No Fee Banking Tangerine vs PC Financial

By: GenXinvestor

Welcome to my post on no fee banking Tangerine vs PC Financial.  I want to say upfront that I think both banks offer a lot of value and that I use both of them for my banking.  I’m a huge fan of no fee banking because I don’t believe in the insane practice of paying fees to access my own money!  While a growing number of competitors are entering the no fee banking space, there’s no question that, in Canada, the 2 dominant players are Tangerine (formerly ING Direct) and PC Financial. In this post I compare the two.

General Information About Tangerine and PC Financial

Both banks are similar in that each is affiliated with one of Canada’s Big 5 banks.  Tangerine Bank was created when Scotiabank bought ING Direct Canada in 2012.  PC Financial has been around for well over a decade and while it was created by Loblaw’s, the personal banking is handled by CIBC’s direct banking division.

What I like about Tangerine is the $50 sign-up bonus and the referrer program.  If you’d like to open one, then visit the Tangerine website and remember to use the Orange Key More25 to get $50 in free bonus cash just for opening up an account!

In contrast, PC Financial doesn’t offer either of those perks.  PC Financial used to be good for getting “PC points” toward groceries, but not anymore.  At one time, customers could accumulate points for things like online bill payments, setting up direct deposits and the like.  However, they no longer offer those benefits.

Comparing Banking Services

No Fee Banking Tangerine vs PC FinancialFirst off, I have to say that both banks offer a full menu of banking services – everything from chequing and savings accounts to mortgages, credit cards and investments.  One point to note is that all banking is done online or over the phone.  So if you’re someone who needs handle banking face-to-face with a bank teller then neither of these banks would be a good fit for you.

Most people shy away from these banks because they think that it will be hard to access their money.  I haven’t really had that problem though because I handle virtually all my finances online.  Also, if need be, I can transfer my money from Tangerine or PC Financial to another, full service, banking institution.  And of course you can access your money at automated banking machines.  For PC Financial, there are bank machines inside Loblaw’s stores or you can use CIBC bank machines.  Tangerine customers can use bank machines through the Scotiabank network.

Bank Account Offerings at Tangerine and PC Financial

Both banks offer savings and chequing accounts with similar interest rates.  For example, both banks pay 0.80% on balances for savings accounts and for chequing, Tangerine pays 0.25% while PC Financial pays 0.05%.

Other Accounts: RRSPs, TFSAs and RESPs

Both banks offer registered accounts such as RRSPs, TFSAs and RESPs.

Mortgages

For most people, their biggest expense is the monthly mortgage payment so it’s really important to get best deal possible.  Both companies offer a variety of ways to make extra payments – which is key to paying your mortgage off faster.  Beyond their similar prepayment features, when it comes to mortgages there are significant differences between Tangerine and PC Financial in two very important areas.

First, PC Financial offers Conventional Mortgages.  A conventional mortgage simply means that the amount owed is what’s registered against the property.  For example, if a person bought a house for $300k, put down $100k and took a mortgage for $200k – all that’s registered against the property is $200k.

Tangerine, on the other hand, offers only Collateral Mortgages.  A collateral mortgage means that the amount that is registered against the property could be full amount of the property’s value.  So for example, a person buys that same $300k house, puts down $100k and takes a mortgage for $200k – the amount that’s registered against the property could be as much as $300k.  The reason Tangerine does this is that it makes things easier in the event that a person wants to borrow more money or refinance the property to take advantage of an increase in home equity.

The second major difference is the interest rates offered by the banks.  Simply put, I find that PC Financial’s rates can’t be beat.  For example, on a 5-year fixed the rate at Tangerine is 3.79% while PC Financial offers a special 5-year fixed at 2.47%.  The difference between the 2 rates is about $138 a month!

My personal preference is for a conventional mortgage – if I want more money I’ll look for a line of credit.  I also think PC Financial mortgage rates can’t be beat.  So when it comes to mortgages I think that PC Financial is the clear winner here.  This is definitely an area where Tangerine needs to become more competitive because most people tend to bank where their mortgage is.

Investments

Now for my favorite topic of discussion…investments.  It’s fair to say that both banks offer a fairly limited choice when it comes to real investments.

Tangerine offers its own, “in-house,” menu of mutual funds.  They offer 4 choices that are a combination of balanced and index fund portfolios.  With MERs running at 1.07%, they aren’t exactly low-cost, but they’re not super expensive either.

PC Financial offers a much larger mutual fund selection through CIBC.  Some of the index funds have similar MERs to the Tangerine mutual fund portfolios, but I think paying even 1% for an index fund is outrageous when TD offers e-series funds for much less (about 0.30%) and exchange-traded funds (ETFs) are even cheaper than that.  Think investment costs don’t matter because the amount is only a difference of 0.70% then check out my article on the danger of mutual fund fees.

It’s worth noting here that Tangerine offers index portfolios which are an all in one type of deal.  PC Financial offers stand-alone index funds or index portfolios.  Sadly, I couldn’t find MERs for the index portfolios only on their index funds so it’s hard to do a pure apple to apple comparison here.

Overall, I’d have to say that I like Tangerine’s mutual fund portfolio offerings.  In fact I wrote a piece on Balanced Funds that featured one of their products in comparison to others.  The Tangerine mutual fund portfolio offerings are basic for sure, but for those with little or no experience or interest in investing they’re not bad at all.

PC Financial offers more choice but I don’t like that you have to leave PC Financial and deal with CIBC directly with the mutual fund investments.  Also, I don’t feel like the mutual funds offered by PC Financial are truly low-cost options at all considering that TD e-series funds can be purchased at a fraction of the costs.

Cash Back Credit Cards

Both Tangerine and PC Financial offer special rewards credit cards to their customers.  Hands down, the best reward credit card offered by PC Financial is the President’s Choice Financial World Elite MasterCard.  Unfortunately, this card is not offered to everyone, just to those earning at least $70k a year or a family earning a combined $120k.

Here are some key features of this card:
1. No annual fee. This is key as the same card offered by MBNA comes with $89/year account fee.
2. If used at Loblaw’s or Shoppers Drug Mart you get 30 PC points per $1 spent (or 3 cents/dollar).
3. Gas up at Esso and get up to 3 cents per litre in PC points.
4. All other purchases will earn 10 PC points per dollar spent (or 1 cent/dollar).
5. The interest rate is 19.97% on purchases and 22.97% on cash advances.

The Tangerine Money-Back Credit Card is the only no-fee MasterCard offered by Tangerine Bank.

Here are some of its key features:
1. No annual fee
2. 2 % cash back from your choice of 2 of 10 categories, including groceries and gas.
3. If a person opts to have the cash back deposited into a Tangerine Savings Account instead of having it applied directly to any outstanding balances, a 3rd category for the 2% cash back becomes available.
4. 1% cash back on everything else.
5. Interest rate on purchases and cash advances is 19.95%

Honestly, both cards offer a lot of value in my opinion and I think that they would be better used to complement one another.  For example, if a person shops a lot of groceries at a Loblaw’s store then the PC Fin world elite card is the best choice as it offers 3% back (in the form of PC points).  At other places I think the Tangerine card is better.

The 2 main issues with the PC world elite card is that it’s too exclusive and the greatest reward is an extra 1% if you shop at their stores.  So I’d have to say that the Tangerine card offers the best overall value to consumers because there’s no income threshold to get the card and that it offers more choices to the consumer to get 2% cash back.

Overall, with the exception of the mortgage options, I’d say that Tangerine offers its customers good value.  Thanks for reading my post on No Fee Banking Tangerine vs PC Financial.

Image credit: Photo by Mister GC / FreeDigitalPhotos.net

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