Banking Script, Activity, and FAQ
Slides for the script can be accessed here.
Introduce yourself (your name, your school/job and what makes you coming to volunteer)
Introduce today’s agenda:
- Canadian Banking System Overview
- Credit Unions
- Personal Account Types
- Setting Up an Account
- Credit Score
Activity 1* - “Big Five Banks”
These are the five largest banks in Canada:
- Bank of Montreal (BMO)
- Bank of Nova Scotia (Scotiabank)
- Canadian Imperial Bank of Commerce (CIBC)
- Royal Bank of Canada (RBC)
- Toronto-Dominion Bank (TD)
According to a ranking produced by Standard & Poor's, in 2017, the Big Five are among the world's 100 largest banks, with Toronto-Dominion Bank, Royal Bank of Canada, Bank of Nova Scotia, Bank of Montreal, Canadian Imperial Bank of Commerce at 26th, 28th, 45th, 52nd and 63rd place, respectively.
Canadian Banking System
Canada has one of the world’s most stable financial system which makes depositing and investing in Canadian banks safer
Here is an interesting fact: Canada’s financial system was able to handle the pressure after the Financial Crisis better than the U.S. The U.S. had 14 banking crises over the past 180 years while Canada has never experienced systemic banking crises.
Other banks in Canada includes National Bank of Canada, HSBC, PC Financial and Tangerine (Owned by Scotiabank). These banks usually offer more incentives to clients in order to compete with big five banks.
Credit unions in Ontario are collectively owned by the people who belong to them. Every member is a shareholder and every credit union is a cooperative that answers to its members exclusively. You have a say in how your credit union is governed. They usually offer lower interest rate for borrowing compared to banks because they are not-for-profit. Here are three credit unions in Toronto (there are more ) : Meridian, DUCA, Alterna Savings
Personal account types
The chequing account is the most common type of bank account. It is a deposit account that allows withdrawal through checks, ATMs and debit card. Here is an example of a cheque from a Canadian bank.
A saving account is an interest-bearing deposit account held at banks and other financial institutions that provides a modest interest rate. There is usually a fee if you withdraw cash directly from your saving account. Most banks allow clients to move their money from saving account to chequing account free of charge.
Other Types of Accounts
- Tax Free Savings Account - Delay tax payable on investment held in this account which allows clients to invest pre-tax income)
- GIC - provides guaranteed return of the principal but the return is usually modest compare to other investment alternatives)
- Direct-Investing Account/Self-Directed Investment - DIY account for clients to invest in stocks and funds by themselves. You may not receive any investment advice but the cost is significant lower than a full-service broker)
It’s very simple: First, you need to decide which financial institution you want to work with, then locate one of their branches. You may need to book an appointment with a financial advisor or you can just ask the front desk at a branch. Remember to bring 2 pieces of ID with you: Government issued ID with photo such as driver’s licence and your SIN number.
Debit Card vs. Credit Card: They are both physical cards you can carry in your wallet. Debit card allows you to make withdrawal of your money deposited in a financial institution while credit card allows you to borrow money (with a limit) from a financial institution. Using a credit card regularly helps build your credit history but remember to pay back in 30 days to avoid interest charges.
It is important to keep a healthy credit score. It helps when you need to apply for a loan or mortgage.
Loan: What is a loan? Loan is an act of giving a large amount of asset in exchange of future payments of amount borrowed plus interest
Mortgage: A legal agreement by which a bank lends you money at an interest in exchange for taking title of your property (ie. house). It’s a common practice in purchasing large capital items such as houses. Fix interested is set and will not change. Variable interest rate adjusts periodically.
Activity 3* - Any questions?
1: Can you name some of banks you have heard of in Canada?
- Can you name some features and benefits of banks?
- Have any of you opened an bank account in Canada already?
2: What are some advantages of using credit cards? Debit Card? What are the risks you can think of that are associated with credit cards?
3: $2,000 loan at 2% annual percentage rate is repaid at the end of 1 year, how much would you be paying in total? (Amortization Formula and TD Mortgage Payment Calculator)
1. Are big five banks the only financial institutions that offer personal banking services? Many smaller banks and credit unions offer personal banking services. Most of them offer more incentives to their clients/members compared to big five banks.
2. Do I have to book an appointment to set up a bank account? An appointment is not necessary. However, by booking in advance you can make sure there is financial advisor available at the time you visit the branch.
3. Do all of personal banking accounts come with physical cards? Many smaller institutions offer online banking. For example, Tangerine’s saving account does not come with a physical card but clients can transfer their money online from the saving account to any chequing account free of charge.