The banking system of Canada

Largest Banks in Canada

According to the World Economic Forum's Global Competitiveness Report, Canada is among the top three countries with the safest banks worldwide. In nearly 100 years, Canada has experienced only two regional bank failures.

In 2024, Canada's banking system remains one of the most advanced and reliable globally. The country has over 80 banks, about 5,600 bank branches, and more than 18,600 ATMs, making it one of the countries with the highest number of ATMs per capita.

The largest banks in Canada by total assets are Royal Bank of Canada (RBC), Toronto-Dominion Bank (TD), Scotiabank, Bank of Montreal (BMO), and Canadian Imperial Bank of Commerce (CIBC), also known as the "Big Five." These banks play a key role in the country's economy and continue to show resilience in the face of global challenges.

In 2024, Canada's major banks continue to offer various programs for newcomers to help them adapt quickly and access banking services.

Royal Bank of Canada (RBC)

RBC offers the "Newcomer Advantage" package, which includes free banking for the first year, credit cards with limits up to CAD 15,000 without a credit history, and favorable mortgage and auto loan terms. For customer convenience, RBC provides support in various languages, offering services in 200 languages.

Toronto-Dominion Bank (TD)

TD has developed the "New to Canada Banking Package," which also provides free banking for the first year with unlimited transactions on a current account. Newcomers are offered credit cards with no annual fee in the first year, even without a credit history. TD also offers bonuses of up to CAD 1,785 when certain conditions are met.

Scotiabank

Scotiabank's "StartRight" program offers free Preferred Package account services for the first year, as well as bonuses of up to CAD 2,000 for opening accounts and meeting certain conditions. The program also includes reduced international transfer fees and access to special offers on credit cards and investments.

Bank of Montreal (BMO)

BMO provides the "NewStart" program, under which newcomers can enjoy free Performance Chequing plan services for the first year. Additionally, BMO offers free safety deposit box rental for 12 months and commission-free international money transfers, as well as credit cards and mortgages without requiring a credit history.

Canadian Imperial Bank of Commerce (CIBC)

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CIBC also offers free account services for two years, credit cards with no annual fee in the first year, and bonuses of up to CAD 600 when opening accounts and meeting certain conditions.

All of these banks have offices in most Canadian cities. There are also many branches of international banks such as Citibank, J.P. Morgan Bank, Société Générale, UBS, and others.

Technological Innovations and Open Banking

In 2024, Canadian banks are actively implementing new technologies, including artificial intelligence and digital identification systems, making services more accessible and secure for customers. An important trend remains the development of open banking, which allows consumers to safely share their financial data between various services, potentially transforming the financial services market in the future.

Bank Accounts and Payment Methods in Canada

The main payment methods in Canada include debit and credit cards, checks, cash withdrawn from ATMs, and money transfers to and from bank accounts.

Bank Accounts

You can open a bank account in Canada even if you don't have a job and even if you're a foreigner. Usually, you need to visit a bank in person and provide identification, a Social Insurance Number (SIN), and immigration documents. You may also need an employee ID card with your photo or a debit or credit card with your name and signature.

Some banks offer low-cost accounts (around CAD 4 per month). These financial institutions include BMO, CIBC, HSBC, ICBC, KEB Hana Bank Canada, Laurentian Bank, National Bank, RBC, Scotiabank, and TD Canada Trust. For example, RBC offers a "Day to Day Banking" account for CAD 4 per month, and TD Canada Trust has a "Minimum Chequing Account" with a similar cost.

For online banking, there are free checking accounts available at some banks, such as Motive Financial, Motusbank, Tangerine, and Simplii Financial. These accounts have no monthly fees and offer unlimited transactions, making them a popular choice among those who prefer to manage their finances online.

Debit Cards

When you open an account with a Canadian bank, you're typically provided with a debit card that can be used to pay for goods and services, as well as withdraw cash. An important aspect is that banks may set limits on cash withdrawals using debit cards. These limits vary depending on the bank and account type. For example, cash withdrawal limits can range from CAD 500 to CAD 3,000 per day, but in some cases, for premium clients, limits can be increased to CAD 5,000 and above.

Regarding fees for using a debit card, they may depend on the type of card and bank. Usually, there's no fee when using your bank's ATMs, but if you use another bank's ATM or a private operator, additional fees may apply. These fees can range from CAD 1 to CAD 9 per transaction.

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Credit Cards

You can also get a credit card when opening an account. It's important to do this as soon as possible to start building a credit history. With such a card, you can obtain a limited amount of money as debt to pay for goods and services. Some banks charge an annual fee for using certain cards. Credit card interest rates in Canada typically range from 9.99% to 20.99%, depending on the type of card and bank. Annual service fees can vary from CAD 0 to over CAD 300, depending on the chosen card and its benefits. You can choose a credit card using the credit card comparison tool.

Money Transfers

The most popular tools for international money transfers are CurrencyFair and Wise. Wise charges a fee of 0.41% to 1.5% of the transfer amount, providing the mid-market exchange rate without hidden markups. CurrencyFair also remains competitive, charging about 0.45% for currency exchange, with a fixed fee of 3 EUR or equivalent in local currency for each transfer.

Alternatively, you can use international transfer systems like PayPal and Western Union. However, their fees may be higher compared to Wise and CurrencyFair.

Here's the English translation, made natural and easy to understand:

Interac e-Transfer is used for domestic transfers in Canada, but can also be used to send money abroad through certain services like Western Union. However, it's not the most popular option for international transfers due to limitations and potential extra fees.

Checks

A check is a written "payment order" that you sign and give to someone as payment. For checks up to $1,500 CAD, the maximum hold period is 4-5 days, and you can immediately access the first $100 CAD. For checks over $1,500 CAD, the maximum hold period is 7-8 days.

ATMs

In Canada, ATMs are called ATMs (Automated Teller Machines) or ABMs (Automated Banking Machines). Fees may include: client fee ($1-2 CAD), ATM network access fee ($2-3 CAD), and service fee ($1-5 CAD). If you withdraw money from your bank's ATM, there's usually no fee.

Loans: Types, Rates, and Borrower Requirements

To get a loan from a Canadian financial institution, you typically need:

• A Canadian credit history (except for microloans or special programs)
• ID, like a permanent resident card
• A permanent address in Canada
• A bank account
• Proof of income

The most popular types of bank financing include personal loans, lines of credit, microloans, and mortgages.

Personal Loan

With a personal loan, you borrow a fixed amount and repay it over a set period with regular payments plus interest. Personal loans can be secured by your assets or unsecured (with higher interest rates). You can use a personal loan for buying a car, medical expenses, a down payment on a house, etc.

Most personal loans range from $500 CAD to $50,000 CAD for 6 to 60 months. Annual interest rates can vary from 6.99% to 46.96% depending on the institution, term, and loan amount.

Line of Credit

A line of credit is an agreement to lend a set amount. You borrow from the bank without a specific purpose. These loans can be secured or unsecured.

The interest rate on a line of credit is usually variable and lower than credit cards and personal loans. In 2024, the average rate for secured lines of credit is about 6-7%, and for unsecured lines, 9% to 10%. Financial institutions usually require a minimum family income of $35,000 CAD to $50,000 CAD per year.

Payday Loans

Payday loans are short-term loans up to $1,500 CAD, usually for up to 62 days, with high interest rates. If you can't repay on time, you'll pay more interest and fees, increasing your debt. The lender or a collection agency might sue you and seize your property.

The maximum cost for a two-week $100 CAD loan can range from $14 CAD to $17 CAD depending on the province or territory.

Mortgage

A mortgage is a long-term loan used to buy a home, secured by the property.

The minimum down payment is 5% to 20% depending on the purchase price. Terms can vary from a few months to several years. Interest rates can be variable or fixed. The average fixed rate is 4.5%. Total monthly housing costs (including mortgage payments, property taxes, and utilities) shouldn't exceed 32% of family income. However, in some major cities like Toronto and Vancouver, housing costs often exceed this, making home ownership less affordable for many Canadians.

Are Loans Popular Among Canadians?

All types of loans are extremely popular in Canada. Statistics Canada data shows that the average Canadian household owes $1.76 CAD for every dollar of disposable income. This includes mortgages, car loans, and credit card debt.

Canada has the highest household debt-to-GDP ratio (over 100%) among G7 countries. In total, Canadians owe over $2 trillion CAD, according to the Bank for International Settlements.

According to the Canada Mortgage and Housing Corporation, mortgages account for more than half of Canadian households' debt burden. The total average household debt is higher in cities with expensive real estate, ranging from just under $200,000 CAD to over $500,000 CAD in Vancouver and Toronto.

Why It's Important to Work on Your Credit History

You might be a law-abiding person with plenty of money, but you'll be practically invisible to the Canadian banking system without a credit history in this country. Your credit history from another country doesn't transfer to Canada, so it's important to start building it as soon as you arrive. Without a credit history, Canadian banks can't assess your creditworthiness, which can make it difficult to get loans and mortgages.

It's recommended to start working on your credit history as soon as you arrive in Canada. Start by getting one or two credit cards. Don't accumulate debt until you start receiving a stable income. Initially, use small loans for purchases that you can pay off in 1-2 months. When you find permanent work, you can gradually increase your debt amount.

Monitor your account. Contact Canadian credit bureaus, TransUnion or Equifax, at least once a year. The minimum credit score is 300, the maximum is 900. A score above 660 is considered good, and a score between 680 and 700 gives you good chances of getting a loan on favorable terms.

Don't forget about the statement date. This is the day when your credit company checks the current status of your credit card. If you have a large unpaid debt at the time of the check, you'll likely lose a few credit score points.

Getting new loans and using a credit card can affect your scores. To maintain a high rating, follow these tips:

• Increasing your credit card limit will work in your favor. A limit of $2,500 CAD is enough for banks to see that you're trustworthy and can manage your finances well.
• Don't borrow more than 30-35% of your credit limit. If you borrow too much, banks might think you're having financial troubles, which could negatively impact your credit score. If you can pay off the debt on time, simply increase your credit limit instead. This way, you'll get all the money you need without going over the limit.
• Try to avoid having multiple open debts at the same time — this can lower your credit score.
• Don't forget to pay off your debt or make the minimum payment on time. Make sure to do this at least one day before the payment deadline.