Frequently Asked Questions

Mortgages

What is the difference between a fixed and a variable mortgage rate?

A fixed rate stays the same for the whole term, so your payment does not change. A variable rate moves with your lender's prime rate, so the interest you pay can rise or fall during the term.

What is the difference between a posted rate and a special or discounted rate?

A posted rate is the lender's standard advertised rate. Lenders and mortgage brokers often offer lower special or discounted rates, so the rate you are offered can be below the posted rate.

How much down payment do I need in Canada?

The minimum is 5% of the first $500,000 of the purchase price and 10% of the portion above that, for homes under $1.5 million. Homes priced at $1.5 million or more need at least 20% down.

What is mortgage default insurance?

If your down payment is less than 20%, you must buy mortgage default insurance, which protects the lender if you stop making payments. The premium is usually added to your mortgage, and insured mortgages often come with lower rates.

Credit Cards

What is a foreign transaction fee?

It is a fee charged when you make a purchase in a currency other than Canadian dollars. Most Canadian cards charge about 2.5% of the purchase amount, and a few cards charge nothing.

How is credit card interest charged?

If you pay your full statement balance by the due date, you pay no interest on purchases. If you carry a balance, interest is charged at the card's purchase rate. Cash advances start charging interest right away.

Does applying for a credit card affect my credit score?

An application usually leads to a hard inquiry on your credit report, which can lower your score slightly for a short time.

What is a welcome bonus?

It is extra points or cash back for new cardholders, usually earned by spending a set amount in the first few months. Check the conditions before applying, because offers change often.

Savings Accounts

What is the difference between a regular rate and a promotional rate?

A promotional rate applies only for a limited time, often to new customers or new deposits. After it ends, the account pays its regular rate, which is usually lower.

Are my savings protected?

Eligible deposits at CDIC member institutions are protected up to $100,000 per insured category. Credit unions are covered by their provincial deposit insurer instead.

What is a TFSA?

A Tax-Free Savings Account lets your savings and investments grow tax-free, and withdrawals are not taxed. Contribution room is set each year by the federal government.

What is an FHSA?

A First Home Savings Account helps first-time buyers save for a home. Contributions are tax-deductible, and qualifying withdrawals to buy a first home are tax-free. You can contribute up to $8,000 a year, to a lifetime limit of $40,000.

GICs

What is a GIC?

A Guaranteed Investment Certificate pays a guaranteed interest rate for a fixed term, and your principal is protected.

What is the difference between redeemable and non-redeemable GICs?

A non-redeemable GIC locks in your money until maturity and usually pays a higher rate. A redeemable or cashable GIC lets you withdraw early, usually at a lower rate.

Are GICs insured?

GICs at CDIC member institutions are eligible for deposit insurance up to $100,000 per insured category. GICs at credit unions are covered by the provincial deposit insurer.

Can I hold a GIC in a TFSA or RRSP?

Yes. Most institutions offer GICs inside registered accounts such as TFSAs, RRSPs and FHSAs.

Chequing Accounts

How can I avoid monthly fees on a chequing account?

Many accounts waive the monthly fee if you keep a minimum balance, and some online banks charge no monthly fee at all.

What is Interac e-Transfer?

It is a way to send money from your Canadian bank account using an email address or phone number. Some accounts include unlimited free transfers, and others charge for each one.

Are there special accounts for students, seniors and newcomers?

Yes. Many banks reduce or waive fees for students, youth, seniors and people new to Canada, sometimes for a limited period.

What is overdraft protection?

It lets you spend more than your balance, up to a set limit. Interest applies to the overdrawn amount, and some accounts also charge a fee.

Personal Loans

What is the difference between a secured and an unsecured loan?

A secured loan is backed by an asset such as a car or home, which the lender can take if you do not repay. An unsecured loan needs no collateral and usually has a higher rate.

What affects the interest rate I am offered?

Lenders look at your credit score, income, existing debts, and the amount and term you ask for. A stronger credit profile usually means a lower rate.

What is the maximum interest rate a lender can charge in Canada?

Since January 1, 2025, the criminal rate of interest in Canada is 35% APR, so most loans cannot be priced above that.

Can I repay a personal loan early?

Many lenders let you repay early without a penalty, but some charge a fee. Check the loan agreement before you sign.

Insurance

What is the difference between term and permanent life insurance?

Term life insurance covers you for a set number of years and is usually cheaper. Permanent life insurance covers you for life and may build cash value, at a higher premium.

What affects the cost of life insurance?

Premiums depend mainly on your age, health, smoking status, the amount of coverage and the length of the term.

Do I need a medical exam to get life insurance?

Some policies require a medical exam or health questionnaire. Simplified and guaranteed-issue policies skip the exam but usually cost more for the same coverage.

How much life insurance do I need?

It depends on your debts, the income your family would need to replace, and future costs such as education. An insurance advisor can help you work out a figure.

Investments

What is the difference between an online brokerage and a robo-advisor?

With an online brokerage you choose and trade investments yourself. A robo-advisor builds and manages a portfolio for you, usually from low-cost ETFs, for a management fee.

What fees should I look at?

Look at trading commissions, account fees, the robo-advisor's management fee, and the management expense ratio (MER) of any funds you hold.

Is my investment account protected?

Accounts at member firms of the Canadian Investor Protection Fund (CIPF) are protected up to $1 million per account category if the firm becomes insolvent. CIPF does not cover losses from market movements.

Which registered accounts can I invest in?

Most brokerages and robo-advisors offer TFSAs, RRSPs, FHSAs and RESPs, as well as non-registered accounts.