How Canadian banks protect your money

You work hard to save money and trust your bank to keep it safe in your savings account. But what happens if the bank were to go bankrupt? Learn more about the Canadian Deposit Insurance Corporation (CDIC), how it protects your deposits in CDIC-insured institutions and compare bank accounts with CDIC protection.

What is CDIC Canadian deposit insurance?

The Canadian Deposit Insurance Corporation (CDIC) is a federal crown corporation that guarantees deposits up to $100,000 in CDIC-member institutions. This means that if the institution were to collapse or fail, you would be fully reimbursed up to $100,000.

What types of accounts does the CDIC guarantee cover?

Compare bank accounts with CDIC bank account protection up to $100,000

• Chequing accounts
• Savings accounts

CDIC deposit insurance limit

The $100,000 limit applies per depositor, per institution and per insured category. Insured category simply refers to whether the account is owned by one person (single), is shared (joint), or held in a RRSP, RRIF, TFSA, or in trust. RESPs and RDSPs will also be eligible for coverage beginning in April 2021. Depending on the size of your deposits, it might make sense to hold accounts at different institutions to ensure that all of your money is covered.

Consider the situation below where someone holds $25,000 in a savings account, $50,000 in a chequing account, and $75,000 in a GIC, at one bank. In that case, the CDIC would cover a total of $100,000, so $50,000 won’t be covered.

Personal accounts at one bank

Savings account deposit	$25,000
GIC account deposit	$75,000
Chequing account deposit	$50,000
Total of uninsured deposits	$50,000

Is my money protected with Canadian deposit insurance if I have multiple accounts with different banks?

Yes – as long as your deposits don’t exceed $100,000 at each bank. Let’s say you have $100,000 in savings and GICs at one bank and $100,000 in your chequing account at a different bank. In the event that both banks failed, all of your money would be insured.

Personal accounts at multiple banks

Bank 1: Savings account deposit	$50,000
Bank 1: GIC account deposit	$50,000
Bank 2: Chequing account deposit	$100,000
Total of uninsured deposits	$0

What if I have joint accounts?

At one bank, let’s say you have $50,000 in GICs, $25,000 in a joint chequing account and $25,000 in a single savings account. If the bank were to fail, all of your money would be insured since you hold less than $100,000 in each ownership category.

Joint account at one bank

Personal account: Savings account deposit	$25,000
Personal account: GIC account deposit	$50,000
Joint account: Chequing account deposit	$25,000
Total of uninsured deposits	$0

How do I know if an institution is CDIC-insured?

CDIC-member institutions often display a CDIC sign at branches, but you can also see the full membership list of CDIC institutions here.

Do I need to apply for CDIC deposit insurance?

No. CDIC Canadian deposit insurance automatically applies to deposits at CDIC-member institutions, so you won’t need to apply or take any further steps. As long as your funds are deposited at an institution that is CDIC-insured, you will be covered for up to $100,000 in the event that the institution fails.

What happens if the bank goes bankrupt?

Are you still protected under the guarantee if your bank goes bankrupt? Yes. If your institution is CDIC-insured and it goes bankrupt, you are protected up to the $100,000 insured limit by this Canadian bank insurance.

The CDIC has many policies in place governing the operation of member institutions helping to prevent any failure. But, if your bank were to fail, the CDIC would attempt to sell existing deposits and loans to a more stable institution or look at the possibility of amalgamating with another institution. If this happens, your accounts would be transferred to the new bank and you would retain access to your money. If any further action is required, you would be contacted by the CDIC.

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How effective is CDIC deposit insurance?

The CDIC was created in 1967 to protect eligible deposits and ensure the flow of the Canadian financial system. It has handled 43 failures affecting more than 2 million depositors since its inception. In fact, there hasn’t been a single depositor that has ever lost a single dollar of insured deposits since the CDIC was created.

How do banks make money?

There are a few different ways banks make money.

• Lending. Banks take the money you keep in your chequing, savings and other types of accounts and lend it out to others in the form of home loans, auto loans, student loans and more. Even if the bank pays you a 2% APY, it may be making anywhere from 5% to 20% on loans and credit cards.
• Bank fees. Financial institutions make a killing off of the account holder fees it charges for monthly maintenance, overdrafts, ATM usage, paper statements, early withdrawals from GICs, and so on.
• Optional services. Some banks offer additional services, such as investment management, safety deposit boxes and payment processing for businesses. All of these extras bring in revenue for the bank.
• Interchange fees. When you use your debit card to buy something, the store pays an interchange fee to your bank and the store’s bank, usually a small percentage of the total transaction.

How could a bank go bankrupt?

A bank fails when they can no longer meet their obligations to depositors. Some common reasons include:

• They lend out too much money. When banks don’t keep enough cash on hand, they may have to borrow money from the Government or another bank. If the bank doesn’t have a good lending record or strong collateral, it could risk failing.
• Lending is too risky. Loans are often the biggest moneymaker for banks. If they lend to risky individuals or businesses who can’t make repayments, it could create problems that lead to the bank’s demise.
• Funding issues. Banks have a long list of assets on their balance sheets. If they get in a position where they can’t repay their debts, it could fail.
• Significant shifts in the market. When banks don’t plan for economic downturns, it can lead to huge losses that force it to close its doors.

Vulnerabilities of bank accounts

Even though your money is often protected by Canadian deposit insurance, bank accounts still have a number of vulnerabilities.

• Fraudulent activity. It’s important to keep an eye out for suspicious behaviour both online and in public. You should never give out your bank account information (account number, PIN, etc.) or use your credit card on websites you do not trust. If someone gets a hold of your bank account or credit card information, you should contact your bank immediately.
• Mistakes. Mistakes happen. Bank or merchant errors can lead to you being overcharged or incurring unnecessary fees. Check your statements and keep electronic or paper copies for reference, and call or visit your bank if you think there is an error. Some banks offer text message alerts that can help you stay on top of your account activity.
• Phishing and other online scams. Phishing scams and malware can lead to your account being compromised, so it’s important to keep an eye out for any suspicious behaviour when you’re online. Avoid any links, sketchy websites or email attachments from unfamiliar sources, as scammers can set up fake websites and viruses to steal your information.
• Hacking passwords. With online banking becoming more popular every day, it’s even more important to make sure your passwords are secure. You should always create strong and unique passwords with a mix of upper- and lowercase letters, numbers and special characters if possible. You should avoid using your name or other obvious words and should never use the same password for multiple accounts. If it’s available, 2-factor authentication can provide an extra layer of protection to keep your account secure.
• Phone scams. Watch out for phone calls or text messages from phone numbers claiming to be your bank. Your bank will never contact you to ask for account information, so if you are unsure about the sender, you can hang up and call the bank directly to speak with customer service.
• ATMs. Scammers have been known to place fake card scanners called “card skimmers” over ATM card slots, which can lead to your account information being copied or stolen. Before using an ATM, it never hurts to wiggle the card slot to check if anything feels loose.
• Unsecured Internet access. Watch out for public Wi-Fi when accessing your account and check for https encryption. Hackers may connect to unsecured networks in hopes of intercepting your account information or passwords, so it’s best to do your online banking at home.

Bottom line on Canadian bank insurance

Most savings accounts in Canada are offered by banks that carry CDIC’s Canadian deposit insurance and bank account protection. So as long as the bank you choose is a CDIC-member institution and your deposits fall under an insured category your money will be protected even if the institution goes belly up. Generally speaking, that assurance can free you up to focus on comparing savings accounts that best meet your financial needs, like those that offer a competitive interest rate, low or no fees, low or no minimum balances and convenient ways to access your money.