5.90% for 5 months for new customers and has a targeted new deposit promo for existing customers
• Tangerine Bank is offering 6.00% for 5 months for new customers and appears to have a new batch of targeted new deposit promos for existing customers every month
• There are always some other savings account promos on our promotions page

Thus, it’s no wonder that multiple savings accounts factor into the personal finance strategy of so many Canadians.

Higher rates if you can wait to access your money

Would you take a higher savings account interest rate if you had to give some notice before withdrawing your money? That’s the premise of EQ Bank’s new Notice Savings Account. It gives you 5.00% if you provide 30 days of notice, and 4.50% if you provide 10 days of notice.

This is not an entirely new concept, as Canadian Western Bank offers something similar, although with lower rates and longer notice periods. This seems to combine some features of a cashable GIC with some of the general flexibility inherent to a savings account.