Some common banking terms
In Canada, there are many ways to pay bills, buy goods, send money and receive money. These include:
Cheque: A cheque is a piece of paper with your bank account information printed on it. To pay by cheque, you add the payment information, sign it, and give it to the person you are buying something from. When they deposit the cheque into their bank account, the money will come out of your account.
Debit card (or bank card): When you open a Canadian bank account, you will receive a debit card and a Personal Identification Number (PIN) for security. You can use these to pay for goods. When you pay with a debit card, the money will immediately be taken from your account and paid to the store.
Email money transfer (Interac e-Transfer): This is a fast and safe way to transfer money to another person. To pay somebody this way, give your bank the email address of the recipient and the amount you wish to pay. The bank takes care of the rest.
Direct deposit: When someone gives you money by direct deposit, they put money directly into your bank account. Many employers pay their employees this way.
Pre-authorized payments: These are repeated payments that come out of your bank account automatically. People use these to pay phone bills or hydro bills, for example. When you set up a pre-authorized payment online, you do not have to worry about forgetting to pay your bill.
An explanation of credit terms
Annual fee: Some credit cards will charge you an annual fee that you must pay once a year. Credit cards with an annual fee usually offer special benefits – for example, a lower interest rate, travel miles, or other rewards.
Credit card limit: This is the maximum amount you are allowed to borrow with your credit card.
Credit rating: Your credit rating is a number between 300 and 900 that lets money lenders know if they can trust you to pay your bills and pay back loans. The higher your score, the better. Find out how to build your credit rating.
Minimum payment: This is the lowest amount you are allowed to pay back to the bank when you get your account bill. You can pay more than the minimum payment, but you must not pay less. If you pay less it will damage your credit rating.
Fixed rate: If the bank charges you a fixed rate of interest on a loan, the amount of interest you must pay will stay the same.
Variable rate: If the bank charges you a variable rate of interest on a loan, the amount of interest you must pay may go up or down.
CMHC: The Canada Mortgage and Housing Corporation (CMHC) is the Canadian government’s housing authority. They provide research and advice to help keep the Canadian housing market affordable to home buyers.
Down payment: If you are buying a home, you may need a mortgage to help pay for it. A mortgage is a type of loan. You cannot get a mortgage for 100% of the cost of your new home, so you will have to pay some of the cost yourself. This amount is called the down payment.
High-ratio mortgage: If you get a mortgage for 80% of the value of your home or more, it is considered a high-ratio mortgage. High-ratio mortgages must be insured. The Canada Mortgage and Housing Corporation (CMHC) can help you with mortgage insurance.
Mortgage amortization: When you get a mortgage, you and your bank agree on the number of years you can take to pay it back in full. This time is referred to as your mortgage amortization. The maximum amortization is usually 25 years. Ask your bank for details.
Mortgage Term: When you get a mortgage, you will agree to pay a certain interest rate for a specific length of time. This length of time is called the mortgage term.