Banking Basics

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Information compiled from the Canadian Banker’s Association Website

Fast Facts Activity:
About Canadian Financial Institutions and
Credit Unions

Check out these links to see how Canadian

Banks and Credit Unions serve Canadians !

https://ccua.com/about-credit-unions/
https://www.cba.ca/cba-history
 Canada’s ranking by the World Economic
Forum for the most sound banking system in
the world?

#1
A ranking achieved for the eighth year in a row
since the 2008 Financial Crisis. Currently
ranked 3rd in 2022

Canadian Bankers Association: www.cba.ca

 Competition

88 banks in Canada compete not only with each

other, but also with a variety of other financial services
providers2
35 trust companies
90 life insurance companies
200 loan, finance and property insurance companies
nearly 900 credit unions and caisse populaires

2 FCAC -- FCAC’s 2007 Cost of Banking Guide - Number of institutions as of 2013

 Accessible

Canada has one of the most accessible banking systems in the world 4

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Banks offer basic low-fee accounts, priced at $4 or less per month.

Youth, students, seniors, Registered Disability Savings Plan

beneficiaries and newcomers to Canada can access discounted or free
accounts.

Not-for-profit organizations can also access community service

accounts.

5 Abacus Data research findings for the CBA, December 2014

 Consumers’ Right to Access Accounts

You can open a personal bank account in Canada if you meet the
identification requirements that are set out in the Access to
Basic Banking Services Regulations under the Bank Act.

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A bank does not have to open a personal account for you if:

It believes that you plan to use the account for illegal or fraudulent purposes.

You have a history of illegal or fraudulent activity in relation to financial services

providers within seven years prior to your request to open the account.

It believes that you knowingly made false statements in the information

provided.

It believes that opening the account would subject other customers or employees
to physical harm, harassment or other abuse.

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A bank does not have to open a personal account for you if:

You refuse to consent to the bank verifying the identification presented or

whether any of the above conditions apply.

The request is made at a branch or point of service where the only accounts
offered are linked to an account at another financial institution. (PC
Financial /CIBC, Tangerine/Scotia Bank)

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If the bank representative cannot open the account, they are
required to advise the consumer in writing ( Refusal Letter ) and
provide them with information on how to contact the regulator.
 Bank Compliance Requirements
Banks and other financial institutions must comply with the
requirements of a number of laws and regulations.

For example there are specific identification requirements

under Canada’s anti-money laundering legislation (AML),
the Proceeds of Crime (Money Laundering) and Terrorist
Financing Act and its various regulations. This is why
financial institutions create a detailed client profile with
information and identification.
 Federal Government Compliance

The Income Tax Act requires banks to ask you for your Social
Insurance Number (SIN) when you open an interest-bearing
account, so the bank can report your interest income to the
government.

Consumers have the right to refuse their SIN and

in most cases will be able to open the account. The
exception would be on those that have tax
sheltering (RRSP and TFSA) as contributions and
withdrawals from are reported to the government.

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 Consumers’ Right to Access Funds
Banks have to Cash Government of Canada cheques up to $1500 per cheque
for non-customers under the Access to Basic Banking Regulations.

One piece of ID from the list, if it bears your signature and

photograph will work. (Ontario Driver’s License alone will
cover the requirement)
Banks are not required to cash a
cheque if:

There is evidence that the cheque has been altered in some way or is
counterfeit.

The cheque is not an item that will be accepted under the Canadian
Payments Association rules.

The bank believes there has been illegal or fraudulent activity involved.

If the bank cannot cash the cheque, it will advise you in writing and
provide you with information on how to contact the regulator.

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 In some cases banks also have agreements with
Provincial Governments to cash cheques for non
customers with specified ID. B.C., Alberta, Quebec and
New Brunswick

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Municipal Government issued social assistance benefits
require that the recipient to open a bank account for direct
deposit to ensure that the funds are deposited on time and
are accessible with no hold funds.

Under special circumstances a person may be able to cash

benefit cheques if the municipality has made a special
agreements with its bank. You can find out which bank is
contracted to serve you by contacting your social services
office.
 Credit bureau check at Account Opening

Banks may conduct, with your consent, a credit bureau check to

help determine the conditions for the account, such as ABM
withdrawal limits and hold fund policies on non-electronic deposits.

Your positive credit history could allow the bank to

offer you higher limits or other enhanced terms such
as partial holds on a smaller portion of the deposit

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Holds on funds deposited by cheque:

When you have a bank account, you may cash most cheques, subject to
applicable hold periods.

Banks may apply a hold on funds deposited by cheque to allow time for
the cheque to clear.

This protects banks and their depositors from losses due to fraud.

Banks will explain their hold funds policy clearly to you during the
account opening process.

The best way to minimize holds is to establish a stable relationship

with your bank branch.

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Direct deposit:

Having funds deposited directly to your account is the easiest way to

guarantee immediate access on the date of payment without concerns
of late, lost, stolen cheques, or holds on funds.

The Government of Canada has largely phased out its use of cheques
by encouraging Canadians to have payments directly deposited to a
bank account for tax refunds, disability and retirement benefits, GST
and Trillium.

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 Tips to get the best value in banking services:

Sign up for a low or no-fee account: Beware of accounts with limited

debit transactions. (debits are any time you are withdrawing or making
payment from your account.

Use the FCAC Account Selector Tool

http://itools-ioutils.fcac-acfc.gc.ca/STCV-OSVC/acst-osco-eng.aspx?f1=1&
f2=1
to see if the features and benefits available on your account are meeting
your needs and to compare cost with other financial institutions.

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 More Tips to get the best value in banking services:

Maintain a minimum balance: It’s possible to avoid monthly

service fees if your bank waives these fees when you maintain a
minimum monthly account balance.

If you have additional products with that bank (e.g., a mortgage or

credit card), ask if your bank offers rebates on service fees.
 More Tips to get the best value in banking services:

Ask for youth or student discounts if you qualify: Banks offer basic
bank accounts with no monthly fees for younger customers and
students. Ask for Senior discounts when you reach the qualifying age.

Ask for a discount if you are a newcomer to Canada: Many banks

offer free or discounted banking for newcomers to Canada.

Use cheaper online banking services: There are accounts available

that offer discounts or even free banking if you use only online services.

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 More Tips to get the best value in banking services:

Take advantage of cash back: Pay for your purchases with debit and get
cash back from the retailer to avoid extra bank transactions.

Avoid ABM convenience fees: Use only your own institution’s bank
machines. You’ll save on fees that the other bank machine owners charge
to use their machines. In fact, 75 per cent of ABM cash withdrawals are
done by customers at their own bank so no convenience fees are charged.

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 More Tips to get the best value in banking services:

Consider overdraft protection: Do you frequently write cheques

that bounce and pay NSF (i.e. insufficient funds) charges?

If so, cut fees by applying for overdraft

protection. The small monthly charge is a lot
lower than NSF charges. And some financial
institutions offer a service that only charges you
when you actually use the overdraft (pay as you
go ODP), for additional savings.
 Cheques:

Canada has one of the most efficient cheque clearing systems in the world
and, while the use of cheques has been declining with the growing
popularity of electronic, mobile app and card payments, financial
institutions in Canada still process nearly a billion cheques every year.1

When you write a cheque, you are agreeing to pay another individual or
organization money that you owe them and you are instructing your bank
to make that payment.

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How Cheques are Processed

All cheques must be processed – or cleared and settled – through the

payments system.

When you deposit a cheque into your account, your bank will send the cheque
to the bank of the person who wrote the cheque. That bank makes sure that
the cheque is legitimate and there are enough funds in the cheque-writer’s
account to cover the cheque, and then sends the funds to your bank.

This process can take anywhere from overnight to a few days, in many cases,
the bank makes the funds available to the customer right away. However, it
isn’t until your bank gets confirmation from the cheque-writer’s bank that it
knows for sure that the funds are available.

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Cheque Holds:

Banks may apply a hold on funds deposited by cheque to manage the risk from
losses in case there aren’t sufficient funds in the cheque-writer’s account to cover
the cheque.

This hold protects the depositor from spending funds from a cheque that might
be reversed because of insufficient funds in the cheque-writer’s account.

Banks are required to provide their hold policies in writing when an account is
opened. The maximum hold period for most cheques deposited to a Canadian
dollar account is four business days, and banks must make $100 available within a
day.

If your financial institution is holding your cheques, ask if there is an alternative

or instead of receiving a paper cheque as payment from your employer, the
government, or individuals, see if the funds can be deposited directly into your
account by direct deposit or an e-mail money transfer: then you will have
immediate access to all of the money.
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Non-sufficient Funds (NSF):

If you deposit a cheque and there is not enough money in the cheque-writer’s
account to cover the cheque, the cheque will be returned to your bank as NSF or
non-sufficient funds. If your bank had given you immediate access to the
funds, it will then remove the funds from your account. If funds are not
available in your account the bank will begin a demand process with both the
cheque issuer and the depositor to ensure that funds are recovered.

If a cheque that you deposited is returned and charged

back to your account the issuer still owes you the
money. Keep a copy of the returned cheque as proof in
case you need to pursue your payment in small claims
court.
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Post-dated Cheques Cashed Early:

You can help in detecting post-dated cheques that are cashed early.
Regularly review your transactions through online, mobile or telephone
banking or at an ABM.

If a post-dated cheque you wrote is mistakenly

processed before its date, you should contact
your bank to let them know. The cheque can be
returned and the amount credited back to your
account up to the day before the date written on
the cheque.

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Stop Payment

A “stop payment” is a service provided by your financial institution, usually

for a fee, to prevent a cheque you wrote from being cashed after you have
given it to the payee. However, putting a stop payment on a cheque does not
guarantee that the funds will not be withdrawn from your account. For a stop
payment to work, your request must be made and processed before the
cheque is cashed.

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A cheque or automated payment with a stop payment lodged on it
may still be cashed if incomplete or incorrect information is
provided to the bank. Exact amount, date, name of the payee
(person to whom the cheque was written ) are required.

Should this happen you are responsible for the cheque. To get the
money back, you will have to contact the payee and arrange
reimbursement..
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Report the situation to your bank as soon as

possible as they may be able to use clearing rules to
assist you depending on when the cheque or debit
was processed to your account.

If the payment is not stopped, you should request

reversal of the fee for the failed service. ($10-15)
 Fraudulent or Counterfeit Cheques:

Sometimes criminals will create counterfeit cheques or change the name or

amount on a legitimate cheque. This is fraud. There are a number of steps
that you can take to protect yourself from cheque fraud:

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Protect Yourself From Cheque Fraud

Keep your cheques in a secure location

Shred any unused cheques

Use ATM, online, mobile or telephone banking to review your bank

transactions regularly and notify your bank of any irregularities

Only accept cheques for legitimate payment of items sold or work

done. Beware of Mystery shopper scams

Beware of altered cheques

Electronic payments such as wire payments, direct

deposit, personal payee through online bill
payments, visa money transfer, or e-mail money
transfers are safe alternatives to cheques
 Mobile Cheque Deposit:

Many banks in Canada offer mobile, or remote, cheque deposit, which

allows you to take a picture of your personal cheque, business cheque
or money order (depending on the bank) and deposit it electronically
using your mobile device.

The process is simple and secure. Your financial

information is not stored on your mobile device
and it is securely encrypted.

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Exercise your knowledge:

Compare your current bank account with two other accounts using the
Account selector tool.

How does it compare in terms of services offered?

Can you save money in monthly fees by changing your habits or

switching to an account that offers the same features at another
financial institution?