Like most countries, having a bank account is a necessary part of everyday life. You will need a personal account to receive your salary any pay your bills, and to conduct transactions online and at retail locations. Fortunately, Canada has a strong, secure banking system, with a choice of several national financial institutions, each of which has multiple branches in most cities and a wide variety of services to meet your financial needs.
How easy is it to open a bank account in Canada?
All residents of Canada have the right to open a personal bank account, regardless of employment status, availability of funds to deposit, credit rating and the existence of prior bankruptcies. When choosing a bank, consider the specific services you need, the location of branches close to home or work, and whether they offer extended or weekend opening hours.
Once you have decided on your bank or financial institution, you can open an account in one of two ways:
- Present yourself at a branch with at least two pieces of government-approved ID, such as a driver’s license or a passport. Contact the back first to find out what specific documentation they need.
- Many institutions will allow you to open an account online, but you may still have to go to a branch in person to confirm your identity.
What kind of bank account should I get?
Most people in Canada use a chequing account for their daily banking needs. This allows them to accept salary deposits, write cheques, set up automatic bill payments, use a debit card and conduct online banking transactions. Because money flows into and out of chequing accounts on a fairly fluid basis, the interest rates are typically low.
If you are intending to save money, you may also consider a savings & investment account. These are designed for limited use and carry higher interest rates. In addition to the regular savings accounts offered by financial institutions, there are some tax-sheltered options available, including the registered retirement savings plan (RRSP), registered education savings plan (RESP), registered disability savings plan (RDSP) and tax free savings account (TFSA).
What are the service fees like?
The service fees you pay on your bank account depend on the bank and on the specific services that you use. Most banks will charge a minimum monthly fee that covers a set number of transactions, and then a charge per transaction if you exceed that limit. There are some financial institutions that offer no-fee daily banking, with unlimited free online, debit and bank machine transactions. These banks tend to charge more for special services, such as bank drafts and teller transactions. In general, Canadian banking fees are reasonable and affordable.
How secure are Canadian banks?
Canadian banks accounts come with sophisticated security features that are designed to protect you from fraud, bank card theft and appropriation of online banking login credentials. All of the major banks are members of the Canada Deposit Insurance Corporation (CDIC), which covers your bank accounts up to a maximum of CAD $100,000 in the unlikely event of a bank failure.
What services do Canadian banks offer?
You can find a variety of services at most of the Canadian banks. The more commonly used services include the following:
- Automated teller machines (ATMs): Most bank customers use these to deposit cheques or cash, withdraw cash, check balances and transfer funds between linked accounts. Although you can use most bank cards at any ATM, you will pay a fee if you use one that is not owned by your bank. Privately owned ATMS that are found in many restaurants, convenience stores and other public places are especially costly, since you will charged by both the machine and your bank.
- Cheques: Although online banking is an increasingly popular means of paying bills, cheques are still written for items like rent and payments that are sent by mail. The cheque is honoured as long as your bank account contains the funds to cover it. Otherwise, it returned for non-sufficient funds (NSF) and your bank charges you a fee.
- Debit cards: These are used to pay for transactions at almost every retailer in Canada. It saves you from having to carry cash or use a credit card: the amount of transaction is simply deducted from the balance in your account. The Interac system, which administers debit payments, allows for the online transfer of funds between two individuals without the requirement to disclose any bank account information.
- Credit cards: This provides a way for you to purchase items on credit, and pay the credit card provider in instalments that include interest payments. Getting a credit card in Canada is generally fairly easy as long as you do not have a poor credit rating.
- Loans: A variety of loans are available, ranging from a line of credit that is added to your chequing account, to a personal loan that is used for a large purchase, such as a car, tuition fees or home renovations. Some banks will allow you to consolidate your credit card debts into a single loan, which carries a lower interest rate than the credit cards.
Banking terminology can vary from country to country. In Canada, the most commonly used terms and phrases are as follows:
- Account: a bank fund that allows the customer to make deposits and withdrawals
- Automated teller machine (ATM): also known as an automated banking machine (ABM), this is a self-service machine that allows the customer to perform deposits, withdrawals, balance inquiries and funds transfers
- Bounced cheque: a cheque that has been returned to the issuer due to non-sufficient funds
- Correspondent bank: a bank that performs services for a financial institution that has no physical presence
- Credit history: an individual’s record of debt payment that indicate whether they can be considered for a loan
- Electronic funds transfer (EFT): the use of electronic means rather than paper to transfer money or pay bills
- Interest rate: the cost of borrowing money for a specified period of time, usually expressed as a percentage of the amount borrowed
- Line of credit (LOC): an agreed amount of money, over and above the funds in an account, that a borrower can draw as a loan
- Liquid assets: accounts and deposits that can be easily transferred into cash, such as demand deposits, short-term deposits and publicly traded stocks
- Minimum opening deposit: the minimum amount of money that is needed to open and maintain an account without incurring service fees
- Non-resident account: a bank account held by a person from outside the country where the bank is located
Online banking: a secure method of conducting transactions such as bill payments and account transfers, using the Internet
- Personal identification number (PIN): a numeric code, usually four or six digits long, that is used to verify the identity of a cardholder and authorize transactions
- Savings account: a bank account that bears interest without a stated maturity, that can be used as an on-demand account
- Service charge: the fees charged by a bank for the use of bank accounts and services
- Stop payment: a directive by an account-holder to not honour a cheque that has been issued
- Telephone banking: a means of using the telephone to conduct bank transactions, with instructions carried out by a physical person or an interactive voice response (IVR) system
- Term deposit: a high interest bearing savings/investment account that term lengths and set redemption options
- Wire transfer: an electronic transfer of funds between two financial institutions