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Personal finance

How does the Canadian financial system work?

September 6, 2021

Are you a newcomer to Canada or will you be immigrating soon? Here’s an overview of the main financial considerations to better understand your new reality.

Types of bank accounts

To access the range of payment tools available in Canada, open an account as soon as you choose your financial institution. You’ll also have to choose a transaction plan based on how you intend to use your account. Most institutions offer options that allow you to limit the banking fees associated with some transactions.

The following 2 types of accounts are a good place to start.

Everyday account

A basic account that lets you write cheques, get a debit card and manage everyday financial activities:

  • Deposit your paycheque, annual bonus, money transfers from your home country, etc.
  • Routine transactions (withdrawals, transfers, bill payments, direct payments, mobile deposits, etc.)
  • Withdrawals from an ATM or a service counter

Savings account

An account for setting money aside for the short term or for a major project or investment in the medium or long term. Interest can be paid on it under certain conditions.

To save on banking fees:

  • Choose a monthly transaction plan.
  • Use your financial institution’s ATMs.
  • Use automated and online services instead of going to a service counter.
  • Use a credit card instead of a debit card, but make sure to repay it in full by the due date to make this a worthwhile option!

Main payment methods

The most common payment methods include debit cards, credit cards, cheques and cash. Cash is less popular than it used to be, but it’s still accepted in some places and is more suitable for certain payments. For example, in stores where small purchases are the norm and for inexpensive services (convenience stores, small grocery stores, buses, taxis, bars and cafés).

Debit cards

For a minimum purchase amount, you can pay by debit card in small stores. What’s the benefit? As soon as you pay, the amount is withdrawn from your account.

But above all, debit cards are your master key to accessing ATMs and taking advantage of your financial institution’s online banking services:

  • View your account and credit card balances
  • Deposit cheques in your account from anywhere (for this you need a smartphone more than a debit card)
  • Make transfers between accounts, to individuals and abroad
  • Pay your bills or schedule bill payments
  • Make regular payments to a savings account

Are there service fees?

In some cases, you may have to pay service fees to use your debit card. This will depend on the plan you choose when you open your account. You should also be aware that withdrawing money from an ATM other than your institution’s may incur additional fees. Contact us to learn more.

Credit cards

A credit card from a recognized Canadian provider is essential for making online purchases, renting a vehicle, booking plane or concert tickets, or reserving a hotel room. It’s also one of the tools for building your credit report. In any case, be sure to use it wisely to avoid certain pitfalls.

Tips for managing your credit card

  • Choose one card rather than many. Having more cards doesn’t mean having a better credit report!
  • Choose a credit limit that suits your needs.
  • Pay your account in full every month, by the due date.
  • Schedule your payments to make sure you pay on time.
  • If you feel like you’re losing control, set it aside and choose to pay with a debit card instead.
  • Avoid using it to withdraw cash.


Less commonly used than other forms of payment, cheques may be requested to:

  • Receive your salary (your employer will ask you for a void cheque to make a direct deposit of your pay into your account)
  • Pay your rent, school fees, sports activities, certain medical or specialist practices, etc.

In Canada, cheques are valid for 6 months after the date of issue.

When you deposit a cheque, the funds appear in your account, but you may not have access to the full amount deposited for a few days, depending on the terms of your account. This is because a hold was placed on the funds. You can use your funds as soon as the cheque is confirmed as valid.

However, don’t overlook the popularity of Interac® e-Transfers between individuals, which tend to replace the use of cheques, in some cases.

The importance of a good credit report

In Canada, your repayment habits and use of credit over time are used to build your credit report.

Based on the quality of your credit report, you’re assigned a credit score. Your credit report and credit score are the indicators that lenders use to decide whether to give you a loan or credit. Adopting good financial habits early is to your advantage.

Making a budget: Look ahead to get ahead

A budget is your best ally in learning about your new financial world. Making a budget will give you a clear picture of the expenses you can expect and the income you can count on. You can then make the right decisions to take full advantage of your new life and make plans for the future.

® Interac e-Transfer is a registered trademark of Interac Inc. Used under licence.

To learn more about the topics covered in this article, please contact us.