Online vs Traditional Banks in Canada: Which is best?

Online banking in Canada is quite popular, with 87% of surveyed Canadians in 2024 saying they “have banked online in the last year.” But accessing your online banking is different than using an online bank. Logging into your account through a mobile application or web browser means you’re using a digital tool. Using an online bank, on the other hand, means your financial institution operates primarily online, without physical branches.

The traditional banks in Canada offer strong digital platforms. Yet they are still branch-based banks. Meanwhile, digital-first institutions focus on lower fees, simplified products, and app-based service. For consumers, choosing between the two means deciding which structure fits your needs.

What Are Online Banks?

In Canada, online banks are financial institutions that operate mainly through digital channels. Instead of maintaining a full branch network, they deliver services through mobile apps, websites, and customer support centers. One benefit of this structure is that it reduces overhead costs and allows the institution to lower its fees or provide higher savings rates to its customers.

Most online banks in Canada are CDIC member institutions, but some fintech platforms and certain institutions may offer coverage through partner banks or provincial deposit insurance. Always confirm coverage directly. For more details on how to do so, visit Finly’s guide to CDIC insurance.

Examples of online banks in Canada include EQ Bank, Simplii Financial, Tangerine Bank, and Alterna Bank.

What Are Traditional Banks?

Traditional banks in Canada operate through physical branch networks while also offering digital tools. These institutions typically provide full-service financial products, including mortgages, investment accounts, business banking, and in-person branch support. The biggest banks in Canada fall under the traditional banking structure.

Side-by-Side Comparison

Choosing Between an Online Bank and a Traditional Bank

Making the choice about which bank to use means considering your personal banking habits. How you spend (and save) day-to-day will have an impact on which banking setup is best for you. Your level of comfort with digital money management will also come into play.

Online Banks Are Best For?

Selecting an online bank tends to work well for Canadians who:  

• Want low or no monthly account fees
• Prioritize a greater savings interest rate on their emergency fund, short-term savings goals or secondary accounts
• Are comfortable managing money through their phone or computer
• Rarely deposit cash or make frequent withdrawals
• Prefer streamlined banking products
• Manage their finances remotely

Traditional Banks Are Best For?

Using a traditional banking setup may be better suited for those who:

• Value in-person service and financial advice
• Require complex financial products
• Use certified cheques or safety deposit boxes
• Want bundled services with their mortgage, investments, and credit products all under one institution.

Questions to Ask Before Switching Between Online and Traditional Banks

Before opening a new account at either an online bank or a traditional institution, take the time to compare more than just the headline interest rate. Examine how the account will function in your everyday life. Ask yourself the following questions:

• What is the monthly fee on this account? Is it possible to waive that fee?
• Is there a minimum balance requirement?
• How easy is it to move money between accounts?
• Can I avoid ATM fees with this account?
• Does the bank offer other products I may need in the future?
• Is customer service support available at the times when you will typically need it?

By doing a complete comparison between the two types of banks, you can ensure you make a choice based on long-term value rather than simply a short-term promotion.

The Hybrid Approach

Many Canadians don’t just choose an online bank or a traditional bank. Often, they use both to get the “best of both worlds.” Combining the two allows you to experience the advantages of online banks and traditional institutions while minimizing their drawbacks.

Let’s look at how this could work. Imagine that you keep your everyday chequing account with a traditional bank as you find it beneficial to have access to in-person service, certified cheques and branch support for your investment products. At the same time, you may decide that opening a savings account with an online bank can help you earn a more competitive interest rate. In practice, you can use both. Your traditional bank relationship works well for payroll deposits, bill payments, and complex investment products, while the online one can store your emergency fund and your savings for upcoming travel plans. Then, when you need, you can transfer money from one bank to another.

This structure allows you to maintain both convenience and access while reducing fees and maximizing your interest rate. Instead of committing entirely to one, you can build a system that supports your preferred money management style.

Takeaway

There is no universal “best” option when it comes to banking in Canada. The decision between an online and a traditional bank is one that depends on how you choose to manage your money, what services you use the most, and how comfortable you are with digital banking.

Online banks often win on fees and savings rates. Yet traditional banks offer a broader range of services and in-person support. This is why many Canadians choose to combine the two and work with both types of banks. With this in mind, we encourage you to ignore the marketing hype and focus on your day-to-day financial needs. Which type of bank will deliver the most value to you?