Canadian Bank Account Types
The banking system used in Canada
is vastly different from the systems employed by other countries. For example, it is mandated in Canada for individuals to have a bank account
, which may not be the case in most countries. There are differences in terms of operating hours, fees, account names, and means of transaction. The bill payment options may also be dissimilar.
There are several main types of bank accounts
you may consider. These range from savings accounts
to time deposit accounts. Savings is a type of account that is popular with individuals who may not need the money right away. One of its advantages is that the interest rates offered with this particular kind of account are higher compared to those of chequing accounts. The money may be accessed through the use of automated teller machines.
Savings accounts are typically not recommended for those who need to tap into their accounts frequently. This is because savings accounts in Canada have limitations such as minimum balance or the amount of money kept in them. There may also be a restriction when it comes to the number of free transactions made each month. Should the owner of the account exceed the limit, the payment of additional fees may be required.
The chequing account
is a type of bank account that is more suited to everyday transactions. There is very little interest paid out to these types of accounts. In fact, some may not pay any at all. The advantage of having a chequing account is that there are no monthly fees that need to be paid out. The transaction fees are also lower. The utilization of the chequing account may be done through the use of a debit card or by the writing of a cheque.
It has to be noted that there should be enough funds in the account to cover the cheques made. If a cheque is deposited against an account that does not have sufficient money, the cheque is referred to as a “bounced cheque”. Banks charge large fees against the maker of the cheque.
Another kind of bank account used in Canada is the money market account
. With this financial instrument, a higher rate of interest is paid compared to chequing and savings accounts. There is, however, a minimum balance set before interest can be earned. Usually, this minimum balance is also higher than that offered by other types of accounts. A money market account may be limited, usually to six per month.
Time deposits or certificates of deposits are a type of bank account that requires the fund to be left in the bank for a specified amount of time. In exchange, the bank pays interest to the account that is much higher compared to the other types of bank accounts. Some financial institutions provide the allowance by letting the interest be withdrawn from the account without affecting the principal. Also, there is an option to withdraw the principal before the maturity of the certificate of deposits but against a penalty.