Debunking Five Banking Myths during a Pandemic
Money is a source of stress for many families, especially during a pandemic. Many may be unsure if their money is safe in a Canadian financial institution. To reassure families that it is good to continue banking during a pandemic, we’ve asked our guest writer Peter Routledge, President and CEO of Canada Deposit Insurance Corporation (CDIC), to do some myth busting. We hope that you will share this information with families in your community! Safe banking can be one less thing for families to worry about during this already stressful time.
November is Financial Literacy Month in Canada, and it has never felt more significant. We all know that this has been an especially difficult and stressful year. COVID-19 has impacted people’s lives—and their finances—in ways they could never have foreseen. Some families, especially those who may be new to Canada, may be unsure how safe Canada’s banking system is during times of such economic uncertainty.
While CDIC covers a wide range of products, there are certain types of products and activities that we do not insure. That’s why, at a time when families are thinking more about their money, we have put together these Five Banking Myths and Truths. Please share this information, along with the additional resources listed below, with any family who may be worried about keeping their money in a Canadian bank during COVID-19.
I hope that that they make it easier for the families you support to understand what protection is available, so they can be confident in choosing the products and services that make sense for them. There is no time like the present for Canadians to increase their financial literacy to help them make informed decisions.
Five Banking Myths… and Truths
- Myth: It is safer to keep my money at home than to put it into a bank account.
Truth: When it comes to your money, we know that your priority is to make sure it’s safe. It is much safer to keep your cash in a chequing or savings account at a bank than under a mattress or in a safe at home. Money that is kept at home could be stolen or destroyed in a fire, earthquake or flood. Over the years, savings could become damaged or disintegrate. You could forget the combination to your safe, you may forget where you hid it – or that you even hid it in the first place. CDIC is the federal Crown corporation – a part of the Government of Canada – that protects eligible deposits that are held in our CDIC member institutions. Coverage is free and automatic: you don’t have to apply for it. If there’s a failure and your deposits are insured, you won’t have to file a claim: we will pay you automatically. To see what’s covered and what isn’t, visit our website.
- Myth: Canadian banks never go out of business.
Truth: Canada’s financial system is strong and stable and Canadian financial institutions must meet robust prudential standards to maintain their safety and soundness, but like all businesses they can fail. Since 1967, there have been 43 bank failures in Canada—but not one person lost a single dollar under CDIC protection. Many people may not realize how safe banking in Canada can be. Visit our website to learn more about our history.
- Myth: If my bank goes out of business, I could lose my hard-earned money.
Truth: CDIC safeguards eligible deposits at more than 80 member institutions. If your money is in an eligible product and you bank with one of our members, you would be protected if the financial institution were to go out of business. We have many tools to ensure you would have quick access to your insured deposits. If there’s a failure and your deposits are insured, you won’t have to file a claim: we will pay you automatically. Visit our website to learn about what happens in a failure.
- Myth: I will have to sign up and pay for CDIC protection.
Truth: If you bank with a CDIC member, protection is free and automatic. An easy way to see if you’re protected by CDIC is to look for our purple logo in-branch, on your financial institution’s website, ATM or mobile banking app. Many people in Canada benefit from CDIC’s protection and don’t realize it! Another way to check, especially if you’re looking at opening an account at a new bank, is to check this list of CDIC members on our website.
- Myth: CDIC only covers the money that I have in chequing and savings accounts.
Truth: CDIC protects your cash and term-deposit savings held at financial institutions that are CDIC members, but not everything is covered. We insure eligible deposits SEPARATELY (up to $100,000, including principal and interest) for EACH of the following seven categories: Deposits held in one name; Deposits held in more than one name; Deposits held in a registered retirement savings plan (RRSP); Deposits held in a registered income fun (RRIF); Deposits held in a tax-free savings account (TFSA); Deposits held in trust; and Deposits held for paying taxes on mortgaged properties.
New: As of April 2020, this includes foreign currency deposits and term deposits (like GICs) with terms of 5 years or greater at financial institutions that are CDIC members. You can see what is covered, and what isn’t on our website.
Peter Routledge is the President and Chief Executive Officer of Canada Deposit Insurance Corporation (CDIC). Mr. Routledge leads CDIC’s team of approximately 180 professionals from a variety of disciplines whose work supports the corporation’s vision to earn the trust of Canadians as a global leader in deposit insurance and resolution.
- 10 Things you should know during times of uncertainty, prepared by the Financial Consumer Agency of Canada for Financial Literacy Month
- Learn more about CDIC
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- Play and share CDIC’s financial literacy game, ‘Earn and Learn’. We are giving away $10,000 in prizes!