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Canada's banks

Canada’s Banks, a word on famous banks and banking system in Canada

Canada’s banks have always been considered safest in the world, and the Canadian banking system is known as one of the cleanest banking systems globally, if not the cleanest one. It is an important industry in Canada, and as of August 2021, 3.5% of Canada’s GDP is directly contributed by banks.

Here in this article, we dive into Canada’s banks and their regulations. As an essential part that might make questions in your mind, we talk about Credit Cards, Debit cards, and their differences, with a bit about the fico score and what it means. Stay with us till the end of this article, so we learn about them altogether.

Toronto Financial District, home to four of the Big Five
Toronto Financial District, home to four of the Big Five

Which of Canada’s banks are most well-known?

In Canada, there are six major banks that hold most of the market share, but five of them are known as the “Big Five”, which are national banks. These big five banks are:

  • Royal Bank of Canada (RBC)
  • Toronto-Dominion Bank (TD)
  • Bank of Nova Scotia (Scotiabank)
  • Bank of Montreal (BMO)
  • Canadian Imperial Bank of Commerce (CIBC)

Among these banks, the Scotiabank is the oldest one, founded in 1832, Nova Scotia. The above-mentioned big five, along with the National Bank of Canada, form the major banks in the country.

How the Canada’s banks are regulated

The banking regulations in Canada divide all banks into three categories, named Schedule I, Schedule II, and Schedule III. It is based on the Bank Act 1991.

  • Schedule I: Banks permitted to accept deposits and are not subsidiaries of foreign banks. Big Five are examples of this section.
  • Schedule II: Banks permitted to accept deposits and are subsidiaries of foreign banks.
  • Schedule III: Foreign banks with permission to operate in Canada.

Through time it’s always been Canada’s banking system, Canada’s banks, and generally a monetary policy to keep a low-interest rate to obtain a monetary expansion rate and to maintain a low and stable inflation rate.

This low-interest policy, along with being one of the cleanest banking systems, has caused a high percentage of adult Canadians to have at least one account in banks, more than 99%. Though due to the pandemic and generally the development of technology and using online services, the number of bank branches across Canada is experiencing a decline.

Credit Cards and Debit Cards

Like many other countries, you can have one or multiple credit cards and debit cards in Canada. But what’s the difference? On the first look, they seem the same, a 16-digit number, expiration date, chips, etc. Using either, one can purchase goods or withdraw money, but there’s one fundamental difference; debit card spends money directly from your deposited funds in your account while a credit card allows you to borrow up to a certain amount of money from the card issuer, of course, you have to pay back with an interest rate.

Based on the type of credit card one uses and the issuer (which can be one of the Canada’s banks or a financial firm), there are perks to be achieved, often at a fee. These perks could be discounts, cash, etc. 

At a specific time, usually at the end of each month, one should pay back the money spent from their credit cards. If one refrains from doing so, there will be consequences. It can vary from losing FICO score (A system to evaluate your liability towards your credits spent) to harsher penalties. Having a low FICO score could cause problems when trying to get loans. So it’s essential to have a good credit history.

Visa and MasterCard are issued by some Canada's banks too
Visa and MasterCard are among the most famous credit card issuers

Fico Score 

Fico score is a credit score that determines one’s creditworthiness. Different versions of the Fico score have been used over time, but the whole scheme is the same.

In this method, scores can be between 300 and 900 (in Canada), a lower score shows higher risk for lenders, and higher scores ensure Canada’s banks and lender of lower risks. Fico’s score calculation is based on payment history, accounts owned, length of credit history, credit mix, and new credit. 

Fico ScoreRatingEffects of Score
Lower than 579PoorLenders consider you a risky borrower, serious problems with getting loans
Between 580 and 639FairSome lenders approve your loans
Between 640 and 719GoodMost lenders consider it good score, almost no problem with loans
Between 720 and 799Very GoodLenders consider you a dependable borrower
Higher than 800ExceptionalLenders consider you an exceptional borrower

Last words on Canada’s banks

So, now we have discussed Canada’s banks. Now we know which one is the oldest bank in Canada, which are Canada’s most famous ones, and where they are stationed. Also, we got a good hold of what a Credit Card is.

Here we finish our article on Canada’s banks in hopes that you enjoyed it. If you are interested in knowing more about Canada, check our other articles on Geography, Politics, Socio-cultural, and historical aspects of Canada.

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