How Canada’s Banking Systems Work Step By Step

Canada’s banking systems are sound. Their banking system is internationally recognized and accepted around the world. 

Creating a bank account is a crucial step toward settling in Canada

You need a personal bank account to see transactions like paying your utility bills, renting or buying accommodations, getting a phone line, receiving your salary, etc. 

Canada’s Banking System

Canada’s banking system comprises different sections. Some of these sectors include:

Deciding On A Bank

Deciding on a bank can be challenging and confusing, but personal research can help determine the right bank.

There are several national banks with offices and branches in some Canadian cities. There are also regional banks, credit unions, and international banks.

Services such as online banking and automatic banking machines, and many of the major ones offer programs for newcomers that come with specific incentives.

Before deciding on a bank, it would be best to consider the convenience of transiting from your home/work to any of the bank’s branches, the bank’s working hours, and their general features that align with your needs.

Read also:  How To Choose The Best Bank In Canada For You

Creating A Bank Account

With over a hundred bank account packages from over twenty banks, there are several options for creating a bank account in Canada.

To create an account, you will have to:

  1. Visit the bank that meets your preference, either in-person or via their official website, to apply to create an account.
  2. Provide two original and valid copies of identification. 

In Canada, you can decide to own a bank account if:

  1. You currently do not have a job
  2. You are not buoyant enough to fund your account immediately.
  3. You have a poor rating in your credit account
  4. You have had a history of bankruptcy.

Chequing, savings, and investment accounts are the main types of bank accounts one can open.

For users who wish to save their money, savings and investment accounts would be the best choice due to the higher interest offered than chequing accounts. 

Canada has banks such as Registered Education Savings Plans (RESPs), Tax-Free Savings Accounts (TFSAs), Registered Retirement Savings Plans (RRSPs), and Registered Disability Savings Plans (RDSPs).

The Government provides them to encourage savings that have relatively more minor taxes.

Chequing accounts enable its user to use a debit card and write cheques. It is very beneficial to an employer to make use of payroll deposits. 

But you must understand that the monthly charges of a chequing account depend on the number of allowed transactions.

Bank Security

Bank security is practically the protection a bank offers to a customer. You want to feel safe and relaxed keeping your money in Canadian banks with the most unlikely tendency to fold.

Everyone wants a bank that is well-managed, well-capitalized, and well-regulated.

One of these bank security is the Canada Deposit Insurance Corporation (CDIC), founded in 1967 to stabilize and provide deposit insurance to the country’s financial system. 

They make it possible for accounts to recover up to $100,000 if the bank is a member of the Canada Deposit Insurance Corporation (CDIC).

Read also:  How to Start Investing as a Newcomer to Canada

Bank Services

All banks in Canada offer services to their customers. Most of those services provided by banks include: 

  1. Credit Card

A credit card enables a customer to purchase something even when he doesn’t have sufficient funds. They can make the purchase and pay it back later with interest.

Credit rating is essential as it measures how you can borrow from your bank. The higher your rating, the more money you can borrow and vice versa.

If you pay for the money you borrowed on the due date, they will not charge any interest fee. However, credit cards enable users to borrow money and deliver it within a month, so interest rates vary. 

It is essential you carefully think it through before using one.

You can apply either online or in person to get a credit card. 

You can also sign up for credit card reward schemes. In these schemes, users get points for every purchase made on the credit card. In addition, users can cash in the points for products and services. 

  1. Debit Cards

Banks offer debit cards to customers that carry little cash around. Users can use debit cards to make payments without any extra charge.

Banks and Merchants make use of the Interac system as a payment system. For example, using Interac email transfers, also known as e-transfers, enables customers to transfer money online to other customers with a Canadian bank account with features of the Interac system. 

Cheques

It is a service used mainly by firms to see out significant transactions. Therefore, this service mainly attracts charges. 

To successfully do a transaction, you must have the total amount of money specified in your cheque. You cannot carry out transactions on credit.

If you do not have a sufficient amount to see a transaction, the cheque will be invalid on non-sufficient funds (NSF), and they will charge you.

  1. Automated Teller Machines (ATMs)

Automated Teller Machines (ATMs) are one of the services that relieve customers of stress.

It is crucial as it makes basic banking activities like transferring funds between two accounts, depositing and withdrawing money, printing account statements, and more conveniently possible and easy with credit or debit cards.

They are self-service machines that banks or individuals can own. The use of automated teller machines varies on its owner’s interest.

When you make a transaction from your bank, there will be no charge, but there will be charges if you use an ATM from another bank.

You can find privately-owned ATMs in restaurants, bars, malls, and other public places. However, this could be very costly as they will charge you from both your bank and the machine itself.

  1. Loan Service

Offering a loan is one of the services rendered by banks. These loans could be for individuals or corporate businesses.

Before obtaining a loan, the one receiving the loan must be eligible and agree to the agreement term. However, there is always an interest that you must pay and the principal amount. 

It is essential to review the terms of the agreement to know if you can pay on those terms as there are penalties for defaulters.

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