The search for an inflation-beating return on savings knows no age limit, which is why one of the new online clients of Toronto-based Equitable Bank is 100 years old.
After 10 years of steadily declining rates — rewarding borrowers at the expense of savers — the hunt is on at all ages and stages for anything that keeps you ahead of the game.
Your bank may offer 0.5 per cent on a savings account that’s oddly named “bonus” or “premium”. Money-market funds appear to be a bit better, but subtract their fees and you’re also losing after inflation.
The discount banking space is a better bet. That’s where Equitable’s EQ Bank is the newest online-only entry, joining full-service players such as Tangerine and PC Financial.
EQ’s 3 per cent rate on a savings account is much better than the 0.8 per cent you’d get from a comparable one at Tangerine and PC Financial (which still offer better interest rates than you’d get from a major bank).
The discounters can offer a better rate because all their banking is done online from a desktop, tablet or phone. There is no branch network to maintain, no tellers and, in Equitable’s case, no access to cash machines.
ING Direct pioneered the discount space in Canada almost 20 years ago. It was acquired by the Bank of Nova Scotia in 2012 and renamed Tangerine. Loblaws has the PC Financial brand, which uses CIBC infrastructure.
Equitable is not a household name, but it has been around since 1970. It is one of nine Canadian banks listed on the Toronto Stock Exchange, and has 500 employees and $14.4 billion assets under administration. It is best known for commercial real estate lending and higher-risk consumer mortgages.
But after two and half years of planning, it is after new customers. It’s branching out, so to speak. It has a modest goal of 10,000 new accounts this year. By contrast, Tangerine has 2 million customers.
For now, EQ is not offering any products other than its savings account. You can pay all your bills for free; you can also make e-Transfer from the account, five of which are free each month. Thereafter, each costs $1.50. There are no other fees. Accounts are covered by the usual Canadian Deposit Insurance Corp. rules.
There is a clear explanation of rates and fees on Equitable’s web site.
Equitable assumes that you also bank elsewhere. To get cash from an EQ account, you’ll have to transfer money to your main bank and go from there. For anyone with basic online skills, the steps are easy — ask that 100-year-old client.
Tangerine and PC Financial also offer low, or no, fees, but also have a far wider range of services, including credit and debit cards, lines of credit and Tax-Free Savings Accounts.
So how long might Equitable’s too-good-to-be-true interest offer last? CEO Andrew Moor admits the rate will eventually drop, but maintains that won’t happen anytime soon. It’s a loss leader being paid by from other parts of the bank, and should certainly stick around until Equitable hits its 10,000-customer target, which Moor expects will take the better part of a year.
Contrary to popular myth, the offer is not just about building a younger audience. “It’s anyone who’s confident using a computer,” Moor says. “It’s more about lifestyle than age. My father watches opera on his iPad.”
Tangerine CEO Peter Aceto is watching the new competition with interest, but says he’s not particularly worried.
“Yes, they are offering a high rate today,” he says. “There are always competitive offers where someone has a higher rate for some period of time. But Tangerine has been bringing great rates and low or no fees to Canadians for 19 years.”
That’s true, and Tangerine also offers a lot more. But anything that drives down the cost of banking and increases your return is a good thing. So if you’re shopping around in this space, you might want to put EQ Bank on your list.