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Is Your Money Safe in Canadian Banks?

One of the first pillars of financial health is having enough cash set aside so that you don’t have to rely on credit to pay for emergencies. We’ve discussed the best high-interest savings accounts for your emergency fund before (hint: it’s not at one of the Big Five banks), but you might be worried about your money. Is your money safe at Canadian banks, even if they’re online?

The short answer is: Yes.

The long answer is: Yes, because your money is insured by the Canada Deposit Insurance Corporation. Even if it wasn’t, the last bank failure of a CDIC member was 22 years ago – it’s not exactly likely that a bank will disappear.

But “not exactly likely” isn’t the same as “guaranteed not to happen.” There is still a chance that a bank may fail, however small that chance is. If the worst would ever come to pass and your bank vanished, your money would be safe – up to a cap.

 

The Canada Deposit Insurance Corporation

The CDIC was created in 1967 after two high-profile bank failures forced a parliamentary decision. Atlantic Acceptance Company went under in 1965, followed by Prudential Finance Company in 1966. They were not the only failures, but they were the tipping point for many. In a bid to restore confidence to the average Canadian in financial institutions, the government mandated the CDIC to ensure deposits at Canadian banks so that customers wouldn’t lose their life savings if their bank went bankrupt.

In the beginning, deposits were only insured up to $20,000. Today, they’re insured for up to $100,000 in each of the following categories per member institution:

·        Savings and chequing accounts in your name alone

·        Savings and chequing accounts in your name and another’s

·        Trust accounts (coverage is $100,000 per beneficiary in the same account)

·        Your Tax-Free Savings Account (TFSA)

·        Your Registered Retirement Savings Plan (RRSP)

·        Your Registered Retirement Income Fund (RRIF)

 

What CDIC Covers

Chequing Accounts

Most chequing accounts in Canada are at CDIC member institutions. Some companies that have apps that allow you load funds onto a prepaid card or a pseudo-bank account are not CDIC-insured.

Savings Accounts

Savings accounts at every major and minor bank are covered by CDIC. What’s more, even non-bank institutions like WealthSimple offer CDIC-insured savings accounts. Be sure to check if an account is CDIC-insured before depositing your money there.

Tax-Free Savings Accounts

If you can open a TFSA at a bank, you may be limited in what you can put in it. Tangerine, for example, only allows you to hold either cash or proprietary Tangerine investment funds within their TFSA. Cash deposits are covered under CDIC, but investment funds are not.

On the other hand, brokerage TFSAs are never CDIC-insured. This doesn’t necessarily mean that brokerage TFSAs are riskier than those at a bank. Depending on the company, they will have their own insurance policies that may even offer more coverage than CDIC. Be sure to check for a company’s insurance before investing with them.

 

Registered Retirement Savings Plans and Registered Retirement Income Funds

Just like with TFSAs, the only assets that are insured are cash and GICs held within the RRSP. Brokerage RRSPs won’t be covered by CDIC.

 

What’s not covered

-        Investments

-        GICs longer than 5 years

-        Foreign currency

-        Digital and cryptocurrencies

 

Here’s an infographic that shows how much coverage you might get with certain accounts:


Spreading out your coverage

One of the most important aspects of CDIC insurance is that you get up to $100,000 insured per category per institution. In other words, you can have multiple accounts to increase your coverage and reduce your risk.

If you have $200,000 in a savings account, you’re only insured up to $100,000, or 50%. By moving $100,000 to another CDIC member, you’ll have two accounts worth $100,000 and have 100% protection for both.

The downside to this is that it becomes slightly harder to keep track of all your finances. If you have multiple accounts at multiple institutions, make sure to keep good records indicating where the accounts can be found.

 

Credit Unions and Caisses Populaires

On the CDIC website, you can view each of the CDIC member institutions, which are almost entirely banks. If you manage your finances with a credit union or caisses populaires, there is still coverage available for your deposits. Instead of being covered by CDIC, they are covered by provincial insurers. As the provider varies province to province, the coverage and terms are different depending on where you live. The companies and coverage are as follows:

Province

Deposit Insurance Provider

Deposit Coverage Terms

Alberta

Alberta Credit Union Deposit Guarantee Corporation

All deposits1 within Alberta

No maximum

British Columbia

Credit Union Deposit Insurance Corporation

All deposits1 within in B.C.

No maximum

Manitoba

Credit Union Deposit Guarantee Corporation2

All deposits1 within in Manitoba

No maximum

New Brunswick

New Brunswick Credit Union Deposit Insurance Corporation

Savings and GICs in Canadian Dollars (CAD) up to $250,000

Deposits in registered savings plans up to $250,000

Newfoundland and Labrador

Credit Union Deposit Guarantee Corporation

Savings and GICs in Canadian Dollars (CAD) up to $250,000

Deposits in registered savings plans up to $250,000

Nova Scotia

CUDIC

Savings and GICs in Canadian Dollars (CAD) up to $250,000

Deposits in registered savings plans up to $250,000

Ontario

Deposit Insurance Corporation of Ontario

Savings and GICs in Canadian Dollars (CAD) up to $100,000

All deposits in registered savings plans

P.E.I

Prince Edward Island Credit Union Deposit Insurance Corporation

Savings and GICs in Canadian Dollars up to $125,000

Deposits in registered retirement savings plans and other retirement accounts up to $125,000

Quebec

Autorité des marchés financiers

Savings and GICs in Canadian Dollars up to $100,000

Deposits in registered savings plans up to $100,000

Saskatchewan

Saskatchewan Credit Union Deposit Guarantee Corporation

All deposits1 within Saskatchewan

No maximum

1Only deposits made at a credit union
2Not a government corporation

This insurance on savings accounts is an important part of the entire banking system. Without it, there would be no recourse for savers whose banks mismanage their money. You can rest assured that your money is safe and sound, no matter the bank or credit union it's saved in.


Chris Chris 01/26/2019
Canadian personal finance buff and all-around writing enthusiast, Chris loves breaking down complicated money ideas to show that they're really not so complex. 
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