Key banking terms
In Canada, many transactions are not made with cash. Here are some of the main methods used instead of cash to complete financial transactions.
Cheque: A slip of paper imprinted with your account information that you can fill out, directing payment of a specified amount to a person or business.
Debit card (or bank card): A card used instead of cash to pay for purchases. Once you approve the transaction by entering your PIN, the amount is debited (deducted) from your account and paid to the merchant or retailer.
Direct deposit: An amount deposited directly into the bank account of a person or business. Many Canadian employees have their paycheques deposited directly into their accounts.
Email money transfer (Interac e-Transfer): A fast, secure way to transfer funds. You provide the recipient’s email address and an email is sent to the recipient with instructions on how to complete the transfer.
Pre-authorized payments: Amounts authorized to be deducted from your account on a regular basis. Many people use pre-authorized payments for regular bills like their telephone or cable.
Key credit terms
Annual fee: An amount charged every year for use of certain credit cards. Credit cards with an annual fee may offer enhanced features, such as a lower interest rate, travel miles, or other reward programs.
Credit card limit: The maximum amount of credit available on your credit card.
Fixed rate: An unchanging rate of interest charged for the entire term of a loan.
Minimum payment: The smallest amount that must be paid to keep your account in good standing.
Variable rate: A rate of interest that rises and falls as the prime lending rate changes.
CMHC: The Canada Mortgage and Housing Corporation. The federal government’s national housing agency, and Canada’s leading provider of mortgage insurance.
Down payment: The money paid up-front for a home, typically ranging from 5% to 30% of the total value of the home.
High-ratio mortgage: A mortgage with less than 20% of the total purchase price to put down as your down payment. It must be insured (see CMHC).
Mortgage amortization: The number of years required to pay back a mortgage in full.
Mortgage Term: The time for which a specific interest rate applies on a mortgage or loan. This is the total period of time over which you have agreed to pay back a specific rate of interest on the loan.