There are many banking options in Canada, with different types of banks, accounts, and ways to manage your money.

If you’re new to Canada, learning about the banking system and how to look after your money can be challenging. But with some extra knowledge, you can make informed decisions about your financial future. Read on to learn more about bank accounts in Canada.

Types of banks

Do you like the idea of a big bank with branches everywhere and an international presence? Or do you prefer a smaller local bank, an online banking alternative, or a not-for-profit option with lower fees? In Canada, you have options with different benefits. It’s your choice — it just depends on what is important to you regarding banking.

Big banks

The biggest banks in Canada are the Bank of Nova Scotia (Scotiabank), Royal Bank of Canada (RBC), Bank of Montreal (BMO), Toronto-Dominion Bank (TD), and Canadian Imperial Bank of Commerce (CIBC). These are also known as the “Big Five” banks. The next largest bank (although smaller) is National Bank, which mainly serves customers in Quebec and New Brunswick. The big banks offer everything you might expect from a bank, from accounts to mortgages, loans, investments, insurance, and more. They have an international presence, with branches overseas; domestically, they have many branches in neighbourhoods all over Canada.

Smaller banks

Beyond the Big Five (or Big Six if you include National Bank), there are also many smaller regional Canadian banks and international banks with a Canadian presence. These banks with a smaller foothold in Canada offer many of the same services as the big banks but have fewer branches and ATMs (automated teller machines). Whether you choose one of the big banks or one of the smaller banks will depend on your personal preference. Some banks with a smaller presence in Canada may be familiar to newcomers from back home — banks like ICICI Bank, HSBC, and the Bank of China. Newcomers to Quebec may opt for the local Laurentian Bank, or if you choose to settle in Alberta, perhaps you’ll join Canadian Western Bank.

Credit unions / Caisses populaires

Credit unions (called caisses populaires in French-speaking areas) are similar to banks. They offer many of the same banking services and the same kinds of accounts. However, credit unions are different from banks in one fundamental way: their members (customers/you) own them). If you want to bank with a credit union, you need to join as a member. Credit unions are not-for-profits, so the priority is its members’ financial well-being, meaning credit unions often offer better interest rates and smaller fees than traditional banks. In addition, as a member, you have a say in the direction of the bank because you are entitled to vote on decisions like who should serve on the board of advisors.

Alternative banks

Canada has many internet-based banks and bank alternatives if you prefer to bank online and don’t need access to a traditional bank branch. Online banks, neo-banks, and fintech (financial technology) companies offer banking services that might appeal to you. Many of these alternatives to traditional banks offer bank accounts, bank debit or credit cards, investment services, and more.

How to open a bank account

If you’re new to Canada, you may want to consider a newcomer account, which many banks offer (including all big banks). Newcomer accounts often have reduced (or zero) fees for a set period, the first 12 months. They may also offer newcomer credit cards.

With some banks, you can open an account before you arrive in Canada by providing the correct information online. You will need to do it with other banks once you arrive. Either way, you must go to the bank in person to activate the account, prove your identity, and collect your bank cards.

You must share the proper identification documents to open a Canadian bank account. The documents must be originals, meaning you can’t use photocopies or photographs of your original documents. Banks usually require two pieces of identification — one shows your name and date of birth, and another shows your name and address. The government has a list of documents banks can accept, but some documents will not be available to newcomers. However, even if you only have one form of documentation showing your name and date of birth (for example, your passport), you may still be able to open an account. Banks may accept a reference letter from another bank customer or an upstanding community member. When you choose a bank you want to join, you can ask them what documents they accept.

Chequing accounts

The first (and foremost) bank account you will need in Canada is a chequing account. You need a chequing account for everyday banking, purchases, and transactions. Your chequing account is where your employer will deposit your paycheques. It’s also the account linked to your debit card, the card you use to take out cash from an ATM and the card you’ll use for many smaller day-to-day electronic purchases in stores. A chequing account will often come with a chequebook. A monthly or annual fee is often associated with chequing accounts, but these fees are frequently waived for newcomers. Chequing accounts usually offer no interest — so they’re suitable for accessing and spending money but not for saving it.

Savings accounts

Typically, you’ll open a savings account alongside your chequing account, which makes transferring money between these accounts very easy. As the name suggests, savings accounts are used to save money. You should use a savings account to put aside money you don’t need. You can use savings as an emergency fund (in case something terrible happens and you need some extra cash) or as a way to save towards a more significant purchase, like a car or a vacation.

Regular savings accounts usually earn interest, meaning you make money on the money in your savings account. But it’s not much. Most regular savings accounts earn less than 0.3 percent. So, for example, if you had $100 in your savings account, you might earn 3 cents in interest. Or if you had $1000, you’d earn $3. As the interest you earn is so low, savings accounts like these are best for putting money aside for use in the short-term, not for long-term significant savings like retirement or purchasing a home.

High-Interest Savings Account (HISA)

If you want a savings account that will earn you more interest, you can open a High-Interest Savings Account (HISA). This savings account offers interest rates 10x more than regular, around 3% or even more. HISAs are excellent for savings for longer-term, more significant goals. Funds in HISAs are usually locked in for a different period, but there may be restrictions on how many transactions (like withdrawals) you can do per month.

Credit Cards

While a credit card is not technically a bank account, it is an essential part of banking life in Canada that should be mentioned here. Credit cards are linked to your bank accounts and are usually issued by your bank. In your online banking and bank statements, your credit card often shows up alongside your chequing and savings account. With online banking, you can also transfer money from your other accounts onto your credit card to pay it off as needed.

With a credit card, you make payments using credit (or money borrowed from your bank). This differs from your chequing and savings, where you spend your money. Credit cards allow you to pay for things with cash you don’t have ready — and then you need to pay that back onto your card. Most credit cards will give you 21 days interest-free before you start getting charged interest on the money you owe. So the trick is to buy things you know you will be able to pay back quickly, or else you can find yourself in financial trouble paying extra interest.

Savings accounts with tax advantages

These accounts are where you can make your money work for you. Canada has a few savings accounts designed to encourage Canadians to save money. These accounts incentivize saving by offering tax advantages.

Tax-Free Savings Account (TFSA)

A Tax-Free Savings Account (TFSA) is what it sounds like – a savings account that is not taxed. That means, in most cases, you don’t pay tax on the money you contribute to the account, nor on the interest you earn. Within a TFSA, you can invest your money in several investment vehicles, like stocks, bonds, mutual funds, exchange-traded funds (ETFs), and guaranteed investment certificates (CIGs). So, you can invest your money within a TFSA into various investments, and everything earned within the TFSA is tax-free. When the day comes, and you’re ready to take your money out of the TFSA, your withdrawal isn’t taxed either.

Registered Retirement Savings Plan (RRSP)

Registered Retirement Savings Plans (RRSPs) are designed to help you save for retirement. With an RRSP, your contributions are tax-deferred. This means any money you pay into your RRSP during the year will be deducted from your taxable income for that year. For example, if you earn $60,000 during the year and put $5,000 into an RRSP, you will only be taxed as if you’d earned $55,000. So, an RRSP is a great way to lower your taxable income while also saving for your retirement. And, like a TFSA, you can invest your money within your RRSP into investments and earn more tax-sheltered money. However, money withdrawn from an RRSP is taxed as income in most instances — but if you start to withdraw it once you’ve retired, you will be taxed less as you probably won’t have other income.

First Home Savings Account (FHSA)

The First Home Savings Account (FHSA) was introduced by the government in 2023 to help Canadians save towards their first home purchase (although the money in an FHSA doesn’t have to be used for a home). An FHSA combines the best parts of a TFSA and an RRSP — like an RRSP, your contributions are tax-deductible, and, like a TFSA, your withdrawals are not taxed. A FHSA allows you to save up to $8,000 a year to a maximum of $40,000. The account can be open for up to 15 years, and then you have to withdraw it, or you can transfer it into an RRSP or other tax-sheltered account.

This article is provided for information purposes only. Any information, data, opinions, views, advice, recommendations or other content included in this article are solely those of the author and not of Scotiabank or its affiliates. It is not to be relied upon as financial, tax or investment advice or guarantees about the future, nor should it be considered a recommendation to buy or sell. Information contained in this article is subject to change without notice. All third party sources are believed to be accurate and reliable as of the date of publication.