Believe it or not, there are banks other than the Bank of Mom and Dad. Banks provide so many products and services so getting stared can be overwhelming. With all the various accounts, how do you find out which is one right for you? It’s important to know what options are available for you. Banking is not limited to just the Big 5 (RBC, TD, Scotiabank, BMO & CIBC). You also don’t have to go with the same bank the rest of your family uses. You need a bank that caters to your specific needs and priorities.
Let’s start with the basics: What are the major differences between a checking and a savings account?
|Purpose||Day-to-day spending||Emergency fund & short/long term saving|
|Transactions||Unlimited or Monthly limit||None|
|Incentives||Waived fees for carrying minimum balance or bundling with other products||Receive higher interest rates as you save more money|
This table does not cover everything. With all the various banking institutions that exist, there are definitely some exceptions. Now that you have a better idea of these accounts, you might be wondering where you should bring your money. Let’s go over three methods: traditional banks, direct banks and credit unions.
The brick-and-mortar banks are what you will encounter the most. The main advantages of traditional banks over the other two alternatives are the numerous locations and the ability to interact one-on-one with a representative. Being able to develop a personal relationship with your bank can be beneficial for negotiating better rates, assuming you’ve been a long-time customer. As you explore this option, you will notice these banks have student checking accounts. These accounts are often free but have limited monthly transactions. Note that banks may automatically change your account type upon graduation. Be mindful of this so you are not caught off guard!
As mentioned earlier, banks are not just limited to the Big 5. It would be wise to look at direct banks such as PC Financial and Tangerine. These institutions are primarily online-based but have little to no fees at all – even for their checking accounts! The companies also offer competitive rates on both borrowing and saving. If you don’t have the need to visit banks in-person, they may be a good alternative to the traditional banks. If you need to withdraw cash, you can access one their partnered Automatic Banking Machines (ABMs) free of charge.
The last alternative you could look into are credit unions. One of the key differences between a bank and a credit union is that you’re not necessarily a “customer” of a credit union but rather a member. If you decide to join a credit union, there is generally a $25 initial deposit to become a member (which you will get back if you decide to leave). When you buy into the union, you are essentially a shareholder of the company. Members of a credit union will generally have better borrowing and saving rates as well as fewer fees than a traditional bank. Credit unions are smaller in scope than traditional banks so physical establishments are harder to come by.
With all these institutions and their various products, it can be very time consuming to do thorough research. Luckily, the Financial Consumer Agency of Canada (FCAC) has you covered. The website has an Account Selector Tool which includes a comprehensive database of all bank accounts. You can filter by services, discounts and type of account.