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Royal Bank of Canada has a special rate of up to 2 per cent on its High Interest eSavings Account right now. The convoluted terms and conditions of this offer can help explain why money has been flying into EQ Bank, an online upstart competitor to RBC and the other big banks.

EQ Bank launched in early 2016 and a year ago was sitting on assets of about $2.7-billion. In February, EQ hit $5-billion. “It’s pretty remarkable,” Mahima Poddar, head of personal banking at EQ parent Equitable Bank , said in an interview this week. “During the pandemic, we crossed $3-billion, $4-billion and now $5-billion in assets.”

What’s happening at EQ is worth a look because it tells us a lot about the state of alternative banking today. Customers are more open to moving their money than ever before.

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EQ offers 1.5 per cent for regular accounts and 2.3 per cent for tax-free savings accounts and registered retirement savings plans. RBC’s regular rate on its eSavings account is 0.05 per cent and its offer of bonus interest is a model of confusing, unhelpful marketing.

If you check out RBC’s online promo for eSavings, skip down to the dense, 351-word footnote that makes reference to calculations involving a regular rate of interest, an initial bonus interest rate and subsequent bonus rate. You also need to open a registered account – TFSA or RRSP – to get a temporary 2-per-cent rate.

EQ’s regular savings account rate isn’t quite the highest out there, but the RRSP and TFSA rates are exceptional and, thus, very likely to be pared back. At a time when the pandemic is driving elevated savings rates for households where jobs and incomes have held steady, offering higher rates than the big banks is resonating with people like never before. The number of people banking at EQ has risen to more than 185,000 from approximately 102,200 a year ago, and new account sign-ups are about 150 per cent higher than they were before the pandemic began.

EQ came into the pandemic with a rate of 2.45 per cent on its regular savings account and then slashed rates to 2 per cent, 1.7 per cent and finally to the current level of 1.5 per cent. You may have heard about rising rates in the bond market, which are putting upward pressure on the cost of fixed-rate mortgages. Savers should know that the rates they get on their money are unaffected by this trend, and that makes rate increases on savings account very unlikely.

In fact, the rates that guide savings account returns remain stuck in the basement. A 12-month Bank of Canada treasury bill has a rate of around 0.2 per cent these days, which tells you that EQ and other alternative banks are offering premium rates that are way beyond what’s happening in financial markets.

“Right now, we are very much invested in trying to keep the rate,” Ms. Poddar said. “But there are realities in terms of how long this can go on if the market doesn’t catch up with us.”

EQ’s boom in new business reinforces a lesson being learned in the investment industry: Even digital financial players need a well-run call centre. Snappy apps and websites aren’t enough.

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Online brokerage clients have reported waits measured in hours to get through to live representatives. Ms. Poddar said the average wait at EQ was, at worst, 10 to 20 minutes, with maximum waits of an hour. Staff at the bank’s call centre has grown by 250 per cent since the beginning of last year.

“When you’re digital, the call centre is even more critically important because it’s your only real touch point,” Ms. Poddar said. “It’s almost like a moment of truth for clients – this is their only person-to-person engagement with the bank. We better be there, we better have the answers.”

Coming upgrades from EQ Bank include U.S. dollar accounts with competitive rates for both interest paid and changing Canadian dollars into U.S. currency. What you won’t see: temporary offers with 351-word footnotes.

Stay informed about your money. We have a newsletter from personal finance columnist Rob Carrick. Sign up today.

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