Canadian Banking Guide
Find out which banks operate in Canada and the offers to newcomers
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Banking in Canada is widely considered one of the most efficient and safest banking system 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. |
Access to an Account
Anyone can open a bank account in Canada if they meet the identification requirements set out in the Bank Act. You can open an account even if you don’t have a job or money to deposit.
You can even open a bank account before landing in Canada with some select banks.
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.
To open a bank account in Canada, you need to provide two specific pieces of identification, such as :
- a Canadian driver’s license,
- a Certificate of Canadian Citizenship,
- a Permanent Resident card or Confirmation of Permanent Residency,
- a foreign passport.
Types of Bank Accounts
You can choose from two different types of accounts, a checking account or a savings account:
Checking account:
Checking account:
- Used for everyday banking (frequent expenses) and usually pays you little or no interest.
- Transactions can by 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 checkbook when choosing your bank (around $50 for a 100 cheques).
Another cheaper and reliable option is to order your cheques through a 3rd party, such as ASAP cheques : 200 cheques for $34!
Another cheaper and reliable option is to order your cheques through a 3rd party, such as ASAP cheques : 200 cheques for $34!
Credit History and How to Build it
Your credit history is a record of how you have paid off past debts or loans. If you have not paid off some debts or made late payments, this will hurt your credit rating and make it more difficult for you to borrow money. 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 uses a scale from 300-850 to measure your credit worthiness.
Once you receive your credit card, use it wisely to build a good 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.
- Do use your new credit card to create a credit history. Make purchases with the card, but pay your bills in full and on time.
- Be aware of interest rate charges if you do not pay your credit in full each month. They are usually quite high.
- Don't exceed your credit card limit.
- Don't apply for credit too often since too many credit cards can hurt 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
Some newcomers to Canada regularly send money to loved ones in other countries. Banks in Canada can make these transfers, called remittances, to family members or friends abroad in a number of different currencies. Banks charge a fee for remittance payments and the fees are clearly disclosed on bank websites and in branches.
If you are sending money to someone in another country that does not have a bank account, there are money transfer services that can do that for you. These companies can transfer money to thousands of agents around the world that are often located in shops.
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.
If you are sending money to someone in another country that does not have a bank account, there are money transfer services that can do that for you. These companies can transfer money to thousands of agents around the world that are often located in shops.
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 $5 to $30 per month, depending on the number of monthly transactions and other options you want to make. You may be able to have these fees waived or refunded if you maintain a sizeable balance, 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
Money can be transferred online simply by entering the receiver’s email address or phone number. Both parties must have a Canadian bank account that has Interac capabilities. It costs $1 to $1,5 per transfer, or can be free if included in your bank plan.
Fees can range from $5 to $30 per month, depending on the number of monthly transactions and other options you want to make. You may be able to have these fees waived or refunded if you maintain a sizeable balance, 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
Money can be transferred online simply by entering the receiver’s email address or phone number. Both parties must have a Canadian bank account that has Interac capabilities. It costs $1 to $1,5 per transfer, or can be free if included in your bank plan.
"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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Online Banks
Tangerine
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PC Financial
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What's next?
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