Let’s talk a little bit about choosing a bank. What should you look for when picking the best place to park your cash?
The following factors will probably weigh into your decision making process, at least a little:
- Proximity to physical branches
- Ability to get a loan at an attractive rate
- Overall fees
- Interest paid on savings accounts
- Attractiveness of front-line employees
That last point is especially important, and I just want y’all to know my bank has SEVERELY DROPPED THE BALL ON THIS. All the attractive ladies have been promoted to office duties. The ones that remain up front are still pleasant and effective, but they’re just not hot enough.
As we all know, Canada’s banking system is dominated by the so-called “big five”, five banks we’ve all heard of. Most of you reading this will have at least one account with them, and if you’re anything like me, you’ll have a credit card with one, a bank account with another, and a former mortgage with a third. There’s no escaping these guys.
Nor should there be. Despite the thousands of stories out there how some bank ABSOLUTELY SCREWED YOU, they all give about the same caliber of service. They’re all big enough the law of large numbers comes into play. They all revert to the mean because they’re just too big. There just aren’t enough outliers out there.
How to choose the best bank?
Okay, so if bank service, products, and fees fall to the lowest common denominator, how’s a guy supposed to choose the best bank?
There’s a simple answer. You don’t.
For the sake of our discussion, let’s separate Canada’s banks into two different categories. The first is full-service, and it includes all of the traditional banks, credit unions, and hybrid government owned FREAKS like Alberta’s ATB Financial. The other category is the online-only banks, like Tangerine, PC Financial, EQ Bank, and so on.
What’s the difference between any of the full-service banks? They offer similar bank accounts charging similar fees. They offer GICs with pretty anemic interest rates and credit cards with the same kind of bonuses. It’s all pretty much the same.
It’s the same thing with online-only banks. They all offer big interest rates to people who first sign up, dropping the rate to something much less exciting after the grace period. They all offer free cheques and transfers and whatnot too.
Sure, there are subtle differences between them. They just don’t really matter all that much. In short, they’re all pretty much the same. The difference between them isn’t worth analyzing.
Nelson’s choosing a bank strategy
So if banks are all interchangeable, how do you go about choosing one?
Well, there are a few different strategies, each with their own pros and cons.
The first is to chase promotions. If a bank is giving away a free toaster (or the 21st century equivalent, an iPad), you show up and get an account long enough to get some of that free scratch, baby. As soon as it’s possible, you hit the road and find the next offer.
There are a couple of downfalls to this strategy. The first is it’s kind of annoying to get new accounts all the time. You have to re-input all of your online bills and direct deposit info and all that other stuff every time you do the switch.
The second is you’ll need to live in a big place to really take advantage of it. My small town has about six banks if you count the credit union. I’d run out of sign-up bonuses in about a year.
The second strategy is to pick an online-only bank and stick with it. You’ll enjoy a decent rate on your savings and basically no bank fees.
But even though I have an account at Tangerine, I’ll still never switch to it for all my banking. About once every couple of months I need U.S. cash or a bank draft or something like that. An online-only bank can’t do these things very well, and often time is of the essence, especially when you’re a procrastinator like me.
Or, you can choose the Nelson ultimate lazy solution.
The Nelson ultimate lazy solution
I just said that. Who edits this thing, anyway?
Oh, right. Nobody.
So here’s the deal. Despite all the guides out there that explain which Canadian bank is the best, I don’t even try to hack my bank experience. I’m still with the same credit union I’ve been for the last 20 years. I even pay bank fees, which come to an average of $4 or $5 per month.
Here’s the deal. I don’t believe I’m getting a better deal by hopping from bank to bank. I don’t like the lack of features offered by the online-only banks. And I’m sure as hell not to bother jumping over to some bank just to get an iPad. I already have an iPad I barely use.
Once you believe banks are interchangeable, only one solution remains. You just don’t bother trying to game them. You pick one that meets your needs and just go with it. And since they’re all pretty much the same, I’d recommend not putting much thought into it at all.
You might not need a branch, since you never bother with drafts or foreign currency. Cool. Pick an online-only bank and go to town.
Another person might be heavy into real estate and want a close relationship with their banker. Okay, fine. Start finding some loan officer to kiss up.
And so on. It’s not that hard.
Look, no bank is going to make you rich. Avoiding bank fees as much as possible is a good thing, but ultimately, the difference between banks isn’t going to make a lick of difference for 99% of you. Remember that the next time you’re stressing between a 1.25% and 1.4% introductory offer, or between the $5 per month plan offered by bank A and the $4.99 plan offered by bank B.