Alterna Bank review
Today, we're going to take a look at Alterna bank.Alterna Bank is a digital Canadian bank offering financial services such as savings, chequing, investments, and mortgages.
There is no question that the internet has fundamentally changed the way we live, work, entertain ourselves, stay in touch with friends and family and, of course, the way we do business. The internet's facilitation of e-commerce has made person-to-person interaction unnecessary to conduct many forms of business and, indeed, has flatly eliminated some industries all together.
While the effect that the internet has had on the financial services industry has not been quite that dramatic, at least not yet, it's obvious that the internet has still had a profound effect on the way we access financial services. Most banks, of course, continue to maintain physical branches that house tellers, loan officers, and investors to help customers take care of business. But it's no longer completely necessary to make the trip down to your local bank branch to make a deposit, apply for a loan, or even to start a new investment portfolio. Rather, more and more banks are beginning to offer their customers the option of doing business online and some, as we've seen, are moving services like these online entirely.
Canada has seen remarkable growth in the availability and functionality of online-only banks in the last 5 to 7 years, and we've explored a few of the more prominent offerings on this site already. Some of the online-only banks that we've previewed are specialized institutions, focusing their efforts entirely, for example, on helping their customers grow their savings, while others cast a wider net by offering chequing and limited lending services, as well.
Alterna bank offers the widest array of services of all the online-only banks that we've looked at so far. So, keep reading to find out what Alterna bank has to offer.
About Alterna Bank
Alterna bank is the online-only retail banking arm of Alterna Savings and Credit Union. Based in Ontario, Alterna has been serving Canadians in some form since the beginning of the 20th century. Alterna Savings and Credit Union is currently the second-largest credit union in Ontario and a top-10 credit union in the country, serving 167,000 members and managing over $8 billion in assets.
Despite its commitment to providing "high-touch" and personalized in-person banking services to its customers, Alterna Savings and Credit Union noticed the not-so-subtle shift in consumer demand as the 21st century progressed. Recognizing the "digital-first" preference of many modern consumers, Alterna sought to adjust its offerings accordingly. Like other financial institutions seeking to remain competitive in the modern market, Alterna was mindful of consumers' demand for accessible, streamlined online banking services. Thus Alterna bank was born.
Alterna bank technically has existed as an entity since 1992, when it operated as the Civil Service Loan Corporation. But it has existed in its current online-only form since just 2017, making it one of the newer direct bank offerings available to Canadian customers. Alternabank's youth, however, has not stopped it from making waves. Ratehub has acclaimed Alterna bank's e-chequing and registered savings accounts, and the Globe & Mail has rated Alternabank the best bank for millennials.
Alterna bank is a member of the Canadian Deposit Insurance Corporation, meaning all chequing and savings deposits are insured up to $100,000 per account.
Personal financial services
Alterna bank offers chequing, savings, lending, and even some investment services to its individual customers, making it one of the only direct banks to offer such a wide array of services.
Alterna bank Personal chequing accounts
Many traditional financial institutions are sticking fast to the fee-based chequing account model, despite modern trends to the contrary. Such accounts often require customers to maintain a minimum account balance and to not exceed a certain number of transactions each month. Alternabank, however, like other direct banks, bucks this status quo in favor of a more consumer-friendly option.
Taking full advantage of the money it saves on overhead expenses by not maintaining physical branches, Alterna bank offers just one chequing account option, simply called the No-Fee eChequing account.
As its name suggests, customers pay no monthly fee for access to this account's full list of features. The No-Fee eChequing account requires no minimum balance and it's even an interest-bearing account (although the rate is a paltry .05%). This account provides for unlimited daily transactions, meaning you can write as many cheques or swipe your debit card as many times as you need without worrying about incurring extra fees. The one feature this account does not provide for free, however, is ATM usage. Although Alterna bank eChequing customers have access to over 3,300 ATMs through THE EXCHANGE network across Canada, ATM withdrawals cost $1.90 each.
This account also provides for unlimited Interac e-transfers and unlimited "Me-to-Me" transfers, as well. The "Me-to-Me" transfer is a free feature that allows customers to link their Alterna bank accounts with their accounts from all the different financial institutions they do business with. This allows customers to use their Alterna bank account to transfer funds to and from outside institutions and to use outside accounts to fund new Alterna bank accounts. Given that Alterna bank offers investment and wealth management services beyond GICs and registered savings accounts, Alterna bank customers are likely to find the Me-to-Me transfer feature particularly useful.
Alterna bank also offers "overdraft protection" on the No-Fee eChequing account. We put "overdraft protection" in quotations because it operates more like a personal line of credit than traditional overdraft protection. Instead of the bank charging a hefty one-time overdraft fee, Alterna bank offers overdraft protection for just $2.50 per month. Alterna bank then charges 19.99% interest on the overdraft amount. Alterna bank offers credit limits of $500 to $5,000, so customers can customize their account to their needs.
Finally, like any other modern chequing account worth its salt, Alterna bank's No-Fee eChequing account provides for online bill payments, automatic debits, and remote deposits all from the convenient Alterna bank mobile app.
Alterna bank Personal savings accounts
Alterna bank, like other direct banks we've looked at, offers a high-yield savings account as well as registered savings accounts to help customers save for retirement.
Alterna bank's High Interest eSavings Account carries an interest rate of 2.00%, which appears to be quite standard across the direct bank industry as of this writing. Alterna bank's eSavings Account carries no monthly fee and allows customers to make an unlimited number of monthly transactions, including Me-to-Me transfers. Keeping with standard industry practice, Alternabank calculates interest on the account balance daily and deposits it monthly. Because the High Interest eSavings Account supports online bill payments and other debits, customers can earn interest on their money while maintaining the flexibility to use it for monthly expenses such as rent or mortgage payments, credit card payments, utility payments, or other recurring expenses.
Alterna bank also offers TFSAs to allow customers to grow their money tax-free while saving for a large purchase or while developing an emergency fund as well as RRSPs to allow customers to reducing their instant income tax obligation while saving for retirement.
Personal mortgage lending
Alterna bank recognizes that many modern consumers are not just comfortable doing business online, they prefer it. For this reason, Alterna bank offers one of the quintessential banking services, the home mortgage, in an entirely online option.
Alterna bank offers a variety of closed mortgage options. Recall a closed mortgage is one that generally does not allow the borrower to pay off the loan early, while an open mortgage does provide for early payment. The tradeoff, as we've discussed before, is closed mortgages typically carry a lower rate.
Alterna bank offers fixed-rate mortgages in a variety of options ranging from 1 to 10 years, and two variable rate mortgages, offered in 3 and 5-year terms. Alterna bank's fixed-rate mortgage rates are set out in the table below.
Alterna bank's variable-rate mortgage rates are set out in this table:
Additionally, as we've seen from other institutions, Alterna bank offers mortgage borrowers flexible payment options, the option to increase their payment up to double its current amount, and the ability to pay an extra 20% toward the total balance each year.
Alterna bank also offers borrowers up to $800 toward closing costs.
Business financial services
Alterna bank is somewhat unique among direct banks in that it offers some financial services to commercial customers in addition to individuals.
Alterna bank Business chequing accounts and payment processing
Alterna bank offers an e-chequing account for businesses, but it differs from the personal e-chequing account in a couple of key respects. First, Alterna bank requires businesses to maintain a $3,000 minimum balance or else pay a $5 per month account fee. But second, and on a more positive note, there are no ATM fees associated with withdrawals from Alterna bank business e-chequing accounts, giving businesses convenient access to their funds at more than 3,300 ATMs across Canada.
Next, the business e-chequing account provides for unlimited incoming Interac e-transfers per month, 6 outgoing Interac e-transfers per month, and unlimited electronic debit and credit transactions.
Alterna bank also offers a payment processing service designed to help businesses securely receive payments wherever their business may take them.
Alterna bank Business lending
Alterna bank offers small business loans, but they do not provide much public information about their terms and conditions. Alterna bank instead directs current business customers to research and apply for a small business loan through their online banking portal.
Alterna bank is unique among online-only banks in that it offers a variety of investment services beyond registered savings accounts and GICs. Through their VirtualWealth service, Alterna bank offers customers a secure digital investing service that leverages the power of the internet to provide customers convenient access to a professionally-managed portfolio that tracks Canadian, U.S., and global stock and bond markets.
Alterna bank also partners with Qtrade to offers its customers access to a full suite of investment tools including stocks, bonds, and GICs.
How does Alterna bank stack up to the competition?
Alterna bank comes quite close to being a full-service online-only financial institution. For those customers, however, who wish to keep their chequing, savings, and investment business all under one digital roof, there is a bit of a price to pay when it comes to Alterna bank's eChequing account. While it's true that Alterna bank's eChequing account provides all the modern features digital banking customers have come to expect, its failure to provide fee-free ATM access puts Alterna bank slightly behind the curve in this respect.
Alterna bank's Me-to-Me transfer feature, however, could make up for this minor inconvenience, especially if the customer is considering switching to Alterna bank for its flagship feature: online investment tools. Alterna bank's partnership with Qtrade, along with its VirtualWealth tool, set it apart from other online-only banks that offer no such services.
Alterna bank is as close to a one-stop shop for online banking services that we've seen so far. Its online investment tools allow customers to truly build a nest egg without necessarily needing to spread their business across a variety of financial institutions. For those of you who prefer the simplicity of keeping all your business in one place, Alternabank deserves a hard look. But, as always, we encourage you to check them out for yourself before making any decisions.
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