Are you opening a bank account for the first time in Canada, or opening your first bank account? This guide contains everything you need to know about opening a bank account in Canada. Read more about the different types of bank accounts, what you need to open a bank account, and what to consider when choosing an account type and who you bank with.
What are the different types of bank accounts in Canada
The first thing to consider when opening a bank account in Canada is the type of account you will open. Choosing a bank account starts with identifying your financial and banking needs and then zeroing in on the products and services that will best fit those needs. There are several products within the different types of accounts you can choose from.
Chequing accounts are intended for day-to-day banking needs, such as making daily purchases, paying recurring monthly bills and expenses, and receiving your payroll deposits (once you provide your employer with a void cheque). Chequing accounts typically have zero or very low interest rates on deposits. They are geared towards a higher amount of financial activity. You can make a higher amount of transactions per month before hitting your limit (when the bank may charge you additional service fees for additional transactions).
If this is your first time opening a bank account, a chequing account is the type of bank account most Canadians choose to open for its flexibility and focus on daily banking tasks.
A savings account is not meant for daily use, but instead intended for saving money and holding onto funds you don’t access on a regular basis. A savings account can be a good place to park an emergency fund which can be used for unexpected expenses such as car repairs or vet bills.
Savings accounts typically offer a higher interest percentage – the bank earns interest on the account balance. Banks offer various types of savings accounts, like high-interest savings accounts, tax-free savings accounts (TFSAs), and registered retirement savings accounts (RRSPs).
A student bank account functions as a regular bank account, and is a great option for someone’s first bank account. Student bank accounts often have perks such as low minimum deposit requirements and occasionally do not require you to pay monthly account maintenance fees. Students can choose between a savings account or a chequing account with most youth and student plans offered by Canadian banks.
Just as business owners have unique insurance needs, they also need specific banking features. One of the first steps in establishing a business is opening a business bank account. This allows business owners to maintain clean and accurate bookkeeping for tax purposes, track spending and profitability, and provide access to key business banking tools such as Point of Sale systems.
What you need to open a bank account in Canada
The steps involved to open a bank account in Canada are simple but do have requirements to which you need to adhere.
To begin, you must be over the age of 18 to open a bank account at many Canadian financial institutions. Those under 18 may be required to have a legal guardian present to open the account with them. However, note that these stipulations and age stipulations can change from bank to bank.
The amount of money (or first deposit) required to open an account depends on the financial institution you are banking with. Some will not require any amount of money to create a bank account while others may require you to have anywhere between $25 to $100 to start.
In order to open a bank account in Canada, you also need to provide photographic identification (ID) to the financial institution. Banks require this to ensure you are – in fact – who you say you are, and to do their due diligence in preventing identity theft or money laundering.
An acceptable photo ID could be one of the following:
- Valid passport
- Drivers license
- Permanent residency card or immigration papers
- Photo ID from your employer
Can you open a bank account online?
Yes, you can open a bank account online. You can visit the website of the financial institution of your choice and you will be directed to opening a chequing account online. You will need to provide the same documentation to confirm your identity mentioned above , and you will be asked to sign any relevant documents electronically.
Can you open a bank account if you are not a Canadian citizen?
If you are not a Canadian citizen, you are still able to open a bank account in Canada. Typically, you may be required to open the bank account in person, rather than online.
How to choose a Canadian bank
In Canada, there are five major banks colloquially known as the “Big Five”:
- Royal Bank of Canada (RBC)
- Toronto-Dominion Bank (TD)
- Bank of Nova Scotia (Scotiabank)
- Bank of Montreal (BMO)
- Canadian Imperial Bank of Commerce (CIBC)
Outside of the “Big Five”, there are also small banks and credit unions you can choose from such as Tangerine, EQ Bank, or President’s Choice Financial Services. There are both benefits and drawbacks of choosing a Big Five bank versus a smaller bank or credit union. Some of the benefits of banking with an established bank in Canada are their high levels of financial security, 24-hour customer service, expanded branch hours, access to their ancillary products, and their sheer size.
As with some of Canada’s largest life insurance companies, the country’s big five banks are thought to be “too big to fail”.
It’s true, these large banks are embedded into Canada’s financial structure and economy, and thus offer a tremendous amount of stability. However, fear of your money disappearing should something happen to your bank is unfounded. Just like how there are fail-safes in place should your insurance company go bankrupt, the Canada Deposit Insurance Corporation (CDIC) protects deposits you make into Canadian banks and savings institutions.
No matter the size of the bank, as long as it falls under the CDIC’s mandate, one’s deposits are covered up to $100,000 should something happen to the institution. While most credit unions don’t fall under the CDIC, provincial equivalents typically provide the same coverage as the corporation.
Conversely, the benefits of a “Big Five” bank can also contribute to its drawbacks. Large and established financial institutions are often very conservative when it comes to new technologies and wait for other industry players to introduce features to the general public before they implement them in their own products or services. Features like tap to pay, or signing into your bank account with your fingerprint or Face ID took much longer to come to Canadian banking apps than with their global counterparts.
On the other hand, smaller banks and credit unions are quicker to implement new features and technology as they don’t have the same massive infrastructure to maintain as their bigger competitors. As well, smaller financial organizations often offer competitive contests and promotions to entice new clients to switch to their services.
Their smaller size affords them the opportunity to offer a unique customer service experience more tailored to their client base. However, their drawbacks include less access to their products and services as they don’t have as many physical locations, and a limited product offering compared to larger banks that also have insurance arms offering life insurance, critical illness insurance, disability insurance, balance protection, and more.
Finally, now that you know how to open a bank account in Canada, know that you can also close your bank account fairly easily should you ever need to.
The information provided herein is for general informational purposes only. It is not intended and should not be construed to constitute legal or financial advice.
Call us at 1-888-601-9980 or book time with our licensed experts.