Canada has one of the strongest and most reliable banking systems globally, with Canadian banks and financial institutions held in high regard around the world.
Opening a bank account in Canada is a necessary step in successfully settling in the country. You will probably need a personal account in order to receive your salary, as well as to rent or buy accommodation, pay for gas and electricity, get a phone line, and much more.
Take the opportunity to learn more about banking in Canada in the following sections:
- Choosing a Bank
- Opening a Bank Account
- Security of Banks
- Bank Services
- Banking Glossary
Choosing a Bank
Choosing a bank can seem overwhelming at first, but a little research can help in making the right decision. Canada has several national banks, with offices and branches in most Canadian cities, as well as regional banks, credit unions, and international banks. Most Canadian banks offer similar quality services such as online banking and automatic banking machines, and many of the major ones offer programs for newcomers, which come with specific newcomer incentives.
Before deciding on a bank, you may want to take into consideration which branches are convenient to your home and place of work and what their opening hours are, as well as which financial products they offer that match your banking preferences.
Opening a Bank Account
Opening a bank account in Canada is straightforward and there are many options available to you. There are over 100 consumer bank account packages to choose from offered by more than 20 banks across the country. To open an account, go to the bank of your choice in person and provide documents that prove who you are. It is very likely that two original pieces of identification will be required. It is also possible to apply to open an account online on the bank's website.
In Canada, you have the right to open a personal bank account even if you:
- do not have a job;
- do not have money to put in the account right away;
- have poor credit rating; and/or
- have been bankrupt before.
The main types of bank accounts available are chequing accounts and savings and investment accounts. Chequing accounts enable users to write cheques and typically include the use of a debit card. A chequing account is necessary if your employer uses payroll deposit. The majority of banks charge you to have and use a chequing account, with monthly costs ranging depending on the number of allowed transactions.
Savings and investment accounts help users save their money. These accounts generally have higher interest than chequing accounts. The Government of Canada has also created a number of registered savings accounts to encourage tax-sheltered savings available at Canadian banks such as Registered Retirement Savings Plans (RRSPs), Registered Education Savings Plans (RESPs), Registered Disability Savings Plans (RDSPs), and Tax Free Savings Accounts (TFSAs).
Security of Banks
You can feel comfortable storing your money with Canadian banks as they are well-managed, well-capitalized, and well-regulated institutions. In the highly unlikely event of a bank failure in Canada, the deposits in your savings and chequing accounts are protected up to $100,000 CAD as long as the bank is a member of the Canada Deposit Insurance Corporation (CDIC). The CDIC is a Crown Corporation that was created in 1967 with the purpose of providing deposit insurance and stability to the country's financial system.
Most Canadian banks offer similar quality services including online and telephone banking, mobile banking apps, Automated Teller Machines (ATMs), debit and credit cards, bank loans, and more.
Automated Teller Machines (ATMs)
Automated Teller Machines are very convenient and easy to use. These are self-service machines that allow users to perform basic banking activities such as depositing and withdrawing money, transferring funds between accounts, printing account statements, and more, with the use of a debit or credit card. They may be bank-owned or privately-owned and the specific functions available differ depending on the machine and its owner. Using an ATM from your own bank is free of charge, however, charges will apply for using ATMs from other banks. Using privately-owned ATMs, commonly found in restaurants, bars, malls, and other public places, will result in you being charged by both the machine and your bank, which can be very costly.
In Canada, cheques are often used to pay bills by mail, to pay larger amounts (for example, rent), and as a form of payment where credit cards or direct payments are not accepted. It is crucial to note that when you write a cheque, you must have enough money in your account to pay the full amount specified on the cheque. If you do not have the money in your account, the cheque will be returned to you for non-sufficient funds (NSF) and your bank will charge you a fee.
In Canada, debit cards can be used as an alternate form of payment almost everywhere, typically without any additional fees. For this reason, it is common for Canadians to carry very little cash with them. The Interac system is a collection of banks and merchants that all use the same payment system. Using Interac email transfers (e-transfers), you can transfer money online to any other person who has a Canadian bank account with Interac email transfer capabilities by using their email address (no bank account details are necessary).
Getting credit means borrowing money to buy something now and paying it back later with interest. Interest rates can be high and credit rating is considered to be very important in Canada, so it is important to be cautious when using credit.
If you wish to begin using a credit card, you can apply to do so at most banks, either online or in person. Credit cards enable you to spend money on credit and be billed for it within a month. If you make a payment for the full amount you spent by the specified due date, you will not be charged any interest fee. It is also possible to sign up for credit card reward schemes, whereby you earn points for each purchase made with the credit card. These points can later be cashed in for products and services.
Canadian banks offer a variety of loans including personal loans and those for business. Personal bank loans are extremely useful and can help you manage significant payments such as post-secondary education, cars, home renovations, and more. With a personal loan, the borrower receives a fixed dollar amount and agrees to repay the full amount plus interest over a fixed period of time. Loans are granted at the discretion of the bank.
Before signing a loan agreement, it is important to ensure you understand your duties in terms of payment schedule, late or missed payments, co-borrowing, and interest rates.
A fund that a customer has entrusted to a bank and from which the customer can make withdrawals.
- Automated Teller Machine (ATM)
Self-service machine at a bank or other location that enables customers to perform basic banking activities. You need an ATM card or debit card and a PIN (Personal Identification Number). Earlier, known as an Automated Banking Machine (ABM).
- Bounced Cheque
Cheque that a bank returns to the issuer due to insufficient funds in the issuer's account.
A written order directing a bank to pay money.
- Correspondent Bank
Bank that performs services for another bank which has no branch or physical presence in the relevant centre or jurisdiction. Functions include cheque clearing, cash management, transfer of funds and so on.
- Credit History
Records of a borrower's debt payment that indicate the creditworthiness of the borrower. The credit history helps lenders in determining the borrower's ability to repay debts in a timely manner.
- Electronic Funds Transfer (EFT)
Transfer of funds by electronic means rather than paper based methods. These include using computer systems, ATM, telephone, wire transfers, etc. The funds are transferred faster and are more securely.
- Interest Rate
Price lenders charge the borrowers for use of their money for a specified period of time. The rate charged is usually expressed as a percentage of the total amount borrowed.
- Line of Credit (LOC)
An agreement negotiated between a borrower and a lender establishing the maximum amount of money against which a borrower may draw. The agreement also sets out other conditions, for example, how and when the money is to be repaid.
- Liquid Assets
Cash, demand deposits with a bank or financial institution, short-term deposits and readily marketable investments including publicly traded stocks or bonds.
- Minimum Opening Deposit
Minimum amount of money needed to open and maintain an account. Accounts that fall below the minimum balance may be subject to service charges.
- Non-resident Account
An account owned by a person from outside the country in which the bank is chartered.
- Online Banking
A convenient and secure way of performing banking operations using a financial institutions secure website over the internet. This allows customers to do their banking outside bank hours and from anywhere on the Internet.
- Personal Identification Number (PIN)
A numeric identification code of usually four digits, which users create to access their account. PIN is required for use at ATM machines to verify the identity of the cardholder and to authorize the account transactions.
- Savings Account
A deposit account which bears interest without a stated maturity. Withdrawals and deposits can be made at any time.
- Service Charge
A fee established by the financial institutions for maintaining a particular service, like annual charges for a checking account, late payments of loans, returned cheque, and so on.
- Stop Payment
An order by the writer of a cheque to the bank not to honour the payment. The stop payment order directing has to be given before the cheque has been cashed and can be done by telephone or in writing.
- Telephone Banking
Service provided by the financial institution, which allows its clients to perform transactions over the telephone. Most telephone banking requires authentication and instructions are carried out by a physical person or via an interactive voice response (IVR) system.
- Term Deposit
Secure investments generally offering a higher rate of interest than a simple savings account, available in a number of currencies, a variety of term lengths, and several redemption options.
- Wire Transfer
An electronic transfer of funds from one entity to another across a network administered by hundreds of banks around the world.