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Credit bureau reports and bank accounts

Always, always, always…. maintain a bank account in a financial institution that you do not owe any money to – A debt-free bank account. That way, if you ever end up experiencing financial difficulty you will still be able to operate your account without fear of it being closed down or emptied by the credit grantor – your bank.

Most Canadians have a bank account. However, if you have a poor credit rating you may find that you cannot open a new bank account, never mind operate one. The majority of financial institutions now demand that you allow them to pull a credit bureau report before they will open an account for you. And those same banks will close your account if you experience financial problems that involve them – such as filing for bankruptcy or filing a proposal and in some cases even filing for credit counselling programs.

Many of us pay little attention to what goes on with our bank account until there is a problem – and if the problem affects our credit rating we may not be able to access an account at all, because the banking industry will refuse to open a new account. Of course, there are laws against this practice and I recommend that you speak with a lawyer if you have experienced this.

Offset or set off as it is called

When we deposit money in our account, we expect that the bank will repay us when we ask. However, if you owe money to your bank and you do not pay it back as agreed, no matter what the reason, the bank has the right to claim “offset” – or “set off” against the money that you have on deposit with them – the bank can go into your account and take their payment.

So, maintain a debt-free account at all times.

Opening an account 

When you open a bank account, you will have to sign a signature card; this is so that the bank has a record of your true signature. These days for your protection the banks all want photo identification before they will open an account.

If you have children now is the time to introduce them to the bank– take your kids with you when you go to the bank. It will help if your kids understand how the banks work and what the benefits are of having an account. If you start teaching them about money now it will benefit them for the rest of their lives.

If you have a chequing account, you can expect your bank to honour your cheques when you write them. However, unless you have arranged in advance for overdraft privileges, the bank only has to honour a cheque if there’s enough money in your account. If the bank chooses to allow you to go into an overdraft position, they can and do charge you interest. Depending on the type of account you have, you may also be charged for the number of cheques you write and for any other services that the bank provides.

You may have to pay a service charge every time you use a bank machine or ATM (automated teller machine).

Get a list of the fees from your bank.

What about “NSF” (bounced) cheques?

If someone pays you with a cheque written on another bank account, normally you take that cheque to your own bank to cash or to deposit it. As part of their service, a bank will accept cheques drawn on other banks and arrange to present them to those other banks for payment – or to be “cleared”, as it’s called. Unfortunately, sometimes a cheque doesn’t clear, and it’s returned to your bank stamped “NSF” or “Non-Sufficient Funds.” Your agreement with the bank says that the bank can debit your account for the amount of the NSF cheque, whether or not you’ve cashed or deposited it. If you do deposit a cheque to your account, which is later returned marked “NSF”, most banks will return the cheque to you by mail so you are aware the cheque has “bounced” and that they have debited your account. “NSF” cheques can be sent on collection, so if you have a cheque that was returned, ask your bank to represent it.

Bank errors – time limits

What this means is that if the bank makes a mistake with your account, you have a certain period of time to point out that mistake to the bank. Normally, you have 30 days from the date the bank mails you your statement. If you don’t point out the mistake, you’re considered to have agreed that the balance shown in your statement is correct.

The only usual exceptions are if the bank makes a mistake in your favour by putting too much money into your account, or if the mistake is the result of someone forging a signature on your cheque. If you discover that someone has forged a signature on one of your cheques, you should immediately take steps to inform your bank.

Of course, if a mistake is made, you have to prove it. For that reason, always get a receipt for any deposit you make, and keep your cancelled cheques and bank statements for a reasonable period of time. At least one year.

If you use a bank machine or ATM, keep the receipts provided by the machine so that they can be compared against your account statements. This way, you’ll have a record of all of the transactions in your account. Remember that any deposits or transactions made at a bank machine on a weekend or holiday are processed on the branch’s next banking day.

Personal Identification Numbers – Your PIN number

When you have a bank card and “personal identification number” or PIN, you’re responsible for all amounts withdrawn from your account through the authorized use of your card. So if you lose your bank machine card or find out that someone has stolen your card or PIN, phone the bank immediately. Most agreements require you to phone within 24 hours of finding out that your card and PIN have been lost or stolen.

You normally won’t be responsible for the unauthorized use of your card and/or PIN after you’ve advised the bank about their loss or theft.

Never lend your bank card or credit cards to anyone, no matter what the occasion. Keep your PIN separate from your card.

Joint accounts – joint responsibility

If you have a joint account with one or more people, depending on how the signature card is signed, you agree that the bank can pay out funds on a cheque or withdrawal signed by any of the account holders. If the account is set up so that any of the account holders can sign a cheque or withdraw money, you’re still personally responsible no matter who signs the cheque. This means that if the account is overdrawn, the bank can demand repayment of the full amount from anyone who has signed the signature card.

So pay attention to your bank account at all times – be sure to read your monthly statements and balance your debits and credits – know at all times what is going on with your account.

Open a Debt Free Account now if you don’t have one.

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