During your first few days as a newcomer in Canada, you will need to complete certain tasks to set the foundation for your long-term financial success. Opening a bank account and applying for a credit card should be a top priority on your list.
The Canadian banking industry is large and you’ll have many options to choose from. However, newcomers to Canada have distinct financial needs and not all products may be well-suited to your requirements.
Typically, you should start researching banking options in Canada several weeks before your arrival to avoid delays in the bank account opening process. This article will give you an overview of banks and banking products in Canada and some essential tips on choosing the best bank account and credit card for you.
In this article:
- Banking options in Canada
- Types of bank accounts
- Who qualifies as a newcomer to Canada?
- Things to keep in mind while choosing a banking partner
- How to choose the best bank account for you
- How to select the best credit card for you
Most newcomers opt for one of the “Big Five” banks, given their size and presence across the country. By market capitalization, these include Royal Bank of Canada (RBC), Toronto-Dominion Bank (TD), Bank of Nova Scotia (Scotiabank), Bank of Montreal (BMO), and Canadian Imperial Bank of Commerce (CIBC).
These banks have both a physical and a digital presence. For instance, RBC has 1,201 branches and 4,240 ATMs across Canada, as well as easy-to-use online, mobile, and phone banking options.
In addition to the traditional banks, Canada also has a few digital-only banks, such as Tangerine Bank (powered by Scotiabank), EQ Bank (powered by Equitable Bank), Motus Bank (or motusbank), and Simplii Financial (by CIBC). These banks also offer financial products, but may not have the full range of services that larger banks offer.
There are two main types of bank accounts in Canada that serve distinct purposes: Chequing accounts and Savings accounts.
What is a Chequing account?
A chequing account is an essential basic account in Canada. This is where you keep money that you’ll use for daily transactions, making purchases, and all of your recurring expenses. Typically, with your chequing account, you’ll earn a low or no yearly interest rate on deposits. You may also get a debit card to access this account. Note that using a debit card to withdraw cash from an automated teller machine (ATM) from a different financial institution than your own often comes with a fee.
What is a Savings account?
A savings account is an interest-earning account to help you save money over the longer term. This account is not intended for regular, everyday spending transactions. It’s ideal for money that you won’t need daily access to and can set aside as savings for an emergency fund or longer-term needs. There may be a limit on the number of monthly withdrawals you can make from your savings account.
Typically, banks will consider you a newcomer if you’re a permanent resident (PR) who has lived in Canada for less than three to five years. Some banks, like RBC, also offer newcomer products and offers to international students and temporary foreign workers.
In most cases, you can qualify as a newcomer even if you already have a banking relationship with another financial institution, so you should be able to avail newcomer products and offers if you’re switching banks.
With all the choices available to you, selecting a banking partner that’s right for your financial needs as a newcomer to Canada can be confusing. As this is a crucial decision to make, there are many factors you’ll need to keep in mind to ensure your bank meets your needs.
- Does the bank have specialized accounts or offers for newcomers or international students? Whether you’re coming to Canada as a permanent resident or an international student, your financial needs as a newcomer will be different from those of residents who have been here longer and don’t have financial ties abroad. Some of the larger banks, like RBC, have distinct newcomer banking products that are specially designed to meet your requirements.
- Does the bank have branches or ATMs near you? Also, look at the overall presence of the banking partner to determine whether you’ll have easy access to your money. You can use the branch locator, such as this one for RBC, on the bank’s website to find branches or ATMs close to your home or workplace.
- Do they have a good reputation of service and does their mission align with your interests? Be sure to check if the bank you’re choosing has a good reputation, has advisors who are able and willing to explain financial products to you, and answer your questions. As a newcomer, you want a trusted banking partner who understands your needs, so compare customer reviews and ask your friends in Canada about their experience with their banks. Also, look at awards or recognitions the banks may have received. For instance, the Global Finance magazine ranked RBC as the #1 Best Bank in North America in 2021.
- Does the bank offer a wide range of financial products? As a newcomer, your financial needs may be limited initially, but will likely expand over the next few years. While most banks do, make sure that your bank can offer you the entire range of products from banking basics like chequing accounts and credit cards to products you’ll need over a longer term like mortgages, RESPs, auto loans, and insurance.
- Does the bank have dedicated newcomer advisors and staff who speak your language? Language barriers and cultural differences should not stand in the way of your financial success in Canada. Some banks like RBC have newcomer advisors who specialize in helping newcomers understand the Canadian financial environment and banking products. These advisors understand the questions and concerns newcomers typically have as they transition to life and banking in Canada and can help you build a strong financial foundation, right from the start. If your first language is not English or French, be sure to check if the bank you’re considering has financial advisors who can answer your questions and explain financial products in a language you’re comfortable with.
Not all bank accounts are the same. The requirements, fees, and account features may vary based on the financial institution and the banking product you’ve picked. Here are some things you should compare to find a bank account that meets your needs:
- Minimum balance requirements: Some bank accounts require you to maintain a minimum daily or monthly balance. If your balance dips below this required level, you may be charged a penalty. RBC Day to Day Banking, RBC Signature No Limit, and RBC VIP Banking accounts don’t have any minimum balance requirements, allowing you to access all your money, whenever you need it. At RBC, you can speak to a financial advisor to find the best bank account for your needs.
- Banking fees: Most chequing accounts have a monthly banking fee, which can range from $0 to $30.95. In some cases, the monthly fee can be waived if you maintain a minimum balance in the account. The RBC Advantage Banking account offers a one-year waiver of monthly fees for newcomers*.
- Statement fees: Some banks charge a small monthly fee for issuing paper bank statements. In most cases, you can opt for paperless, e-statements for no charge.
- Cheque or draft fees: Some chequing accounts come with free personalized cheques or bank drafts. In others, a chequebook with 50 leaves can cost as much as $50 and a bank draft can cost up to $10.
- Automated Teller Machine (ATM) or Interac e-Transfer limits and charges: Some accounts may have limits for how many ATM withdrawals or peer-to-peer Interac e-Transfer transactions you can make in a month. You should also check if there’s a fee for withdrawing money from another bank’s ATM or making Interac e-Transfer transactions to an account in a different bank.
- International remittance fees: As a newcomer in Canada, you may want to continue financially supporting your family back home. If you’re planning to make international money transfers regularly, be sure to check the international remittance fees for the chequing accounts you’re considering. RBC offers newcomers up to two free international remittances per month for their first year with an eligible RBC bank account.
- Interest rates: The interest you’ll receive in savings accounts in Canada may be much less than what you’re used to in your home country. However, High Interest Savings Accounts (HISA) such as the RBC HISA usually offer a higher rate of interest to help you grow your savings faster.
- Offers: Some bank accounts offer incentives at the time of account opening. For instance, you may receive cash incentives, higher interest rates, or free services if you open a new account and meet some qualifying criteria.
Having a credit card is essential for your life in Canada. Not only does it give you the flexibility of making purchases on credit, but it also helps you build your credit history. However, there are many credit card options to pick from, so keep the following criteria in mind to find a credit card that’s best for you:
- Eligibility: For certain credit cards, financial institutions require you to have a minimum threshold income or an established Canadian credit history, which many newcomers do not have. The RBC Cash Back Mastercard and RBC Rewards+ Visa credit cards keep in mind the financial realities of newcomers and international students. You could speak to a financial advisor at RBC to get advice on the best credit card products for you.
- Annual fee: The annual fee for credit cards can range between $0 and $400. Many newcomers prefer to start with a no- or low-fee credit card and upgrade later.
- Credit limit: The credit limit of your credit card plays an important role in determining your overall credit utilization ratio. If you’re working on building your credit score, it’s a good practice to use less than 35 per cent of your credit limit. So having a higher credit limit helps, as long as you’re not tempted to spend more than you can afford. While most Canadian banks offer low credit limits to newcomers with no Canadian credit history, certain RBC credit cards have credit limits of up to $15,000 (higher credit limits are subject to higher income and asset requirements**) when you are an RBC banking client. If you plan on making a large purchase such as flight tickets for several family members, ensure that the total sum is within your credit limit.
- Rewards: Depending on the type of credit card you select, you may receive rewards in the form of cash back on purchases, travel points, or other rewards. RBC’s online tool helps you choose a credit card based on various criteria, including the type of rewards you’re interested in. Some banks also offer exclusive loyalty or reward programs. For instance, with the RBC Rewards program, you can use the reward points you earn on credit card purchases for travel, merchandise, gift cards, and even to pay off your bills.
- Interest rates: Credit cards typically carry very high interest rates and you should always try to pay your credit card bills in full and on time. Late or partial payments can negatively impact your credit score and result in high interest charges. However, if you anticipate occasional delays in paying off your balance, be sure to factor interest rates into your comparison. The RBC Visa Classic Low Rate Option credit card could be a good option, as it offers lower interest rates on both purchases and cash advances.
- International usage: If you’re planning to travel abroad often, check if the credit cards you’re considering will allow you to make purchases abroad and compare international usage fees.
- Additional benefits: Some credit cards come with additional features like discounts or cashback on certain purchases, personal or travel insurance, airport lounge access, etc. You may also have the option to add additional benefits for a small fee.
- Offers and joining bonuses: While comparing credit cards, you may come across limited-time offers on certain credit cards. These offers could entitle you to extra rewards or cash back if you meet certain qualifying criteria during the initial months of usage.
As a newcomer in Canada, choosing a bank account and credit card will likely be a top priority for you. The banking system and financial products may be very different from those in your home country, so take the time to understand each product and select a bank account and credit card that best fits your needs. Remember that you are not tied down to the banking products you choose when you first arrive, so you can always upgrade to a higher tier or different account or credit card later.
*Monthly fee will be waived for the first twelve months upon account opening of the RBC Advantage Banking account or RBC VIP Banking account. Thereafter the monthly fee will be charged: monthly fee of $11.95 for the RBC Advantage Banking account or monthly fee of $30.00 for the RBC VIP Banking account. For RBC VIP Banking account, $10,000 CAD must be deposited into the account within 20 days of account opening to qualify for the promotional offer, and offer expires October 31, 2022. Other account transaction fees may apply. Monthly fee waiver for the first twelve months may be replaced with any in-market offer that applies to the RBC Advantage Banking or RBC VIP Banking account. Available only to newcomers who are (i) permanent residents who arrived in Canada within the last 12 months, or (ii) temporary resident workers who arrived in Canada within the last 48 months. Offer may be withdrawn or amended at any time without notice. See complete terms and conditions that apply to this promotional offer.
**Your credit limit will be based on financially related information about you, including income and asset information. Offer available to RBC personal deposit accountholders who are (i) permanent residents who arrived in Canada within the last 12 months, or (ii) temporary resident workers who arrived in Canada within the last 48 months, applying for a new RBC Royal Bank personal credit card (excluding the RBC Rate Advantage Visa). Existing RBC Royal Bank personal credit card cardholders are not eligible. Royal Bank of Canada reserves the right to cancel, modify or withdraw this offer at any time. Higher credit limits are subject to higher income and asset requirements.