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Banking 101: All You Need To Know About Banking In Canada

A simple guide to banking in Canada The only intro to banking you'll need

Managing and growing your money doesn’t have to be complicated. Here are the essentials you need to learn about banks in Canada so you can find the right place to hide your hard-earned treasure.

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Author: Sigrid Forberg
Author: Amy Tokic

By Sigrid Forberg & Amy Tokic

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While stashing your cash under your mattress is always an option for saving your money, most people take a different approach.

With more than 99% of Canadian adults holding a bank account, Canada has one of the most accessible banking systems globally, according to a 2023 report from the Canadian Bankers Association. But, just because most people use a bank, it doesn’t mean they know everything about how banks work — and it doesn’t mean they have the right banking partner for them.

Many people stick with the same banking institution their whole lives just because it’s familiar, even if that institution pays practically nothing in interest or doesn’t offer the right services for them.

So take a look around: With the right info, you can make sure your cash is hustling for you instead of hiding under the sheets all day.

What is banking?

Simply put, banking refers to the business that financial institutions carry out and the services they offer. Those institutions are designed to manage consumers’ cash and borrowing transactions, among other things.

What is a bank?

Banks are for-profit organizations owned by investors. The main goal of a bank is to make money for the investors — and unlike with a credit union, you’re not a bank "member," which means you have no say in bank policies.

Banks don’t restrict eligibility to certain groups of people. Anyone who lives in a bank's serviceable area can open an account and become a customer.

Banks can be broken down into online-only operations and brick-and-mortar institutions. Online banks are completely virtual and have few or no physical locations. While they can’t offer face-to-face service like brick-and-mortar banks, their lower overhead typically allows them to offer better rates.

Getting the most out of your bank account is a lot easier when you know your options. 

Types of bank accounts

Here are the most common types of accounts, which most banks offer to help people manage spending, minimize fees and reach their savings goals.

Savings accounts

A savings account is a type of bank account that pays interest on the money you deposit, which is also referred to as the principal. Often, people who open a savings account will also have a separate chequing account for their everyday banking needs. It typically provides a convenient and prompt way to withdraw and transfer funds.

More: Learn about savings accounts

High interest savings accounts

A high interest savings account (HISA) is a savings account that pays out a higher interest rate than traditional savings or chequing accounts. However, HISAs are less flexible than regular savings accounts and interest rates are dependent on and affected by the Bank of Canada rate. They are a good choice for short-term investment.

More: Learn about high interest savings accounts

Chequing accounts

A basic chequing account is a simple product many consumers use for everyday tasks like depositing pay cheques, making cash withdrawals and transferring funds.

You can write a cheque to pay for things using your checking account, but most users today prefer to use a debit card or withdraw cash at an ATM.

Modern banks also offer convenient online bill-pay services, mobile check deposits and 24/7 services and customer support. 

Some accounts are free, while others will charge a fee. That fee may be waived if you maintain a certain minimum balance.

More: Learn about chequing accounts

Hybrid accounts

A hybrid bank account combines the benefits of a high-interest savings account and a chequing account. With a hybrid bank account, you can enjoy the higher interest rate of a HISA while still having the flexibility to use your funds for daily transactions. You can use your hybrid bank account to grow your money with interest, or as a fully functional chequing account for debit payments, withdrawals, Interac e-transfers, bill payments and more.

GICs (Guaranteed Investment Certificates)

Guaranteed Investment Certificates (GICs) are a type of investment that prioritizes security. With a GIC, you’re guaranteed to receive your initial investment back at the end of the term, plus interest. The primary difference between GICs and term deposits is the length of the term. GICs tend to have longer terms than term deposits.

More: What is a GIC? 

TFSAs

A TFSA, or Tax-Free Savings Account, is a registered savings account that offers significant tax advantages. By holding qualified investments in the account, you can generate interest, capital gains, and dividends tax-free. This makes it an attractive option for individuals who want to save money without incurring tax liabilities. You can withdraw from a TFSA at any time with no penalty.

More: What is a TFSA?

RRSPs

A Registered Retirement Savings Plan (RRSP) is an account in which you can save money for retirement. When you contribute to an RRSP, the funds you put in are not subject to taxation in the year you make the contribution, making it a tax-advantaged investment option. Withdrawals from RRSPs are taxed as income.

More: What is a registered retirement savings plan (RRSP)?

RESPs

An RESP is an investment account that allows family members and friends to contribute funds towards a child's education. The money invested in this account will grow tax-free, and may also be eligible for government contributions, such as the Canada Education Savings Grant (CESG) and the Canada Learning Bond (CLB). There are three different types of RESP plans: the Family Plan, the Individual Plan, and the Group Plan. The ideal plan for your child will depend on your family's unique needs.

More: What is a registered education savings plan (RESP)?

Banking basics

Canada boasts a strong banking system that is home to both domestic and international banks. Canadians have access to a range of different account types, including savings, chequing, and business accounts, to help them manage their finances. Some accounts have fees, minimum balance requirements, or a range of features and benefits.

More: Banking basics 

Banking FAQs

  • How to open a bank account

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    You will need to provide personal information such as your home address, email address, and phone number, as well as identification documents such as a driver's license, social insurance number (SIN), as well as a minimum opening deposit amount. Depending on the bank, you can either open an account online or in-person at a branch.

  • What is the difference between a chequing and savings account?

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    A chequing account is best for managing daily transactions, such as debit card purchases, bill payments, and transfers. A savings account is best for setting aside money for longer-term goals, such as a vacation. Since savings accounts are not intended for frequent transactions, you can keep your money in the account for a longer period of time to earn interest.

  • Can I take money out of a TFSA?

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    Money invested in a TFSA can be withdrawn at any time and for any reason without incurring tax consequences. Additionally, withdrawing funds from your TFSA does not affect the total amount of contributions you have already made for the year.

  • Can I take money out of an RRSP?

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    You can withdraw funds from your RESP to cover any education-related costs associated with full-time or part-time enrollment in qualifying post-secondary educational institutions. If the RESP is not used for education, you can keep the RESP open, replace the beneficiary, or transfer the money to other registered savings plans. You can also close the RESP, which will result in a penalty and tax consequences.

About our authors: faces of finance

Sigrid Forberg
Sigrid Forberg, Associate Editor
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Sigrid’s current role is associate editor, and she has also worked as a reporter and staff writer on the Money.ca team.

In her time with the company, she’s written about everything from estate planning in your 20s to figuring out how much tile you need to renovate a bathroom. Regardless of the topic, Sigrid takes pride in demystifying complex financial issues and turning them into stories that help readers find the personal in personal finance topics.

Amy Tokic
Amy Tokic, Associate Content Editor (SEO)
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Amy Tokic is an SEO content editor for Money.ca. She holds a B.A. in Communications from the University of Windsor. Amy is an award-winning author and has been writing professionally for 15 years, publishing articles in the lifestyle and health sectors. She’s been a guest on many podcasts, and been quoted and sourced in publications such as Toronto Star, PopSugar, Martha Stewart Living and many more.

In her free time, Amy loves perusing used book and record stores, and chasing squirrels with wild abandon (a habit attributed to spending too much time with her pooches).

Disclaimer

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