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opinion

The big banks pay virtually zero on savings accounts these days, but a bunch of them are literally giving out cash to new customers.

Bank of Montreal, Bank of Nova Scotia and Toronto-Dominion Bank have for a few months been offering $300 to people who sign up for unlimited-transaction chequing accounts, and online bank Simplii Financial is offering $200. Royal Bank of Canada has gone a different route in offering a 10.2-inch iPad, while online bank Tangerine is offering people who open savings and chequing accounts 2.1-per-cent interest on savings for five months and $150 in cash.

To qualify for these offers, you have to commit to your new chequing account by doing things such as setting up a recurring direct deposit (your paycheque, for example), make bill payments and/or set up a preauthorized debit, such as a utility bill. Therein lies a lesson in the economics of banking. It’s worth spending $300 to acquire a customer who pays $15 to $30 in monthly account fees and might also get a mortgage, set up a line of credit, buy mutual funds and, well, you get the idea.

A bunch of online banks offer no-fee chequing, of course. But a recent ranking of 25 bank websites and mobile apps by a company called Surviscor found that the best online banking experience comes from big banks.

My take from dealing with at least half a dozen big and small banks is that alternative banks win for chequing accounts on a cost-benefit basis, and they pay better rates on savings. But if digital banking doesn’t come easy to you, then the big banks will have to do.

If you’re in this latter group and looking at changing banks, consider those cash offers. There’s only a bit of time left in the TD offer – it expires Dec. 6. The other offers end later this month or in early 2021. Canadian Imperial Bank of Commerce’s $300 deal expired last month, but it still has an offer of no fees for up to 12 months and a $100 Amazon gift card if you open a CIBC Smart Account.

BMO’s offer is typical of this type of promotion. You get $300 for opening a Performance Plan, costing $15.95 for unlimited transactions, or for a Premium Plan with a $30-a-month cost. An additional $50 bonus is available for the premium and performance plans if you create a family bundle, where a family member gets a no-fee account attached to your regularly priced account.

Qualifying for the money requires that you do at least two of the following: set up a recurring deposit of your paycheque, a government benefit or pension; make a bill payment; and set up a preauthorized debit. To prevent people from grabbing the cash and closing the account, BMO requires that each type of transaction be done twice by the end of February.

If you pay $15 a month for a chequing account, you’re basically getting 20 months of free banking through a $300 cash offer. For long-term free chequing, consider the likes of:

  • Tangerine: owned by Scotiabank and the best of online banks in the Surviscor survey, ranked at No. 9.
  • Simplii: owned by CIBC and 11th ranked by Surviscor.
  • motusbank: a newish entry into online banking that tied for 12th spot.
  • Coast Capital Savings: a B.C. credit union that scored seventh spot.

A strategy for getting even more value from a big bank chequing account is to take advantage where possible of a feature that waives monthly fees if you keep a minimum balance. You can lose the $30.95 monthly fee on Scotiabank’s Ultimate Package by keeping at least $5,000 in your account, and the $15.95 monthly fee on the Preferred Package with a minimum balance of $4,000. Both these accounts are part of the bank’s $300 welcome bonus offer. The significant financial benefit of keeping a minimum balance in a chequing account to get a fee waiver was covered in a column you can read online at tgam.ca/Carrick-bigbalance.

Avoiding fees and extracting welcome bonus money take added importance at a time when banks have been ruthless in slashing interest paid on savings accounts and term deposits. On Cannex.com, big bank savings account rates are listed at 0.05 per cent, which is to say pretty much nothing. A $300 welcome bonus on a new chequing account is a windfall by comparison.


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