Banks and other financial institutions such as “credit unions” and “caisses populaires” are safe places to keep your money. If your financial institution is a member of the Canadian Deposit Insurance Corporation, the government insures the money in your account up to a maximum of $100,000 (go to www.cdic.ca for more information).

A bank account allows you to write cheques, use ABMs to pay your bills, receive funds through direct deposit or use a debit card for purchases. You can get help with these services at your bank branch during business hours. You can also have access to many of these services 24 hours a day, seven days a week, at an ABM, or through telephone or Internet banking. Telephone and Internet banking are very common ways for Canadians to do their banking transactions. Ask your bank for details.

Opening a bank account

In Canada, you have the right to a personal bank account, even if:

• You do not have a job;
• You do not have money to put in the account right away;
• You have poor credit rating; or
• You have been bankrupt.

To open a bank account, you must go to the bank in person and present acceptable identification pieces. The documents you present must be original (not photocopies) and in good condition. Identification that has expired is not valid. There are different combinations of identification you can use to open a bank account.

Remember: Unless the personal bank account you are opening pays interest, you do not need to provide your SIN to the bank.

Note: You do not have to have a permanent address to open a bank account. However, if you do provide an address, the bank may ask you for proof that you live there. An example of such proof would be a recent electricity, cable or telephone bill that includes both your name and address.

If you do not have acceptable identification, contact your federal, provincial or territorial government for information on how to get the pieces of identification you need.

Main types of bank accounts

Chequing accounts allow you to write cheques and usually include the use of a debit card. They often have lower transaction fees than a savings account and may or may not have a fixed monthly fee. You will need a chequing account if your employer uses payroll deposit. Payroll deposit allows your employer to deposit money directly into your chequing account (without of course being able to take out money).

Savings and investment accounts are helpful if you want to save money because they provide higher interest than chequing accounts. With these accounts, you may be allowed to make only certain types of transactions or a certain number of transactions. Additional transactions may be expensive. That is why most consumers who open a savings account also have a chequing account for their day-to-day banking needs.

There are many investment opportunities available in Canada. To learn more about investments, contact your bank or consult the FCAC website at ItPaysToKnow.gc.ca.

Debit cards

Debit cards are accepted in many places and are a popular form of payment in Canada. They are a safe, convenient way to pay for purchases directly from your bank account (direct payment). Make sure that you have sufficient funds in your account when you use direct payment. When you use your debit card in stores, or at an ABM that is not owned by your financial institution, you may be charged an additional fee.

For tips regarding the use of your debit card, consult the FCAC website at ItPaysToKnow.gc.ca.

Cheques

In Canada, cheques are usually used to pay bills by mail, to pay larger amounts (for example, your rent) or where credit cards or direct payment are not accepted. Your bank may charge you a fee for every cheque that you write. You need to have enough money in your account when you write a cheque. If not, the cheque might be returned to you for non-sufficient funds (NSF) and your bank will charge you a fee.

Your bank may apply a “hold” (a waiting period) on money you deposit by cheque. If you need to access your money sooner, you can speak with your bank to see if the waiting period can be shortened. You can also ask your employer or other organizations to deposit funds directly into your account. This way, no hold will be placed on the funds. If the cheque is from a bank or other financial institution located outside of Canada, the cheque can take much longer to clear. Foreign cheques are often held for 30 days.

You have a right to cash a cheque from the federal government free of charge at any bank. You can also cash it at bank branches where you are not a customer, as long as the cheque is for $1,500 or less and you show acceptable identification.

For more information on cheques, consult the FCAC website at ItPaysToKnow.gc.ca.

Credit and loans

Getting credit means that you borrow money to buy something now and pay it back later, with interest. Interest is a fee charged for borrowing the money. Interest rates can be quite high, so you should be very careful how you use credit. Credit comes in many forms: credit cards, lines of credit, mortgages and loans.

Credit cards

Credit cards can be extremely useful and convenient. They have become part of Canadian life, and it can be hard to make certain purchases without one. You will probably save money and manage your finances more effectively if you know how your credit card works.

Choosing a credit card

There are many types of credit cards offered by different financial institutions. To compare the features and costs of cards from different institutions, consult the FCAC website at ItPaysToKnow.gc.ca (look for the “Credit Card Selector Tool” and the “Credit Card Comparison Tables”).

Before you make your final choice, make sure you know and understand all the terms and conditions of your credit card, including:

• The interest rate you must pay on purchases, cash advances and balance transfers;
• How the interest is calculated;
• The annual fee and other applicable fees;
• The grace period (the number of days by which you can be late with a payment); • The minimum monthly payment;
• What happens if you make your payments late;
• Other features, such as introductory offers;
• How your payment will be applied; and
• How to make a complaint if you have a problem with your credit card.

Applying for a credit card

You can apply for credit cards at most banks. Credit cards allow you to spend money on credit and be billed for it within a month. If you pay the full amount back by the due date, you will not be charged interest. If you use your credit card for cash advances, you will be charged interest starting on the date you withdraw the money and continue to be charged interest daily until you pay off the entire cash advance amount.

When your credit card arrives, it will have a card agreement or contract with it explaining the major terms and conditions of the card. Make sure you read and fully understand it, and keep it for your records.

For more information about credit cards, consult the FCAC’s website at ItPaysToKnow.gc.ca.

Personal bank loans

Personal bank loans can often be useful in helping you manage payment for expenses such as post-secondary education, a car or home renovations. Before signing a loan agreement, make sure you clearly understand your obligations when it comes to late or missed payments, co-borrowing, payment of fees and the interest rate.

For more information on personal loans, visit FCAC’s website at ItPaysToKnow.gc.ca.

Lines of credit

A line of credit can be a good short-term loan solution. It often has lower interest rates than other credit products (such as a payday loan or credit card advance) and offers different repayment options. A line of credit allows you to borrow money as needed, up to a maximum credit limit. You are charged interest from the day you withdraw money and until you pay back the loan in full.

Credit reports and scores

In Canada, whenever you take out a loan, use a credit card or take advantage of a “buy now, pay later” offer, a credit-reporting agency collects this information. This becomes part of what is called your credit history. It includes information about whether or not you make your payments on time, and how long it takes you to pay back money you have borrowed.

Having a good credit history and credit score is important. Banks and other financial institutions usually review your credit history and score when deciding whether or not to grant you a loan or credit. Landlords may use your credit history to decide whether or not they will rent to you. If your credit history or score is poor, a lender may refuse to give you a loan or you may have to pay a higher interest rate.

One of the ways to start building a credit history is to get a credit card. However, to maintain a good credit history, make sure to always pay your bills in full and on time, including rent, utilities, cable and insurance premiums.

For more information on credit reports and scores, ask your bank or consult the FCAC website at ItPaysToKnow.gc.ca.

Source: Welcome to Canada: What you should know

www.cic.gc.ca, Immigration, Refugees and Citizenship Canada. Reproduced with the permission of the Minister of Public Works and Government Services Canada, 2013.