How To Choose Financial Products And Services That Are Right For You
By The Financial Consumer Agency of Canada
With the rise of social media and influencers sharing all kinds of information, it’s not always easy to know what to believe. This is also true with financial influencers or “finfluencers” who offer financial advice to their audiences. What’s important to remember is that you can’t always trust what you see or hear on social media. And with an increasingly complex financial landscape, it can be daunting to know how to choose financial products and services that are right for you.
Before you get a new product or service, consider the following:
- how you’ll use it—for example, if it’s a credit card, will you be paying what you borrowed in full each month or carrying a balance?
- the benefits, like reward points or a lower interest rate
- the fees and rates that may apply for different types of transactions
Do your research and compare the products and services that financial institutions offer. Ask questions to make sure you understand the terms and conditions. Many people have all their products and services with one financial institution. However, you may be able to find products with lower fees, better interest rates and more favourable loan terms with another, so shop around!
Low-Cost And No-Cost Bank Accounts
The Government of Canada and certain financial institutions have an agreement to provide low-cost and even no-cost basic banking services to eligible Canadians. Low-cost accounts charge a maximum of $4 per month in banking fees, and no-cost accounts offer basic banking services for free.
You may be eligible for a no-cost account if you are:
- a youth (under 18)
- a student
- a senior receiving the Guaranteed Income Supplement (GIS)
- a registered Disability Savings Plan (RDSP) beneficiary
Contact your bank to learn more and find out if you qualify, or visit the Financial Consumer Agency of Canada’s Account Comparison Tool to find out about available options.
Choosing A Credit Card
A credit card’s interest rate may be an important factor if you regularly carry a balance. The higher the interest rate, the more interest you'll pay on an outstanding balance. A lower interest rate card may save you money over time. But the interest rate may not be an important factor if you pay your balance in full every month, don’t take out cash advances and don’t make cash-like transactions.
Remember to also compare credit card fees for certain types of transactions, like taking out a cash advance or using your card in foreign countries.
The Financial Consumer Agency of Canada also has an online credit card comparison tool that can help you find the credit card that best suits your needs. It allows you to compare features for different credit cards, including interest rates, annual fees and rewards.
Choosing A Mortgage
When you shop for a mortgage, your lender or mortgage broker usually provides you with options. Make sure you understand the different options and features that are available to you. This will help you choose a mortgage that best suits your needs.
Federally regulated banks must offer and sell you products and services that are appropriate for you. They must consider your circumstances and financial needs. They must also tell you if they’ve assessed that a product or service isn’t appropriate for you. Take the time to describe your situation to your bank to make sure you get the right product and don't hesitate to ask questions if you don’t understand something.
It’s always a good idea to shop around to get the best interest rate on your mortgage. This could save you thousands of dollars. And you may be able to negotiate with your mortgage lender by showing lower rates offered by other financial institutions.
Next, make sure you understand the different types of mortgages available. A fixed interest rate stays the same for the entire term. It’s usually higher than a variable interest rate for a similar term. With a fixed interest rate, your payments stay the same for the entire term, which can offer a peace of mind.
A variable interest rate may increase and decrease during the term. Typically, a variable interest rate is lower than a fixed interest rate for a similar term. With a variable interest rate, you may keep your payments the same for the duration of your term. Lenders call this a fixed payment with a variable interest rate. This type of mortgage may however be riskier than you expect. When interest rates rise, more of each payment automatically goes toward interest costs. You could end up in a situation where none of your payment goes toward paying down the principal. Instead of paying down your mortgage, the total amount you owe on your mortgage will increase.
Getting Help If Youíre Struggling Financially
Different types of professionals offer different types of help. Make sure you get the right type of help for your needs. Seek advice from reliable and trusted sources to explore your options. It’s always a good idea to start with your bank as soon as possible as they may have options available to you. If you still feel overwhelmed by debt and feel like there’s no way out, there are other services available as well. Here are a few examples:
Credit counsellors provide advice and education on managing debt, budgeting, and improving credit. Both not-for-profit organizations and for-profit companies offer credit counselling services.
If you’re having trouble paying back your debt or keeping up with your payments, you may want to talk to a credit counsellor. Simply talking to them won't affect your credit score. A credit counselling agency can provide a range of services, such as one-on-one counselling, group courses, tips and seminars and debt management plans.
Do your research to find a trustworthy organization and a qualified counsellor. Make sure you know what services they offer and how much they cost. You can also check if an agency is in good standing with a provincial or national association.
Debt consolidation companies offer loans to combine multiple debts into a single payment. This may help you simplify your debt management and reduce your monthly payments. Different companies offer debt consolidation products or services. Some debt consolidation options may have higher interest rates than your current debts. Shop around to find the lowest rate.
The regulation of debt consolidation companies varies across provinces and territories. Check with the Better Business Bureau if you’re unsure about a company’s reputation.
Licensed Insolvency Trustees (LITs) are federally regulated professionals. They may provide you with advice and services if you have debt problems. LITs may help you make informed choices to deal with your financial difficulties. They’re the only professionals authorized to administer consumer proposals and bankruptcies.
We live in a world where information is everywhere. The bottom line when choosing financial products and services is to shop around, do your research and ask questions when you don’t understand something. It’s also important to know where to find information you can trust. The Financial Consumer Agency of Canada has a variety of unbiased and trustworthy information, resources and tools to help you make financial decisions that are right for you. These include a budget planner, a mortgage qualifier tool, an account comparison tool, and a financial goal calculator. You can find those as well as many other money tips at canada.ca/money.