EQ Bank Enhancements Make it Better Than a "Real Bank"

When my husband Rich and I first joined the CDIC-backed EQ Bank in 2016, we used it solely as a savings account that paid a great interest rate (2.25 percent at its inception).  There weren't any other banking functions available and you needed to link to a "real" bank to to transfer money into or out of the account.  Yet as a savings vehicle, it offered everything we were looking for--totally liquid cash (as opposed to locked in term GICs), a steady interest rate that was significantly higher than what was offered at the "Big Banks", no minimum balance required, free unlimited transactions, no service charges (albeit no services to charge for) and no teaser rates that evaporated after some short period of time.  We also took advantage of EQ Bank's US savings account which currently pays an unprecedented 2% on US funds, again with no minimum balance required and no fees.

While EQ Bank only acted as a savings vehicle, we used Simplii Financial (CIBC's branchless no fee option) to handle all the rest of our banking needs and to pay off our monthly expenses.  Only if we received excess dividends beyond our expense requirements for the month would we transfer the extra funds to EQ Bank for long term savings goals.

Over the years, EQ Bank has gradually been adding more and more banking functions.  Today, we can almost use it as our primary bank.  We are now able to set up automatic deductions to pay for reoccurring expenses, set up recurring or one-time bill payments to common vendors, send and receive free unlimited Interac payments and electronic money transfers, generate an online "void cheque" to link to any other bank, deposit cheques using their mobile app, and send money internationally if required.

Most recently, EQ bank has added yet another feature which brings it even closer to being a "real bank".  It introduced a bank card onto which you can preload funds from your savings account.  You continue to earn the going interest rate while the money sits on the card, and you can withdraw funds from the card using ANY Canadian bank's ATM for free (EQ bank covers the charges). The convenience of this is staggering as we are no longer tied to our own bank's ATMs.  On top of that, you earn 0.5% cashback on any purchases made using the card, with the rewards being deposited into your savings account.  This certainly beats the debit card from our current bank which offers no rewards.  It can be used internationally anywhere that Mastercard is accepted and charges no foreign transaction fees.

In effect, our EQ Bank has turned itself into a high interest savings AND chequing account all in one.  With all these new features, it makes sense for us to use EQ Bank as our primary bank for most of our banking needs while earning the excellent interest rate (currently 2.5% calculated daily) on all funds that we store there.  I have been working over the past month to make this happen.  I contacted each of the billers that we had set up to automatically pay monthly from our Simplii account and provided the banking info for our EQ Bank account instead.  This included our condo fees, property tax, and hydro bill.  I updated the banking info on our CRA accounts so that our tax refunds would be automatically deposited into EQ Bank.  I registered each of our Canadian credit cards so that we could make monthly one-time payments to pay off the balances.  I reassigned my primary email address to link Interac payments to EQ Bank while assigning a secondary email to Simplii Financial.  This way, nothing changes for all the people who have set me up as a contact for Interac e-Transfers but now the money automatically routes to EQ Bank.  I applied for an EQ Bank card, loaded it with some funds and will use this for any "debit-like" payments at stores that don't accept credit cards.  And most importantly, I linked my EQ Bank account to my Scotia iTrade non-registered account so that each time we receive dividend payments in our non-registered accounts, I can transfer the cash directly to EQ Bank, minimizing the lag time before our money starts earning the daily interest.

Today I closed my Simplii Financial "High Interest Savings Account", leaving only my chequing account with that bank.  When the agent asked me why I was closing the account, I replied that despite its name, at 0.40%, it does not actually pay high interest (or even medium interest), relatively speaking.

At this point, EQ Bank meets about 90% of our banking needs but there are still a few things that it doesn't do (yet?).  

1. Even though I have an EQ Bank US funds savings account, I cannot directly pay off my TD US VISA from those funds.  EQ Bank does not recognize non-Canadian currency credit cards as billers.  When I need to pay off my US credit card, I will have to transfer US cash from my US EQ Bank account to my US TD Bank account (which pays no interest!) and pay off the credit card from there.  
2. Smaller vendors are not currently registered with EQ Bank.  When we needed to pay an invoice issued by the contracting firm who will do renovations on our condo, I could not add them as a biller within EQ Bank as they were not found in the billers list.  National Bank has an interface where you can add unknown billers by providing info including their bank, transit and account numbers.  So far, there is nothing like that in EQ Bank.
3. There are no physical cheques provided with EQ Bank (other than the online void cheque for linking accounts), so when there is a need to write a cheque, I need to move money back to my Simplii chequing account and write the cheque from there
4. You cannot specify a beneficiary for your savings account(s)

These are infrequent inconveniences that I can happily live with in order to reap all the benefits of my EQ Bank account.  

While we can't use EQ Bank as our only bank account, in so many ways it is better than anything the Big Six banks are offering.  EQ Bank has a referral program that pays $20 to both parties for the first 3 successful referrals, $30 for the next 4 and $40 after that up to a maximum of $500.  If all this sounds good to you and you want to join, shoot me an email at retiredat48book@gmail.com and I can refer you.  We can both make $20 😁

UPDATE: As of 2023, EQ Bank offered 0.5% extra interest on your savings account if you direct at least $500 of pre-authorized payments to be regularly paid from that account.  As of 2024, they are offering an additional 1% on top of that if you direct your pay into the account, for a total of 4% if you do both.

Banks Show No Respect for Retirees or Retirement Income

Considering that we are in midst of a time when most of the Baby boom generation are either retired or close to retirement, it boggles the mind as to how little understanding Canadian banks have regarding retirees who no longer have employment income. 

Case in point, my husband Rich has been trying since the beginning of January to apply for a CIBC No Fee Dividend Cash-back VISA and has been jumping through hoops in trying to prove that he makes enough income to qualify.  This is despite the fact that he already has excellent credit history and a fee-based BMO World Elite Mastercard for which he is repeatedly offered higher credit limits.  As an aside, new immigrants without jobs and students just out of school seem to have less issues with getting credit cards.

Even though Rich clearly stated on the application form that we are retired (and have been for over 10 years now), the agents that he spoke to via email, chat and phone all insisted that he send proof of employment income by showing the EFT payment of his last pay cheque.  He repeatedly informed them that he has no employment income and no pension.  All his income comes from annual RRIF withdrawals as indicated by T4RIF statements, dividend income from our joint non-registered account (T5 statements) and interest from his high interest bank account with EQ Bank (T5 statement).  Yet even after sending in images of all these tax statements from 2021 (the most recent available at the time), he was still sent emails demanding proof of EFT transfers and told that his application would not be processed without this.

After spending what felt like an eternity on the phone speaking to multiple CIBC agents, he finally (or so we thought) got them to understand that he had no employment income, no pension, but he did have investment income.  He was next informed that the 2021 tax statements were not recent enough.  The last agent idiotically asked for 2023 T4/T5 statements!  Clearly this person does not live in or pay tax in Canada, or she would understand that this is not how Canadian tax system works. 

This process took so long that Rich received his 2022 T4RIF and T5 statements and could send those in to show more current income.  But he needed a secure portal to send in these sensitive documents.  He was asked to use the portal that was open for him back on January 18, 2023.   That email is long gone but consider this -- How secure is a portal that stays open forever?!?  Asking for a new secure portal to be sent to him proved to be the next challenge.  After waiting over a week and not receiving one, Rich decided to make an appointment with a live agent at our local branch so that he could show all his documentation personally and explain the situation.

On the day of his appointment, the email with the secure portal finally came and this is what the email said:

It is like the previous 5 agents that Rich spoke to totally ignored the conversations and just could not grasp the concept of someone not having employment income.   Are we not now at the tail end of the baby boom and have there not been masses of retirees to deal with over the past 30 years?!?  Even if this was a form letter, where is the option for retirement income (be it pension, investment or other)?

Ignoring this last frustrating email, Rich proceeded to the meeting with the bank representative at our local branch.  This time he went in armed with his tax notices of assessments from 2020, 2021 and his T4/T5 slips from 2022, all showing that he had more than sufficient income to qualify for this credit card.  After another hour of questions, a credit check (which presumably was already done before) and viewing of driver’s license and other credit cards, the agent was finally able to approve Rich’s credit card there on the spot.

If you think this is just an issue with CIBC, we have found that this culture of disrespect for retirement income is consistent through all the banks.  A year after we first retired, we thought it would be smart to have a small line of credit for emergencies, although we never intended to use it.  When we applied for the line of credit with one of the other big banks, we were told that our investment income (which consists of mostly dividend payments from blue chip stock) is not reliable since at any time, we could sell our stock and lose that income.  In contrast, this was compared to a steady employment pay cheque, yet there was no consideration that one could lose or quit their job and therefore lose that income.

Rich also ran into trouble when he initially applied for the BMO World Elite credit card. Once again, our investment income was discounted, and he was looked down on for not having employment income.  It was not until we sat with the bank manager and showed financial statements reflecting our investment portfolio that he was finally granted this initial card.  At the time, we thought it was because he did not have much credit history, but this is no longer the case.  Rich now has over 3 years of stellar credit history and should have an excellent credit score since he has never missed paying his balance in full.

There are a few lessons learned for retirees or soon-to-be retirees.

1. Forego the “convenience” of an online credit card application and head straight to the bank to begin with.  You will save many agonizing hours on the phone speaking to agents who just don’t get it

2. If you can, get all your credit cards, line of credits, loans, etc. locked down before you retire, while you still have employment income

3. Banks need to change their antiquated processes that are totally focused on the employed.  There is a large contingent of responsible, financially secure retirees that are being shafted by this mindset.

Handling US dollar income and capital loss on Canadian tax returns

This year, just before we were about to file our 2022 tax returns, Rich received a notice of reassessment for his 2021 tax return.  It indicated that he missed declaring some income and as a result, would need to pay an extra amount in tax, as well as a small interest charge. The issue turned out to be on the T5 form for our dividend stock that paid in US funds.

In 2021, we had two stocks in our non-registered account that paid in US funds.  The first is Algonquin Powers (AQN.T) which is a Canadian stock that qualifies for the dividend tax credit but pays dividends in US funds.  These dividends were shown at the top of the T5 form in boxes 24-26 and were declared properly.  We also owned AT&T which is a US stock and its dividends appeared at the bottom of the T5 in boxes T15 and 16.  In a careless clerical error, I totally missed these lower boxes while preparing our tax returns.  Both of our tax returns should have been reassessed since we split our non-registered income 50/50.  But for expedience, CRA attributed all of the missing income to Rich, since his name was listed first on the Joint T5 form and my name came after.

That was just the start of the issues.  The amounts of dividend shown on the T5 were in US dollars but on the tax return, we were required to declare in Canadian dollars.  Some currency conversion was required, but at what rate?  The agent we spoke to on the CRA help line informed us that we needed to use the Bank of Canada annual exchange rate for 2021, which can be found here:   https://www.bankofcanada.ca/rates/exchange/annual-average-exchange-rates For 2021, the rate was 1.2535.

The day after we spoke to this agent, I realized that on our 2021 returns, I also neglected to submit the T5008 form that listed our capital loss when we sold AT&T in Dec 2021.  Without a record of this form on our 2021 tax return, we would not be able to claim the loss against any future capital gains.  I did not realize this at the time, and since there was no income to declare, I hadn't included it.

I was back on the phone with the CRA info line to find out what was the best course of action to retroactively add this.  Before talking to an agent, I did my own investigations and came up with two possible solutions.  I could try to do a REFILE on my 2021 tax return to add the details of the T5008 form.  This would be a viable solution if I had not also been reassessed (I got a small additional refund, which I accepted without question).  If I did a REFILE, I would be resubmitting my “pre-reassessment” form which would be out of date.

The second alternative was to log onto my CRA Account to select the “Change My Return” option.  I would not be able to enter all of the fields from the T5008, but this seemed to be OK since CRA already had this form on file.  Instead I would update Schedule 3, line 13200 and enter the amount of loss that we incurred when we sold the AT&T stock.  But once again, the amount was in US dollars so it was not as simple as taking the Book value and subtracting it from the Disposition proceeds.  Once again, I had to convert to Canadian dollars.  But this time, I needed the Bank of Canada historic noon rate for the date of the sale, which in this case was December 8, 2021.  Now I had to go to this link to get the right exchange rate:  https://www.bankofcanada.ca/rates/exchange/daily-exchange-rates-lookup  I multiplied our loss by the stated exchange rate and submitted this new value in line 13200.  I got a rapid reassessment that indicated my loss was now on record and I could claim 50% of it against my next capital gain.  Note that I applied all the loss to myself rather than giving half to Rich.  That was more complexity than I wanted to deal with and since CRA did the same with Rich's reassessment, I figured this would be OK.  I was just happy that we didn’t lose the right to use our capital loss in the future.

So, this tax reassessment led to several lessons learned.  Ironically, we learned these lessons too late to be of use to us, as we have since sold both AT&T and AQN from our non-registered accounts and currently no longer have US dividends as income from that account.  But in sharing our lessons learned, hopefully others will not make the same mistakes that I did.

2022 Year End In Review: After Ten Full Years of Retirement

My husband Rich and I can hardly believe that we have now been retired for over 10 years!  At ages 58 and 59 respectively this January, we are now welcoming many of our friends and family as they join us in retirement.  I feel like we have fulfilled so much of our early retirement wish list with extended travel and the luxury of free time to explore hobbies and interests. Now it feels like we are in the "gravy years".  I am grateful that we were able to do all of that before the pandemic brought social life and travel to a halt. I feel sorry for those who retired just as COVID-19 reared its ugly head, but hopefully they can now resume their post-retirement plans.  At least they had the silver lining of preserving extra retirement capital during the period of lockdown when there was nowhere to spend discretionary money.

2022 was a strange and stressful year for the economy. Weather factors impacting crops, global political strife and uncertainty, as well as grain and oil shortages due to the Ukraine War all contributed to soaring inflation experienced around the world.  In Canada, the 2022 inflation rate ended just under 7%, impacting cost of living across the board. Two examples include a bag of three romaine lettuces that cost around $2.99 only a year ago now selling for $8.99, and the price of poultry which increased by between 10-20% over the last two years.

For years, Canada’s inflation rate was steady at around 2% and this is the rate we used in our Retirement Plan that tracks how our portfolio is doing. At the beginning of 2022, I adjusted our plan to reflect an average of 4% inflation rate going forward.  This acknowledges the increase in inflation rate but optimistically assumes that inflation will not continue to trend at 6-7% for the long run. Even with this change, I was relieved to see that although our capital would reduce more rapidly, we still have sufficient funds to last beyond our expected lifetimes. I will keep my eye on this rate going forward and may need to make more adjustments in the future including reducing our rate of spending if required. 

Inflation, supply chain issues and global uncertainty took its toll on the stock market, as the TSX/S&P Composite Index was down by over 9%.  The value of our portfolio took an even bigger hit as our value decreased by over 11%.  It was dragged down by the 1-year returns from long-term losers like Corus (CJR.B – down 51%) and Cineplex (CGX.T – down 40%).  But unexpectedly, we also took a hit from the former stock darling, Algonquin Power (AQN.T) which unexpectedly plummeted in 2022 with a negative return of over 46%!  This further illustrates the need for diversification and not putting all your eggs in one basket by owning just a few companies or industry sectors.

Things looked dire for Algonquin Power in November as the stock price plunged. There were rumours of the possibility of the company cutting its dividend and this came to fruition in the second week of January 2023 when the dividend was slashed by 40%.  We still like this stock for the long term, so we decided to hedge our bets on it. At the end of November when the AQN stock price in our non-registered account dropped to just about the amount that we originally bought it for, we decided to sell these shares, triggering a tiny capital gain. We will use the proceeds to purchase stock that will provide us with more stable dividends. At the same time, we doubled down on Algonquin in my RRIF, enrolling in the DRIP (dividend reinvestment plan) to pick up more shares while the price is low. If the stock does rebound as we hope, then we will have increased our holdings at a discount and can move some shares back out to the non-registered account then.  Algonquin is a Canadian stock that qualifies for the Dividend Tax Credit, but pays its dividend in US Funds, so it would be nice to eventually have our regular source of US cash again.

Despite the dismal year for the value of our portfolio, 2022 was a good year for dividends, which is the main thing that we care about. Our income strategy has been to buy and hold good companies and live off the dividends that they pay.  This strategy has sustained us through several bear markets over the past ten years.  The dividend increases were especially strong in our non-registered account, which is where most of our large-cap, blue chip stocks are held, and where we source our annual income.  Within this account, our dividends rose by over 6%, which just about covers the high rate of inflation for 2022.  I think we are still feeling the effects of the post-COVID boost that started at the end of 2021 when banks and insurance companies were finally allowed to raise dividends and other sectors also started to ease their pandemic fiscal restraints.  It is uncertain what 2023 will bring with inflation is still running rampant.  Yet so far, seven of the companies in our portfolio (BMO, CIBC, ENB, NA, RY, Telus and TD) have already declared dividend raises for 1Q2023, albeit much smaller raises than the double-digit anomalies that we enjoyed when the restrictions on the financial sector were finally released.  Despite a bad year for the value of our stock holdings, our income strategy of living off our dividends remains a winning one.  Since we first retired in 2012, our dividend income has more than doubled.

Another benefit of the pandemic subsiding is that savings account interest rates started to rise again.  For years now, we have used EQ Bank as our no-fee, high-interest savings bank.  We like this company because it consistently has better than average interest rates (especially compared to the big banks) and doesn’t play the “bait and switch” game of teaser rates that only last for a few months. I like the stability that this bank offers and can’t be bothered trying to chase higher rates offered for short periods of time.

In January 2020, just prior to the start of COVID-19, EQ Bank was paying 2.45% on Canadian dollar savings accounts, with no minimum balance requirement. As the pandemic dragged on, the bank gradually lowered its rates, going from 2% in March, to 1.7% in August, 1.5% in October and then as low as 1.25% in April of 2021.  During that same period of time, my so-called “high interest account” with Simplii Financial was paying 0.01%!  In 2022, EQ Bank’s rates started to slowly rise again and as of September 2022, they are paying 2.5%.  With Simplii Financial, my high-interest savings account is currently paying $0.4% for balances up to $50,000.  Note that it is offering a teaser rate of 5% for new accounts, payable only between November 1, 2022 to January 31, 2023.  Guess which rate is touted in large black letters and which one is only found in tiny print if you persistently to search for it deep within the website.

Even more exciting than EQ Bank’s Canadian savings account interest rate is the 2% that it pays for US dollar savings accounts, again with no minimum balance requirement!  Prior to opening a US account with EQ Bank, I had a TD Bank US Daily Interest Chequing account that paid 0.01% (equivalent of 10 cents annually on $1000) and required a $1500 minimum balance to have the monthly transaction $1.25USD fee waived.  I used this TD US account to accumulate US cash from the US dividends paid by some of our stocks. This provides me with a physical bank where I can withdraw US cash for travel without incurring foreign exchange rates. 

I have always wanted a US credit card so that I could make purchases in US funds and pay off the balance with the US cash from my bank account. To achieve this, I switched over to the TD Borderless US Dollar account which pays no interest (but I was getting just about no interest anyway) and requires a $3000 minimum balance to have the $4.95USD transaction fee waived.  But this account also waives the annual $39USD fee for owning a TD US Dollar VISA card.  So now I transfer any US dividends that we receive into my EQ Bank US savings account where my money is finally growing due to the great interest rate.  When I purchase anything from the States using my US credit card, I then transfer money from EQ Bank to TD to pay it off.  This year we plan to start traveling abroad again, starting with a trip to New York City.  I will be able to pay for our accommodations, meals, theatre tickets and other expenses using my US credit card and US cash.

Although our portfolio is set for the most part and we don’t really do much trading anymore, we still had some interesting events happen to some of our holdings. In May, CIBC issued a 2 for 1 stock split. While I don’t really care about stock prices, I do check on dividend payouts quite regularly to determine whether any of our stocks have raised or cut their dividends.  When I noticed that our payout for CIBC reduced by half, I was able to quickly confirm that our number of shares had doubled accordingly and then googled to confirm the stock split.  I was not really that concerned because if one of the big banks ever did cut its dividend (let alone slash it by 50%), that would have been big news!  In June, BIP.UN and BIPC.T had a 3 for 2 stock split and I went through the same exercise to confirm.  Starting July 2022, PKI moved from monthly to quarterly dividend payouts.  The annual net result is still the same, but I miss getting a bit of income every month!

At the beginning of 2021, Cenovous Energy bought Husky Oil, which I held in my RRIF.  As part of that transaction, I received a “purchase warrant” for the right to buy extra Cenovous shares at a given price.  Through a complex formula that I wrote about earlier, I could either buy the shares if the market value exceeded the strike price or sell the warrant (which has its own stock ticker CVE.WT) before it expires in 2026.  In May 2022, the price of CVE.WT rose to $22.62 from an initial value of $3.62.  I could have held on longer to see if the price would continue to rise, but I knew that as we got closer to the expiry date of the warrant, the value of it would start to drop.  Not wanting to worry about this anymore, I decided to cash out and make a small profit.  So far this has looked like a good move, since the current price of the warrant is $18.19.

Since 2019, Rich and I have been actively trying to reduce the sizes of our RRIF accounts so that we can minimize CPP and OAS clawback when we hit age 70.  To accomplish this goal, we pay extra withholding tax from cash within our RRIFs to pay for the year’s income tax, rather than using the dividend income generated from our non-registered account or from our savings account to pay in the new year.  An additional benefit of pre-paying our taxes via withholding tax is that it eliminates the need for CRA-enforced “installment payments” that are required if you owed more than $3000 in tax the previous year.

To estimate how much tax we might have to pay, I use the previous year’s tax program and guess at how much the dividend income in our non-registered account might grow.  I then control how much we withdraw from each RRIF including the withholding tax to reach our desired net incomes. Since 2021, I have even tried to pay enough withholding tax to give each of us a small refund.  We are therefore incented to file as soon as possible in order to receive our refunds.  NETFILE makes this really quick and easy.  Last year we filed on February 23 and had money refunded to our bank accounts by March 3.

Because we filed so early, I did not realize that I qualified for the Digital Subscription Credit, since our Globe and Mail Saturday paper delivery subscription qualified us for a complimentary digital subscription.  The tax receipt arrived after I had already filed, so I did an online REFILE and got the extra refund a week later.  I now know to claim this on my tax return going forward.

We took multiple overnight trips within Ontario during 2022 in order to take advantage of the Ontario Staycation tax credit, which applies to money spent on accommodations during the calendar year.  An individual can claim up to $1000 and a family up to $2000 in order to receive a tax credit of 20% on these expenses.  This worked out great for us since we were still hesitant to travel or fly abroad, given all the travel horror stories we heard about delays, lost luggage and intermittent COVID resurgence.  Instead, we had lovely times spent in Stratford, Ottawa, Perth, and Fergus/Elora Ontario, keeping track of our receipts so that I can claim this tax credit.

Part of the analysis that we did before retiring at age 48 in 2012 was deciding whether we should purchase medical insurance to replace the coverage that we each had when we were working.  It would be another 17 years before we qualified for the Ontario Drug Benefit at age 65. After reviewing multiple plans and calculating the annual premiums vs. estimated claims, we decided that it was not worth it. Especially given the fact that most medical insurance policies have annual caps on claims, we were better off self-insuring and paying for our expenses out of pocket.  This turned out to be a good choice since in almost every one of our 10 years of retirement so far, we did not accumulate enough medical expenses to claim a credit on our tax returns.  That changed in 2022 when we incurred some extra dental and drug expenses. Once we realized that that our combined medical expenses had exceeded the threshold of $2421, we tried to front-load as much as possible into 2022 in order to maximize our benefit claim. This included refilling all of our prescriptions and scheduling Rich’s eye doctor and dentist appointment before the end of 2022.  Had I been more on the ball, I would have scheduled an eye appointment for myself as well. But by the time I thought of it, I was too late to get an appointment.  We transferred all of Rich's expenses to me (his spouse) in order to consolidate all the expenses in one tax return.  

Finally, in terms of personal interests, 2022 felt like the first “almost normal” year after all the COVID years.  In addition to our Ontario Staycation trips, we went on the longest vacation since before the pandemic when we took a 15-day driving trip out to the Nova Scotia and Cape Breton Island. We still haven’t resumed trips that involve flying yet, but probably will start in 2023. In preparation for more international travel to the States and Europe, we finally applied for NEXXUS cards, although it will probably be over a year before they are processed.  2022 was a time for re-socialization where we spent more time dining out, visiting and entertaining friends and family, going to more theatre and museums, like we used to do pre-COVID.  I wonder if all milestones will now be designated as "pre" and "post" pandemic?  All this additional activity showed up in our year-end spending analysis as our discretionary spending has increased again, now that the opportunities to spend money have reappeared.  And finally, we have joined the Pickleball craze, purchasing racquets and playing both outdoors in the summer and indoors at community centres through the colder months.