The Canadian banking system stands out for its efficiency and security, even if it's often a bit pricier compared to elsewhere. But here's some good news for newcomers: most Canadian banks usually offer the first year without any fees! In this article, we will delve into the major Canadian banks, their offerings, and explain the unique features of the Canadian banking system, especially if finance in North America is uncharted territory for you.
Types of Bank Accounts
When you sign up with a bank, you have a choice between two main types of accounts: the checking account (or current account) and the savings account.
Checking Account: Perfect for day-to-day finances and managing regular expenses, even though it typically earns little to no interest. You can perform various transactions using checks, debit cards, or withdrawing from Automated Banking Machines (ABMs). This includes transferring money between accounts, paying bills online, and much more. Many employers may require you to have a checking account for direct salary deposits.
Savings Account: Ideal for setting aside funds for significant purchases or savings goals. This type of account generally offers a higher interest rate compared to a checking account. You can access money from this account using a debit card at an ATM or Automated Teller Machine (ATM).
Common Payment Methods
Debit Card: Upon opening a checking or savings account, you'll receive a debit card and a confidential Personal Identification Number (PIN). This card enables transactions at ATMs or in stores, restaurants, and various retail outlets. It's important to note that some establishments may only accept credit cards.
Credit Card: Credit cards give the cardholder the ability to make purchases without using cash. Typically, no interest accrues on new purchases if the monthly balance is paid in full by the due date. You can easily set up pre-authorized (automatic) payments at no additional cost. For newcomers, credit cards are a valuable tool for establishing a credit history in Canada. More details on credit cards in the section below.
Check: When you open a checking account, you'll receive personalized checks to facilitate bill payments. These checks usually contain your name, address, and phone number. Many employers request a 'void check' at the start of your employment as it contains the necessary bank details for salary transfers. Additionally, some landlords may prefer rent payments via checks.
Newcomer offers from the 5 biggest Canadian Banks
Building a Credit History
Your credit history, or Credit Score, is a crucial element of financial life in Canada. A person's credit history essentially serves as a report card on their debt repayment behavior. Timely payments and consistent debt repayment reflect positively on your Credit Score, making future borrowing easier and more affordable. Establishing a robust credit history is instrumental in achieving your financial aspirations.
Your credit activities are documented in credit reports, maintained by Canada's major credit reporting agencies—Equifax and TransUnion. They utilize a creditworthiness scale ranging from 300 to 900.
Guidelines for Building a Strong Credit History:
Prudent Credit Card Usage:
Use your credit card responsibly, ensuring prompt settlement of credit card bills.
Late payments incur substantial fees due to high late payment interest rates (20~30%).
Maintain spending within your credit card limit to avoid penalties.
Avoid applying for multiple credit cards, which could negatively impact your Credit Score.
Steer clear of impulsive purchases beyond your financial means, a common temptation for credit card newcomers.
Insights into Credit Card Usage:
Understand that some recruiters, especially prominent corporations, conduct credit checks as a final step before hiring.
Unsettled debts or a poor Credit Score may lead recruiters to reassess your suitability for employment.
Tips and Important Facts for Newcomers
Banking Fees: Monthly banking fees vary, starting free and going up to $35, depending on the services you desire. Negotiating to have these fees waived is possible if you maintain a specified account balance, typically ranging between $1,000 and $4,000.
ATM Charges: Withdrawals are free from your bank's Automated Banking Machines (ABMs). Charges apply when using ABMs of other banks. Utilizing privately owned machines (ATM) not affiliated with any bank incurs charges from both your bank and the ATM owner, sometimes totaling up to $5 per withdrawal.
Interac / E-Transfer: Allows easy online money transfers to another bank account using the recipient's email or phone number. Both the sender and receiver need a Canadian bank account that supports Interac. Transfer fees range from $0,5 to $1.5 per transaction, or it may be free if included in your bank plan.
International Transfer: Newcomers can send money to/from their home country through their Canadian bank using remittance services. Fees for remittance payments can be found on the bank's website. A cheaper option is to use online money transfer companies (like wise.com) that send money abroad to a bank account.
Credit Cards 101
It's vital for newcomers to Canada to adapt to the financial landscape for lasting success. This involves learning about new financial products and best practices for managing money. Canada primarily operates on a credit system, including credit cards.
Here's what you need to know:
Credit cards are crucial to establish a good Credit Score.
It's vital to pay off the full balance every month to steer clear of high interest rates (usually ranging from 20 to 30%).
Credit cards have a designated credit limit, and this limit can be negotiated to better suit your needs.
They are essential for facilitating online purchases.
Utilizing credit cards for cash advances is not advisable due to the hefty fees and high interest rates associated.
Prioritize your negotiation with the bank on boosting your credit limit — essential for that upcoming flight back home! 😊
Credit Cards for Newcomers
There's a vast array of credit card options in the market. They're obtainable through your bank or third-party providers like American Express, Amazon, Walmart, etc.
While some are free, most come with an annual fee, often offset by greater rewards and cashback.These cards can be broadly classified into two categories:
Rewards: Commonly affiliated with popular brands like Expedia, Air Canada, and Cineplex. Accrue points with every purchase. Redeem points for travel (flights, hotels) or entertainment (movies).
Cashback: Earn a percentage of cashback for each transaction, credited monthly or annually. Typically offer different rates, including a standard rate for general expenses and a higher rate for groceries, gas, and recurring spending.
Simple Relocate is your relocation partner in Toronto. We can certainly assist you in selecting a bank and a credit card, along with many other services to make your move to Ontario smooth and hassle-free.
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