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Canadian Banking Guide
Find out which banks operate in Canada and the offers to newcomers
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The Canadian banking system is reckoned as one of the most effective and secure in the world, though not always free. However, Canadian banks usually offer the first year for free for newcomers.
This article will take you on a tour of the major Canadian banks and the specificities of the Canadian banking system if you are not familiar with North American banking. |
Opening a Bank Account
To open a bank account in Canada, you need to provide two specific pieces of identification, such as :
You can even open a bank account before landing in Canada with some select banks.
- a Canadian driver’s license,
- a Certificate of Canadian Citizenship,
- a Permanent Resident card or Confirmation of Permanent Residency,
- a foreign passport.
You can even open a bank account before landing in Canada with some select banks.
Types of Bank Accounts
You can choose from two different types of accounts, a checking account or a savings account:
Checking account
Savings account
Checking account
- Used for everyday banking (frequent expenses) and usually pays you little or no interest.
- Transactions can be made by cheque, debit card, Automated Banking Machine (ABM) or Automated Teller Machine (ATM), moving money from one account to another, paying bills online, ...
- Many employers require you to have a chequing account in which to deposit your salary.
Savings account
- Helps you save money for major purchases.
- Usually has a higher interest rate than a chequing account.
- Money can be retrieved from the account by a debit card or ABM.
Common Payment Instruments
Debit Card
When you open a chequing or savings account, you will receive a debit card and a confidential Personal Information Number (PIN). A debit card lets you make transactions at an ABM or ATM, stores, restaurants and other retail outlets. Note that some stores and retailers only accept credit cards.
Credit Card
Credit cards allow the cardholder to charge purchases rather than pay cash. Generally, no interest is charged on new purchases as long as the monthly balance is paid in full each month by the due date. Pre-authorized (automatic) payments can be set up at no cost. As a newcomer, credit cards help you build your credit history in Canada.
Cheques
When you open a chequing account you receive personalized cheques to pay bills. Cheques often include your name, address and phone number. Many employers will request a ‘void cheque’ at the beginning of your employment. This is because it will contain the bank details they require to transfer money to your account. Some landlords also require payment of rent via cheques. You need to pay attention to the price of a chequebook when choosing your bank (around $50 for a 100 cheques).
Another cheaper and reliable option is to order your cheques through a 3rd party.
When you open a chequing or savings account, you will receive a debit card and a confidential Personal Information Number (PIN). A debit card lets you make transactions at an ABM or ATM, stores, restaurants and other retail outlets. Note that some stores and retailers only accept credit cards.
Credit Card
Credit cards allow the cardholder to charge purchases rather than pay cash. Generally, no interest is charged on new purchases as long as the monthly balance is paid in full each month by the due date. Pre-authorized (automatic) payments can be set up at no cost. As a newcomer, credit cards help you build your credit history in Canada.
Cheques
When you open a chequing account you receive personalized cheques to pay bills. Cheques often include your name, address and phone number. Many employers will request a ‘void cheque’ at the beginning of your employment. This is because it will contain the bank details they require to transfer money to your account. Some landlords also require payment of rent via cheques. You need to pay attention to the price of a chequebook when choosing your bank (around $50 for a 100 cheques).
Another cheaper and reliable option is to order your cheques through a 3rd party.
Credit History and How to Build it
The credit history of a person is basically a transcript of how they pay back their debt. Paying late or not reimbursing debt at all will negatively affect credit rating and make it more difficult and expensive to borrow money again. Building a good credit history will help you meet your future financial goals.
Your credit history is recorded in what are called Credit Reports, in at least one of Canada's two major credit-reporting agencies, Equifax and TransUnion. Equifax and TransUnion use a scale from 300-850 to measure your creditworthiness.
After receiving your credit card, you need to use it carefully in order to construct your credit history:
You need to know that some recruiters (usually big companies) carry out a credit check on you as a last step before hiring. If they find out you have not paid off a debt or have a bad credit score, they will reconsider hiring you.
- Use your credit card, but always settle your credit card invoices on time.
- Paying your credit card bill late will cost you money. Check the late payment interest rates, they are usually quite high.
- Do not exceed your credit card limit.
- Do not apply for a lot of credit cards, this can negatively effect your credit rating.
- Do not make impulse purchases that you cannot afford. That can be very tempting for newcomers who have never had a credit card.
You need to know that some recruiters (usually big companies) carry out a credit check on you as a last step before hiring. If they find out you have not paid off a debt or have a bad credit score, they will reconsider hiring you.
Sending Money Abroad
If you, as a newcomer, want to send some money to your family in your home country, you can do it through your Canadian bank, in what is called remittances. You will be charged for remittance payments (you can find the fees in the bank's website).
You can also send it through money transfer services, in case your recipient does not have a bank account in your home country. Some of these companies are multinationals that can let you send your money almost anywhere in the world in the matter of minutes.
Another cheaper option is to use online money transfer companies that send money abroad in the bank account of your choice for as little as $3. They have the best exchange rates on the market.
For more information on the subject, please visit this page.
You can also send it through money transfer services, in case your recipient does not have a bank account in your home country. Some of these companies are multinationals that can let you send your money almost anywhere in the world in the matter of minutes.
Another cheaper option is to use online money transfer companies that send money abroad in the bank account of your choice for as little as $3. They have the best exchange rates on the market.
For more information on the subject, please visit this page.
Tips and Important Facts for Newcomers
Banking Fees
Fees can range from as little as $4 to $35 per month. This mainly depends on the options you want to have at your disposal. You can easily negociate to have the banking fees waived if you can keep your bank account from dropping below a set dollar amount, usually between $1,000 and $4,000.
ABM/ATM charges
You can withdraw money without charge from your bank's machines (ABM). You will be charged if you use another bank's ABM.
If you use privately owned machines (ATM, do not belong to any bank), you will be charged by your bank and the ATM. It can cost up to $5 per withdrawal. So, you better avoid them.
Interac
You can transfer your money online to another bank account simply by having the recipient's e-mail or phone number. Both the sender and receiver must have a Canadian bank account that uses Interac. It costs $1 to $1.5 per transfer, or can be free if included in your bank plan.
Fees can range from as little as $4 to $35 per month. This mainly depends on the options you want to have at your disposal. You can easily negociate to have the banking fees waived if you can keep your bank account from dropping below a set dollar amount, usually between $1,000 and $4,000.
ABM/ATM charges
You can withdraw money without charge from your bank's machines (ABM). You will be charged if you use another bank's ABM.
If you use privately owned machines (ATM, do not belong to any bank), you will be charged by your bank and the ATM. It can cost up to $5 per withdrawal. So, you better avoid them.
Interac
You can transfer your money online to another bank account simply by having the recipient's e-mail or phone number. Both the sender and receiver must have a Canadian bank account that uses Interac. It costs $1 to $1.5 per transfer, or can be free if included in your bank plan.
The "Big 5" Banks
Bank of Montreal (BMO)
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Scotiabank
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Canadian Imperial Bank of Commerce (CIBC)
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Toronto-Dominion Bank (TD Bank)
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RBC Royal Bank
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The two major Online Banks
Tangerine
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PC Financial
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