Like a majority of people out there, I still have a physical bank, one I can go and visit. As I’ve learned more about personal finance, I’ve come to realize that maybe a physical bank isn’t worth it anymore. Between the high fees and the low interest rates, I’ve decided to switch to Tangerine, a mostly online only bank. Let’s talk about the pros and cons and moving from a physical bank to a virtual one.
If you are looking for a guide on how to actually switch from your current bank to Tangerine, check out my 2 part guide:
- Step-by-step: How to switch to Tangerine (Part 1) – Preparing to switch and becoming a client
- Step-by-step: How to switch to Tangerine (Part 2) – Opening a chequing account, switching automatic payments and finalizing
What I currently use my bank for
I’ve banked with TD Bank for many years. It is ingrained in my life – I get paid into it, my bills automatically come out of it, I’ve got investments, and I’ve got savings. Every important financial transaction in my life goes through this bank. So why do I want to leave?
Why I need to change
There are quite a few reasons that I’ve decided that TD Bank doesn’t fit my needs anymore:
1. Account costs.
My chequing account costs me $3.95 a month and essentially provides me nothing. I have a Minimum chequing account that provides me 12 transactions a month. I use my credit card for almost all of my purchases and never use my debit card. So I’m essentially paying for nothing.
2. Wasted investment opportunities
I keep $2,000 in my bank account to waive the $3.95 account fee. I’ve written before about the return of keeping a minimum balance to waive bank fees. If you need to have an account that has fees, than using the minimum balance to waive the fee is usually worth it. But if I have no fees at all, I can instead put that $2,000 into an account that will actually make a bit of money in interest of sitting in a chequing account gathering dust.
3. Laughable interest rates
I don’t know how a bank can call 0.5% interest a ‘High Interest Savings Account’, but that is exactly what TD Bank does. TD offers no viable way to save your money short term without it losing grounds to inflation.
4. Being constantly upsold
As nice as the people at the bank are to me, they unfortunately don’t hold my best interest in heart. They try to push me into investments that make them money instead of me (actively managed funds). They try to sign me up for credit cards that have yearly fees and less perks than my current credit card. They signed me up for an expensive Line of Credit that at the time, in my naivety, I didn’t realize how bad it was. Unfortunately, I just don’t trust them anymore.
What if I need to visit a bank in person?
At first when I thought about switching to an online bank, I thought “how can I bank if I can’t physically go and take out and deposit money?”. Then I asked myself “how many times have I been in my bank and talked to a teller in the last year?”
The answer: 3 times!
- Once to deposit foreign currency
- Once to deposit some rolled coins
- Once to deposit a crumpled up bill that the bank machine didn’t like.
That was it! Other than that, I do all my banking online or at a bank machine. And these are all simple transactions that I can find an alternative to outside of having a physical bank.
How good is the alternative?
After doing a bit of research, Tangerine seems to be the way to go if you want to bank online. Specifically, it provides a solution to the 4 issues mentioned above:
1. Account costs.
Tangerine provides a no fee chequing account, with 50 free cheques, and access to banking at all ScotiaBank ATM’s. You even earn a small amount of interest in your no fee chequing account – it’s only 0.15%, but that’s better than the 0.00% that TD earns you in their chequing account.
2. No wasted investment opportunities.
Now that I don’t have to leave $2000 in my chequing account to waive the monthly fees, I can instead invest this money, short of long term. It’s not a lot, but at 2% interest over a year, that $2,000 will earn $40 interest – FOR FREE!
3. Good interest rates (if only for the short term)
Signing up for a chequing and savings account as a new customer with Tangerine will often get you a tax free savings account (or unregistered savings account) with an interest rate of north of 2% for a few months months! 2% (or higher) is amazing compared to TD’s 0.5%. Unfortunately this will only last for 6 months, at which point I can look for an alternative high interest solution (or negotiate with Tangerine to continue the higher rate).
4. Being constantly upsold
I’ll have to see on this one. I’m not sure if phone calls will come, but from having already reviewed Tangerine’s products, I feel like many of them are a better deal then what TD offers (I already use the Tangerine Credit Card) so I feel more comfortable being talked to about them.
5. Sign up bonuses
By using a referral Orange Key, I was able to get a bonus of $50 when I made my initial deposit – and the person who referred me got the same.
6. BONUS: an extra percent on certain credit card purchases
As I mentioned, I currently have a no fee credit card that provides me with 2% cash back on 2 spending categories, and 0.5% on all other purchases. When you have a savings account with Tangerine, they will give you 1 additional category to earn 2% cash back on. It doesn’t amount to a lot of money, but again – FREE MONEY!
What about my investments
The one thing that I still really like about TD Bank? The TD e-Series index investment funds! I’ve talked about these many times before and I would still recommend them. The TD e-Series funds still provide lower MER fee’s than the Tangerine index fund equivalent.
Can I continue to invest with TD e-Series funds after switching?
Yes! If investing through a TD Mutual Fund, you can talk to TD Bank and get them to take payments directly from your new Tangerine account. If investing through a TD Direct Investment account, you can set your investment account as a bill payment, and transfer money to it that way.
Time to switch to Tangerine
After looking at all of this information, it becomes pretty clear: the time to change banks is now! I can find no real downside to moving to an online bank. The thing that might scare people away is the actual process of switching banks. How can you do this easily and seamlessly? Check back soon for guides on how to open new accounts with Tangerine, and how to switch over all of your banking painlessly.