Did you know your money in your chequing account is losing in value every year? In Canada, inflation is about 2% every year. That means every year, the money in your chequing account is worth 2% less than the year before.
That’s why instead of holding your emergency fund in a chequing account you should use a high-interest savings account that is at LEAST 2% so that you aren’t losing money.
In this article, I break down the pros and cons of using one of of the best savings tool: the EQ Bank savings account, where you’ll learn if you should open up an account!
The parent company of EQ Bank is Equitable bank which was founded in 1970 and it’s the 9th largest independent bank in Canada. Equitable Bank, started EQ Bank in 2016 which provides solely online banking services. It’s similar to your online banks like Tangerine and Simplii but there are some key differences that I’ll get into later. Now let’s get into the PROS and CONS of EQ Bank and if you should open an account!
2% interest rate:
EQ Bank currently has a 2% interest rate which is quite high compared to the average rate of other banks are offering. Before it used to be more than 2%, but since COVID-19 and the recession we faced, they reduced it to 2%. None the less, having a 2% interest rate and having your money 100% secure is not a bad deal!
Money is Hard to Access:
The money in your emergency fund should only be used when you REALLY need it. For that reason EQ Bank’s high-interest savings account is perfect. EQ Bank doesn’t have any debt or credit cards, so you can’t use it to make your normal purchases. If you need to take out the money, you have to deposit it to your normal bank account. This acts as a little obstacle preventing you from digging into your emergency fund when you don’t need it.
No Transfer Fees:
Some banks might trick you with a savings account with a higher interest rate than 2%, but there’s a catch. In most cases, you need to pay each time you make a transaction or transfer money. With EQ Bank there are no hidden fees. Its totally free to transfer your money in and out of your account.
No bank cards:
As much as it is a benefit, having no bank cards can be a hassle. It takes about 2 to 3 business days for your money to transfer between your accounts. So hopefully if you know you have a big bill to pay, you have to be a bit proactive and transfer your money at least a few days before its due.
Can’t hold it in a TFSA:
So unlike other traditional banks you can’t hold your savings account in a TFSA. While this might sound horrible, it’s not that bad.
Example: Let’s say you have $10,000 in your EQ account at 2% interest, and for simplicity sake let’s assume a 30% tax rate. Every year you would get about $200 in interest, which would be taxed at 30% which is $60. So you’re losing just about $60 to taxes by not having your savings account in a TFSA. I mean you can probably spend $60 on like a small trip to the grocery store!
Also, although other traditional banks may let you hold your savings account in a TFSA, they likely have a much lower interest rate for 2%.
Overall I think EQ Bank is the perfect place to store your emergency fund for its high-interest rates and its lack of accessibility. Also the cons for the EQ’s saving account aren’t that significant. For these reasons, I tell all of my clients to open up a high-interest savings account with EQ Bank!
If you want to as well, use this link and you will get an extra $20.00 once you open your EQ Bank Account! 🙂