Banking in Canada: Savings & Chequing Accounts
Banks and banking services are available worldwide. These services come in many different forms. It all depends on what people’s needs are. Like in the whole world, Canada is also home to many banks and unique banking services. Citizens and permanent residents of Canada can benefit from using these services and get their finances in order. The information below will help you understand all of the services associated with banks and figure out what you need.
What Do you Mean by Banking?
Banking refers to the industry of financial institutions that offer services around financial transactions. That includes giving credit, handling cash, helping people transfer money, and much more. Banking services can also be used for storing credit and cash safely.
In this global economy, banking is one of the essential drivers for growth. The industry gives liquidity to companies, families, and individuals to invest their money into their future.
In Canada, people of all ages and different backgrounds use banking services. Young students use student credit cards, older people have savings accounts, and new families get mortgages to buy their dream homes.
How to Open a Bank Account in Canada?
It’s pretty simple to open a bank account in one of many Canadian banks. All their services are transparent, and there are many available options. There are over 20 top-tier banks in Canada that offer over 100 different accounts and packages.
If you want to open an account, you will have to go to your desired bank and bring the necessary documents with you. On the other hand, the chances are that you can go through this process online. In most cases, banks require two documents to verify someone’s identity.
People can open personal bank accounts in Canada even if they:
- Are currently unemployed;
- Don’t have any cash to deposit onto their accounts straight away;
- Have a poor credit score;
- Have gone through bankruptcy in the past;
How Do Banks Work?
Banks are regulated, capitalized, and thoroughly managed institutions. In Canada, there are entirely private banks and government-backed banks that secure funding through government means. However, all banks need to be verified members of the CDIC.
What is CDIC?
The Canada Deposit Insurance Corporation offers protection to all chequing and savings accounts up to CAD 100k. Simply put, if the bank goes under for some reason, all account holders will be reimbursed with an amount up to CAD 100k.
The CDIC acts as a stability and deposit insurance institution for the whole financial system of Canada. Banks offer their capital and provide credits, mortgages, and loans by using other clients’ assets.
However, this doesn’t mean that your cash won’t be available to you whenever you want to withdraw or make a payment.
What Are the 5 Most Important Banking Services in Canada?
The majority of banks in Canada offer similar types of services. Here are 5 of the most common services that they offer:
Banks offer many different types of loans, such as business loans or personal loans. A personal loan can help people make necessary payments like education expenses, renovations, car purchases, etc. When someone gets a personal loan, they receive a fixed amount.
At the same time, the borrower agrees to repay that loan, including interest over a certain period. The bank sets the loan terms, including the payment schedule and interest.
Credit & Debit Cards
A credit card gives you access to credit or money that you can borrow instantly to pay for something. So, that you can immediately purchase something even if you don’t have cash, but you will have to pay back that amount with interest.
Interests are usually low, but you will have to pay back that purchase on time to avoid being charged with additional interest. Credit rating is crucial in Canada’s banking system, and you need to maintain it correctly to get a good credit card.
You can get most credit cards either online or directly in a bank. If you clear out your bill each month, you don’t get any interest on your credit. Credit cards come in many different forms and for different uses. Depending on your credit score, you can qualify for Best, Better, or Worse credit cards.
You can use debit cards as an alternative payment method anywhere in Canada. In general, there are no fees associated with their use. That’s why a very small number of Canadians carry and pay with cash.
When you get a debit card, it needs to be connected to a chequing account. Unlike with credit cards, debit cards spend the money that you have in your account.
Cheques are still popular for payments where you can’t pay directly or using credit cards. It often involves paying rent through the mail, bills, or some other larger payments. When writing a cheque, it’s essential to have the amount in the account which you specified on the document.
If not, your payment won’t be completed, and the bank will probably charge you with a fee. This form of payment is best for recurring payments that only happen once a month.
ATMs or Automated Teller Machines offer a lot of conveniences. Using these machines, people can do various banking transactions like withdrawing, depositing, or transferring money from one account to another.
You can use credit or debit cards with ATMs, and depending on what kind of card you have, some ATMs will not be available. For example, closed-loop cards can only be used on the ATMs of the bank that issued the card.
On the other hand, there are open-loop cards like Visa or Mastercard that can be used on various machines and in stores. The fees and interest on your transactions depend on the bank, your card, and the ATM you are using.
Everyone needs a bank account. When you get your pay, it will be directed directly into your account. Everyone who is at least 16 years old can open up a bank account. However, it varies from one bank to another and on the bank account you want to get.
Even non-residents can open bank accounts in Canadian banks. This account is the funds that you leave with the bank for safekeeping, managing, and spending. You can always withdraw your money from this account and get different benefits depending on the account.
This type of account is classified as interest-bearing, meaning that, by committing your money to it, you will be earning through a modest interest rate. Even though the earnings are usually modest, the reliability and safety these types of accounts offer are undeniable.
You should be aware that savings accounts have certain limitations when it comes to withdrawing cash from them. Each bank is different, and you should discuss the limits with your banker.
The most common uses for savings accounts include saving for a car, a vacation, creating emergency funds, or just making your excess cash make more money for you.
These types of accounts are considered one of the most liquid and flexible account types around. Also known as transactional accounts, they can be accessed through many different means. Let’s name a few:
- Electronic transfers
- Automated teller machines (ATMs)
- Electronic debit
- Credit cards
As you can see, this account type can be used with just about anything, and this makes it perfect for people that may need this kind of flexibility. Another advantage is its liquidity, meaning that you can make withdrawals and deposit pretty much without any restrictions.
Business Banking Accounts
Also known as commercial bank accounts, they are intended for use in managing finances for businesses and corporations. These accounts are usually the equivalent of checking accounts or some other liquid account option meaning that companies are free to withdraw from the account at any point.
When opening this kind of account, businesses are usually offered additional services like cash and investment management, credit products, etc.
Since they are servicing businesses and corporations, these accounts usually have service charges that are a bit more expensive than those for regular accounts. In some cases, banks will assign special relationship managers to help businesses get the most out of their accounts.
Students Banking Account
It might seem that students don’t need a bank account to function; they don’t have income after all. This, however, isn’t entirely true. Many college students get student loans, financial aid, scholarships, etc. Recognizing this, many banks started offering bank accounts focused on students.
Student accounts come with many benefits to help students keep their accounts without having a steady money stream. The maintenance fees might be waived, as well as ATM withdrawal charges; the minimum balance might be ignored as well, and finally, they might get some kind of program to help them learn finance management.
RELATED: Scotiabank Student Account
Senior Banking Accounts
Like student bank accounts, these specialized bank accounts are designed to cater to senior citizens. Now, some banks will have a whole category of accounts intended for senior citizens, while others will just start including perks for people who are 65+ years old once their account holders reach that age.
There are a lot of different accounts with a lot of perks depending on the bank. We recommend that you be patient when choosing, as there are many options here, and what you pick should be based on your needs and not the lists of potentially useless perks.
Are Online Banks Legit in Canada?
There are more and more people that use the services of strictly online banks. As younger generations are starting to use banking services, their technology habits come into play. At the same time, banks are looking to modernize themselves and provide adequate services for this demographic.
At the same time, people who use the services of traditional banks often use various online services as well. Mobile banking is a hot trend because it’s convenient and straightforward. There’s no need to go to the bank, carry documents, and wait in lines to talk to a bank representative.
Still, both online banks and traditional banks have their advantages.
What are the Advantages of Online Banking?
Online banking lets you do anything you want without having to get out of your home. You can make instant funds transfers between internal accounts. But with external accounts, the transaction might take up to three days.
Most deposit checks can be done with a single button press and a photo. Online banking includes powerful apps that can let you do all kinds of things. Most online banks give their users debit cards so that they can withdraw funds on ATMs.
These banks often have lower fees and interest rates. That’s because they don’t have any physical presence and added expenses that they cover, which allows them to give their users various conveniences. For example, an average interest rate in Canada for online savings accounts is around 0.10%, while traditional banks will give up to 0.02%.
What Are the Advantages of Traditional Banking?
Traditional banks are not all bad. The first significant difference with these banks is that you can come to a nearby branch and talk to a teller or some other support personnel. Apart from personal customer services, these banks let you deposit cash directly into an account.
It’s very convenient for people who get bonuses or are simply paid in cash. They can put this money instantly on the side. These banks also offer notary services and can convert your money into some foreign currency.
Banking services are essential in this age. They help you move and store your money with ease. At the same time, they allow you to invest in your future through loans and credits. Still, it’s crucial to find the right service for your needs. Don’t get a bank account just because people around you have one. Assess your financial requirements and how banking services can improve your cash flow.