EQ Bank Canada – the bank that offers the best saving rates

With EQ Bank Canada recently announcing that they are increasing their interest rates to 2.3% AND offering you and your referrals $25 each for opening an account, it’s probably a good time to do a review of EQ Bank and whether you should take advantage of their situation and offers.

Who is EQ Bank Canada

EQ Bank Canada (we’ll just call them EQ Bank) is owned by Equitable Bank, the 9th largest independent Schedule 1 bank. All that means is that Equatable Bank can offer all of the same products and services as your big 5 banks (who are also Schedule 1 banks).

But what Equitable Bank is most well known for is their mortgage products for recent immigrants and entrepreneurs. Because these individuals tend not to have as long or as stable of a history (as opposed to people who have been working for years and have shown steady income), the big 5 banks tend not to want to deal with them.

In order for Equitable Bank to offer these individuals these mortgages, they will need to lend out money. How do they get the money? By borrowing from you and me. That’s where EQ Bank comes in.

The purpose of EQ Bank is to raise money for them to be able to lend out. Because the interest rate on these mortgage loans are higher than the normal mortgage loans (4.64% for a 5 year fixed rate vs 2.64% that I got for my place), they are able to offer higher interest rates for their high interest savings account.

Why is EQ Bank increasing their rates

This is just speculation, but EQ Bank probably increased their interest rates because of what’s been happening to their rival – Home Capital Group. Home Capital Group is currently under allegations that they did not disclose a problem they had in 2014 early enough. Because of this allegation, many people have been taking out their deposits with Home Capital Group.

I won’t get into the details here, but banks do not hold all the money that gets left with them. They will typically lend out 50%+ of the money, and only hold a fraction of what was deposited to allow other people to withdraw. So if everyone wanted to get their money out of a bank all at once, they will not be able to deliver. This is what happened with Home Capital Group.

Because Home Capital Group was reporting that 90%+ of their deposits have been withdrawn, they had to take out a very expensive loan to meet the ability to allow their clients to withdraw their money. This quickly brought a lot of other speculations about the housing market crashing and banks failing started to make mainstream media. This is particularly true for Equitable Bank, who operates in a similar environment. Although they did not experience anything as crazy as Home Capital Group, they did report an increase in withdrawals.

Which finally brings us to why they probably increased their rates: they want to show society and their business partners that they are not going through any troubles like Home Capital Group. The best way to do that is to show that their clients still trust them and are depositing their money into EQ Bank Savings Plus Account.

EQ Bank Savings Plus Account

In order to raise the money to offer mortgages at a higher rate, banks can either offer clients chequing accounts, savings accounts, and / or guaranteed investment certificates (GICs). EQ bank offers the last two, but is most well known for their high-interest savings account (HISA) business. They call this the EQ Bank Savings Plus Account.

The best thing about EQ Bank’s Savings Plus Account (we’ll just call it EQ Bank’s HISA) is that they are as good as the 1 – 3 year GICs but you can take out your money or add in more money at any time. This means that EQ Bank HISA make a great place for your 1 – 3 year goals.

EQ Bank interest rate

Before we talk about their current rate, it’s worth a look as to their historical rates. EQ Bank actually opened in early January 2016. They made a big splash when they did by offering 3% on their HISA. At a time when HISA interest rates were hovering 1%, thousands of people jumped at the opportunity. So many that they actually reached their one-year goal in 3 months.

It was also around then (April 2016) that they dropped their HISA interest rate from 3% to 2.25%.

Then in mid-August (4 months after their first interest rate drop), EQ Bank once again lowered their HISA interest rates. This time it went from 2.25% to 2%.

Even though they did drop their rates, they were still the best alternative available. In fact, their rates were better than most 1-2 year GIC rates.

But due to some market unease (mentioned in the intro), EQ Bank has decided to increase their HISA interest rate to 2.3% in order to attract more people to leave their money in EQ Bank’s Saving Plus Account. I don’t know if this is going to be another temporary event or if this is going to last longer, but you might as well take advantage of the situation while you can. And if they ever drop their rates, and you have better options with another HISA account, switch it over (as EQ Bank has no fees for inactivity or for the closing of their Savings Plus Account)

EQ Bank benefits

No monthly fees

You can leave your account empty if you ever find a high interest savings account that is offering you more than EQ Bank. You can also put your money back with EQ Bank when they are offering the highest rates.

Unlimited day-to-day transactions

As per EQ Bank’s FAQ: The EQ Bank Savings Plus Account is more than just a savings or chequing account. The account comes with unlimited deposits, bill payments, Electronic Funds Transfers (EFTs) and Savings Goals.

No minimum balance required

This makes it a great way to just start saving what you can.

Five free Interac e-Transfers per month

The downside of EQ Bank is that they have no debit cards which means you cannot make any direct deposits or withdrawals to your account. However, they do allow you to transfer money from your EQ account to another chequing account with another bank, and allow you to withdraw the money that way. This still might take a few days to transfer.

The other option is to use one of your free Interac e-transfers to instantly give yourself the money.

Member of the Canadian Deposit Insurance Corporation (CDIC)

Read the next section as to what CIDC is and what that means for you.

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Is EQ Bank safe

EQ bank is a member of the Canadian Deposit Insurance Corporation. This means that if something were to ever happen to EQ Bank, you are guaranteed to get your money back (up to $100,000). This type of insurance is the same as your big 5 banks. All this means is that having your money at EQ Bank is as safe as it would be in the big 5. The only difference is that the big 5 banks will give you maybe 0.50% on your money.

Should you leave your money with EQ Bank

I would say that this is a great time to take advantage of EQ Bank’s current situation. With their HISA rates higher than most 1 – 3 year GICs, and being insured by CDIC, getting a guaranteed return of 2.3% is the best you can do. My suggestion (and what I am going to do) is to transfer all my savings into EQ Bank until I have access to higher interest rates. At that time, I will transfer out my money at EQ Bank and leave the account open until they once again, offer the best HISA rates.