Unless you’re coming from the US (hi, Southern neighbour!) chances are you will find the Canadian banking system a bit confusing at first. Interac and credit cards may be new to you and checking accounts may come with a different fine print than the one you’re used to “back home.” Opening a bank account as a newly landed permanent resident and applying for a credit card can seem challenging.
Let’s take a closer look.
The main commercial banks in Canada are:
As a temporary or a permanent resident in Canada, you will need two pieces of personal identification (your Permanent Resident card, SIN card, health card, Canadian driver licence or foreign passport are among the acceptable piece of ID) to open a bank account. You don’t have to be employed or make a minimum deposit to open the account.
Most banks are used to deal with new Permanent Residents but they might not be familiar with your status if you hold a specific temporary work permit. Don’t hesitate to talk to a manager or someone knowledgeable—insist politely if needed.
First, you’ll need a checking account for day-to-day banking. You will be given a debit card with a PIN to withdraw money. Note that you will often pay a fee for pretty much every service and transaction– monthly account fee (anything from $2.00 to $15/month), withdrawal fees (especially when you withdraw at another bank’s ABM), cheque fees… To see an example of fees that can be charged, have a look here.
There are ways to lower your banking fees:
- Always withdraw money from your bank ATM. Avoid other banks’ ATMs and really avoid withdrawing money from no-name ATMs in convenience stores because you’ll pay for this convenience.
- Use the online banking system, most transactions will be free or cheaper than in person at the bank.
- Calculate how many transactions you need per month and choose banking options accordingly. A basic 15 transactions/month package is enough for some but you may want to pay a slightly higher monthly fee to get up to 20/30/40, etc., transactions for free.
Canadians don’t really use cheques except for paying rent or daycare. This is good news because cheque books aren’t free—they must be ordered through your bank from a third party. Canadians mostly pay using Interac, the national debit service. It’s fast and convenient.
Canadians also love using credit cards because most of them offer rewards, plus obviously credit. The main credit card companies are Visa, MasterCard and American Express (Amex). Getting a credit may be a challenge as a newcomer–Catch 22 is the fact you need a good credit history to get a credit card, but you need a credit card to get a credit history. From my own experience, credit history established in your home country is rarely taken into account, which can be frustrating.
A side note about the credit history—it’s a good idea to check your credit score regularly to spot identity theft but some companies try to scam people into paying to see their credit report. Getting a copy of your credit report is free from the three credit bureaux (Equifax Canada, TransUnion Canada and Northern Credit Bureaus) if you just fill up a couple of forms and mail them. A few weeks ago, I downloaded the form from TransUnion and received my report for free two weeks later. Please, don’t get scammed and don’t pay to see what companies are legally forced to disclose!
You may try the following methods to get your first credit card:
- Apply for a store credit card (i.e Sears, Canadian Tire, The Bay, etc.). These credit cards typically have extremely high interest rates (make sure you pay the balance in full every month!) but they are easier to get. You will then be able to apply for better credit cards.
- Ask your bank. They know the newcomer’s credit card problem and will offer to “lock” a certain amount on a bank account (typically $500 – $1,000) and issue a low limit credit card (i.e $500). If everything goes well and you pay the full balance regularly, your money will be “unlocked” a few months later and your credit limit can be raised.
- If you’re a student (even a part-time one) apply for a student credit card. These cards usually have a very low limit ($500) but it’s easier to get approved. And a few months later, you can apply for a higher limit if needed.
- If everything fails, just wait. Get a job, pay your bills regularly for a few months and reapply later.
Don’t forget to save and invest money wisely. Saving accounts, registered saving accounts, mutual funds, etc., are widely available, book an appointment with a representative.
For more banking info, check out:
- Credit reports and scores, using a credit card to establish good credit and the sad-but-true 20 sneaky credit card tricks from Bankrate.
- Info on banking from the Government of Canada.