The offers look attractive: Get money now, low fees, no interest. But what are the real costs? Are there fees you’re not expecting? Are your rights protected when you go outside the established banking system?
In this section, you will learn:
- the pros and cons of alternative financial arrangements.
Pauline was in a hurry. She wanted to pay her electricity bill, but there was not enough money in her chequing account. “I’ve got my paycheque,” she thought, “but my bank always holds it until it clears before they let me cash it.”
Looking around, she noticed the sign over the Cash-It instant cheque-cashing store: “No holds! No waits!”
“That would be much handier than my bank,” she thought.
She lined up in the store and began to fill in the forms the clerk gave her. The store wanted two pieces of photo identification (ID) and the clerk said they would have to verify the cheque. There would be a fee to set up a file and a fee to verify the cheque. And, the clerk said, there would be a fee of three percent for the cashing service. In all, the cost would come to $47.50.
“Over $45 to cash a $600 cheque!” Pauline said. “That’s too much.”
It would be cheaper next time, the clerk explained, because there would be no account fee.
“No deal,” said Pauline. “I can get a cash advance on my credit card much cheaper than that.”
Later, Pauline told a friend about the charges. Her friend said that, because her employer deposits her paycheque directly to her account, her financial institution does not hold back the deposit.
Lessons Pauline learned:
- A cheque-cashing service is sometimes convenient, but there may be many service fees that add to the costs.
- Check the costs for financial services before you use them.
- Compare the costs of different financial services and choose the best one for your needs.
- Speak with your financial institution about any alternatives, such as payroll deposit.
You may be able to choose from a variety of financial organizations that will cash cheques and provide other services. Some of these, such as finance companies, cheque-cashing companies and payday loan companies, may offer to cash cheques without the hold period that conventional financial institutions often require.
In some communities, other forms of financial institutions may also be available that provide services that are traditional in other countries. They may give friendly service in languages that regular financial institutions do not, and have a deep understanding of the financial systems in other countries. These institutions are often based on personal connections and trust. They are not regulated like regular financial institutions, and the services they offer may be very limited compared to those offered by regular financial institutions.
Check alternative financial organizations carefully before you use them. Some may offer convenience or services that conventional financial institutions do not, but they are not regulated in the same way that other financial institutions are. You don’t have the protections that are available with regular banks, trust companies, credit unions and caisses populaires. In addition, service fees and interest charges are often high.
- Alternative financial arrangements like cheque-cashing and payday loan businesses are not regulated like banks, credit unions, caisses populaires and trust companies, and they often charge higher fees.
- Consider the costs as well as the potential benefits when you decide whether or not to use alternative banking arrangements. They are not regulated like regular financial institutions.
At the end of the module, you will find an Action plan. This is a tool that you can use to track your progress and take the next steps to manage your banking successfully in the future. Use the action plan as a roadmap for financial action!
Financial institutions offer a wide variety of services—and customers may not always be satisfied with the service they receive. What rights do you have when you go to a regulated financial institution? And what are your responsibilities?
In this section, you will learn:
- your rights when you use a regulated financial institution
- the responsibilities you have to keep your account secure
- how to make a complaint about a financial institution.
You have rights when you deal with financial institutions in Canada:
- You have a right to open an account when you present the correct identification (ID) in person to a bank. Credit unions, caisses populaires, trust companies and banks have rules like those below for proving your identity when you open an account.
- You need two pieces of ID, including:
- at least one government-issued piece of ID such as a driver’s license, a passport or a social insurance card
- one other piece of ID such as a signed debit or credit card with your name on it, a valid foreign passport or an employee ID card.
- If you have only one government-issued piece of ID, you may be able to have someone that the institution knows confirm that you are who you say you are.
- You need two pieces of ID, including:
For more information about the ID you need to open a bank account, go to the Financial Consumer Agency of Canada’s information on Banking.
- Many of Canada’s major banking institutions have agreed to offer a basic chequing account for a monthly fee of $4 or less. The services included in these accounts vary, and there may be charges for additional services, such as in-person bill payments.
- When you open a deposit account, you have a right to receive information about your account in writing, including:
- the complete account agreement
- any interest paid and how it is calculated
- any charges on the account
- the hold policy on cheques—that is, how long the institution will hold a cheque you deposit to verify it before giving you access to the funds you deposited
- what to do if you have a complaint.
- When the institution makes changes that affect your account, such as changes in fees, it must give you notice in writing.
- You have the right to cash a cheque issued by the Government of Canada for free at any bank. You have this right for any Government of Canada cheque up to $1,750, even if you are not a customer of the bank, as long as you provide ID. Most financial institutions will also cash cheques from provincial and territorial governments for free.
What are your responsibilities as a customer? You must:
- read and understand the terms of your account agreement
- check your account statement regularly and report anything you think is not right
- keep your account documents, passwords and personal identification numbers (PINs) secure.
The Canadian Code of Practice for Consumer Debit Card Services is a voluntary code that outlines the responsibilities of consumers and the financial industry. It helps to protect you when you use debit card services in Canada.
Under the code, it is your responsibility to use a secure personal identification number (PIN) and to keep it secure.
- Choose a PIN that is hard to guess.
- Don’t tell it to anyone, and if you write it down, keep it separate from your debit card.
- Check your account statements frequently.
- If your card is lost, stolen or stuck in an automated teller machine (ATM), or if there has been a transaction you did not authorize, immediately report it to your financial institution.
- For more information about keeping your PIN and debit card safe, see the Fraud protection module.
If you are a victim of debit card fraud, it is usually up to the financial institution to show that you are responsible for the charge, and not the other way around. Financial institutions will usually cover any losses if you have taken the appropriate steps to protect your card and your PIN.
The Financial Consumer Agency of Canada monitors the compliance of federally regulated financial institutions with the code. For full details, go to the Financial Consumer Agency of Canada’s information on the Canadian Code of Practice for Consumer Debit Card Services.
Financial institutions must have a way for customers to make complaints and have them heard. You can resolve most complaints by working through the following steps in order:
Step 1: Your local branch
Try to resolve any problems directly with a customer service representative or the manager of your financial institution.
If you need to discuss a complaint:
- Gather your documents and clarify your facts. (Always keep the original copies of your documents.)
- State exactly what you want and explain your position.
- Make notes of all contacts about the issue, including the date, the name of the person you contacted, what you talked about and any agreements made.
- Request assistance under the institution’s complaints process.
Step 2: Senior level or internal ombudsman
If you can’t resolve your complaint at the local level, you can ask to have it reviewed by a senior staff member or an impartial internal ombudsman.
Step 3: Third-party review
If you feel a financial institution is not living up to its responsibilities, in most cases you can have your complaint reviewed by an independent third party, called an external ombudsperson.
For banks or federal trust companies, you can contact the Ombudsman for Banking Services and Investments (OBSI) or other dispute-resolution bodies. A non-binding review is available to any individual or small business with a complaint. For more information, phone 1-888-451-4519 or go to the OBSI website.
Provinces and territories have similar procedures for resolving complaints about credit unions, caisses populaires and provincially chartered trust companies. To contact your provincial or territorial regulator, consult the Financial Consumer Agency of Canada page on Federal oversight bodies and other regulators.
- You have rights at your financial institution, including the right to know about any interest paid and charges on the account.
- You can complain if your rights are not honoured.
- Independent officers can help resolve issues with your financial institution if necessary.
At the end of the module, you will find an Action plan. This is a tool that you can use to track your progress and take the next steps to manage your banking successfully in the future. Use the action plan as a roadmap for financial action!