On a daily basis, millions of individuals use financial services offered by their bank. From processing deposits to offering mortgages to home owners, banks are important when it comes to personal financial management. As a result, getting to know how banks work and the basics of the Canadian banking system is a must for individuals who wish to become better managers of their financial matters.
Here are 8 things that you should know about your bank
1. Banks Are Regulated By The Federal Government
Although banks are corporate entities, they are regulated by the Government of Canada and are known as “chartered banks”. All banks that you make withdraws from and deposits in are chartered banks.
2. Different Types of Banks
In Canada, there are three types of banks that fall into the categories of Schedule I, Schedule II and Schedule III. Schedule I banks are domestic financial institutions and are authorized to accept deposits. The majority of the Schedule I banks have branches that you can walk into depending on where you are located in the country. Schedule II banks are foreign bank subsidiaries that authorized to accept deposits. Foreign bank subsidiaries are controlled by eligible foreign institutions. There are very few branches of these banks that clients can conduct transactions with on a regular basis. Schedule III banks are foreign bank branches of foreign institutions that have been authorized to do banking business in Canada. Once again, few individuals can have access to these banks on a regular basis.
3. A Bank Is Not A Credit Union
Although they provide the basic financial services, it is important to distinguish the difference between a bank and a credit union. The big difference between the two entities is how they see you as an user. Banks refer to you as a “client” versus credit unions see you as a “member” in which you can benefit from several advantages such as low interest loans and credit cards. In the province of Quebec, the sole credit union is the Mouvement Desjardins.
4. Insured Deposits
In the event that a bank experience financial difficulties or fails, the money that you deposit is insured up to $100,000 by Canada Deposit Insurance Corporation. For your deposit to be insured, it must go into one of the following accounts: savings accounts and chequing accounts, guaranteed investment certificates (GICs) and other term deposits with an original term to maturity of five years or less, money orders, travellers’ cheques and bank drafts.
5. Products / Services
Are all banks the same? No. Banks will try to set themselves apart from the competitors by offerings different products and / or services. Depending on what your present and future needs are, banks will try to sell products / or services that they think fits you. It is your responsibility to conduct thorough research to identify the best option.
6. Services Fees
Before conducting a transaction that you do not perform on a regular basis, inquire about the bank’s service fees. From currency exchange to account overdrafts, banks assigns fees to specific services you may not deem worthy to pay. As a result, you should try to avoid the fees when possible.
7. Online Banking
To save you time and effort, you should know the type of transactions that you can do online. Online banking features such as paying bills, transferring funds and making investment are offered by most banks. For example, ING Direct now permits its clients to deposit cheques via their smartphone. It is best to ask your bank about other functions that aid you in managing your money.
8. The Role of The Bank of Canada
Very often, you will hear the Bank of Canada in the news where it comes to financial matters. It is important to know the Bank of Canada is not a chartered bank that you can become a client, however; it plays a vital role when it comes to your banking transactions. The Bank of Canada is responsible for such things as a) designing, producing and distributing Canadian currency, b) setting interest rates used by financial institutions and c) managing the inflation rate.
Many clients often complain that they are getting robbed by their respective banks. One must understand how banks function as a corporate entity within a system that is regulated for the good of Canadians.
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