Canadian Banking Guide for Newcomers

[ASK]

Canadian Banking Guide for Newcomers

Each country has its own rules and procedures for opening bank accounts. Knowing what they are in advance can make it that much easier for you when you get there.

Banking in Canada is widely considered the most efficient and safest banking system in the world, ranking as the world's soundest banking system for the past three years according to reports by the World Economic Forum.

Banks, credit unions, caisses populaires, and trust companies are all Canadian financial institutes and are regulated by the federal government.

Types of Bank Accounts

There are two types of accounts to choose from - chequing accounts and savings accounts . Each account has different features that help you to do different things.

Chequing account:

- Used for everyday banking and usually pays you little or no interest
- Used by most people to pay for frequent expenses such as groceries, gas, and rent
- Withdrawals can by made by: cheque, debit card, ABM (cash withdrawal), teller, moving money from one account to another, paying bills online, setting up automatic payments for regular monthly bills.
- Many employers require you to have a chequing account in which to deposit your salary

Savings account:

- Helps you save money for major purchases such as a car, vacation, or a down payment on a new home
- Usually has a higher interest rate than a chequing account, which helps your money grow faster
- A good place to keep some of your emergency cash.
- Money can be retrieved from the account by a debit card or ABM transaction (cash withdrawal).

Some special accounts like Students Account and Seniors Account are also available with some of the leading banks in Canada

Some common payment instruments:

Debit Cards:

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 Automated Teller Machine (ATM), stores, restaurants and other retail outlets. After putting the card into the machine, you'll need to enter your PIN.
- Keep your PIN safe. Choose your PIN carefully with numbers that are easy for you to remember
- Memorize your PIN
- Don't share it with anybody
- Don't write it down
- Cover the keypad when entering your PIN
- Change your PIN if you think someone knows it

Credit Cards:

As a newcomer, it helps you build your credit history in Canada. Credit cards such as a VISA® or MasterCard®, 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 (with the exception of cash advances). Pre-authorized (automatic) payments can be set up at no cost

Types of Credit Cards

- Low-Interest Cards - an optimal card for people who cannot pay off their monthly balance and have to carry it forward.

- Reward Cards - for avid travelers, this may be the perfect card; these cards commonly have an annual fee of $120 to $180.

- Cash-Back Cards - a type of reward card where a percentage of cash is paid to the cardholder, based on the amount spent on eligible purchases (gas, food, bill payments).

- Charge Cards - these are not technically credit cards although consumers perceive them as such. These cards have an annual fee and the balance must be paid off in full each month.

- Pre-Paid Cards - these are not credit cards, but operate in a similar fashion. The cardholder loads the card electronically with cash, and can't spend more than the card's balance. Pre-paid cards do not build credit history.


Canadian Cheques

When you open a chequing account you receive personalized cheques to pay bills. Cheques often include your name, address and phone number. Filling out a cheque and signing it, is one way to transfer money from your bank account to someone else whom you want to make a payment or to whom you owe money. When writing a cheque, make it payable to the person or organization that is to receive the money, fill in the amount they are to receive, and the date you are making the payment.

Credit Reports:

Building a good credit history will help you meet future financial goals.

Your credit history or credit rating starts from day one - the first time you get a credit card in your name, a loan or line of credit from a bank. Building a good credit rating now will go a long way to help meeting your future financial goals. If you have proven that you can borrow – and pay back – money responsibly, banks and other lenders will be more likely to approve you in the future for loans.

Your credit history is recorded in files (Credit Reports) maintained by at least one of Canada's two major credit-reporting agencies, Equifax and TransUnion. Equifax and TransUnion uses a scale from 300-900 to measure your credit worthiness; the higher your score, the lower the risk for the lender.

Equifax
1-800-465-7166

TransUnion
1-866-525-0262 (All provinces except Quebec)
1-877-713-3393 (Quebec)

How to Build Your Credit History Wisely?

Your credit history is a record of, among other things, 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. It will be a record of your debts - how much you borrowed - when you borrowed - how much you still owe - and when you paid off debts. Once you receive credit, use it wisely to build a good credit history:

- 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 the interest rate charges if you do not pay the balance in full each month.
- Don't go over the credit card limit.
- If you can't pay the full balance on your credit card, at least pay the minimum balance and make regular payments, with the goal of paying off debts as quickly as possible.
- Don't apply for credit too often since too many credit cards can hurt your credit rating.

Transfer your credit history

Some international banks allow you to keep the credit history you have worked so hard to establish, and make your transition to Canada easier.
Without your transferred credit history, as mentioned earlier, you'll need to start from scratch proving to others that you can be counted upon to make monthly payments on time.

An established Canadian credit rating makes it easier to:

- Obtain a credit card
- Purchase a home
- Apply for a loan to cover moving expenses

Other ways to build your credit history in Canada:

In order to establish a credit history, you need to borrow money and pay it back over time. Here are two ways to do this:

Apply for a retail store or gasoline credit card

They're a good start to help you build a credit history if you always pay your balances, or minimum payments, on time. By making timely payments, you'll start building a credit history.

Apply for a major credit card like MasterCard® or VISA®

Making purchases on a credit card and repaying the balance or minimum payment on time is another way to build your credit history. Interest rates on major credit cards are usually much lower than those on retail store and gasoline credit cards.

Open a Canadian Bank Account before you move to Canada:

You can open a Canadian Bank Account even before make your first landing in Canada. Some international banks like Scotiabank, HSBC, etc has special packages for new comers. Some of these banks may even have a tie up with your local bank for enrolling into this program. The topic on 'Opening a Canadian Bank Account before you arrive' will be posted in detail separately.

Hope it helps.

Sources and References:

http://www3.weforum.org/docs/WEF_GlobalCompetitivenessReport_2010-11.pdf
http://www.cba.ca/en/media-room/65-news-releases/536-good-news-for-all-canadians-world-economic-forum-again-ranks-canadas-banks-as-the-worlds-soundest-
http://www.scotiabank.com/ca/en/0,,5165,00.html
http://www.hsbc.ca/1/2/personal/new-to-canada/moving-to-canada/banking-guide
http://www.hsbc.ca/1/2/personal/new-to-canada/moving-to-canada/credit-history

 

[hope786]

Very good effort....God Bless U

 

[Z AND Z]

Canadian Banking Guide for Newcomers

Each country has its own rules and procedures for opening bank accounts. Knowing what they are in advance can make it that much easier for you when you get there.

Banking in Canada is widely considered the most efficient and safest banking system in the world, ranking as the world's soundest banking system for the past three years according to reports by the World Economic Forum.

Banks, credit unions, caisses populaires, and trust companies are all Canadian financial institutes and are regulated by the federal government.

Types of Bank Accounts

There are two types of accounts to choose from - chequing accounts and savings accounts . Each account has different features that help you to do different things.

Chequing account:

- Used for everyday banking and usually pays you little or no interest
- Used by most people to pay for frequent expenses such as groceries, gas, and rent
- Withdrawals can by made by: cheque, debit card, ABM (cash withdrawal), teller, moving money from one account to another, paying bills online, setting up automatic payments for regular monthly bills.
- Many employers require you to have a chequing account in which to deposit your salary

Savings account:

- Helps you save money for major purchases such as a car, vacation, or a down payment on a new home
- Usually has a higher interest rate than a chequing account, which helps your money grow faster
- A good place to keep some of your emergency cash.
- Money can be retrieved from the account by a debit card or ABM transaction (cash withdrawal).

Some special accounts like Students Account and Seniors Account are also available with some of the leading banks in Canada

Some common payment instruments:

Debit Cards:

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 Automated Teller Machine (ATM), stores, restaurants and other retail outlets. After putting the card into the machine, you'll need to enter your PIN.
- Keep your PIN safe. Choose your PIN carefully with numbers that are easy for you to remember
- Memorize your PIN
- Don't share it with anybody
- Don't write it down
- Cover the keypad when entering your PIN
- Change your PIN if you think someone knows it

Credit Cards:

As a newcomer, it helps you build your credit history in Canada. Credit cards such as a VISA® or MasterCard®, 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 (with the exception of cash advances). Pre-authorized (automatic) payments can be set up at no cost

Types of Credit Cards

- Low-Interest Cards - an optimal card for people who cannot pay off their monthly balance and have to carry it forward.

- Reward Cards - for avid travelers, this may be the perfect card; these cards commonly have an annual fee of $120 to $180.

- Cash-Back Cards - a type of reward card where a percentage of cash is paid to the cardholder, based on the amount spent on eligible purchases (gas, food, bill payments).

- Charge Cards - these are not technically credit cards although consumers perceive them as such. These cards have an annual fee and the balance must be paid off in full each month.

- Pre-Paid Cards - these are not credit cards, but operate in a similar fashion. The cardholder loads the card electronically with cash, and can't spend more than the card's balance. Pre-paid cards do not build credit history.


Canadian Cheques

When you open a chequing account you receive personalized cheques to pay bills. Cheques often include your name, address and phone number. Filling out a cheque and signing it, is one way to transfer money from your bank account to someone else whom you want to make a payment or to whom you owe money. When writing a cheque, make it payable to the person or organization that is to receive the money, fill in the amount they are to receive, and the date you are making the payment.

Credit Reports:

Building a good credit history will help you meet future financial goals.

Your credit history or credit rating starts from day one - the first time you get a credit card in your name, a loan or line of credit from a bank. Building a good credit rating now will go a long way to help meeting your future financial goals. If you have proven that you can borrow – and pay back – money responsibly, banks and other lenders will be more likely to approve you in the future for loans.

Your credit history is recorded in files (Credit Reports) maintained by at least one of Canada's two major credit-reporting agencies, Equifax and TransUnion. Equifax and TransUnion uses a scale from 300-900 to measure your credit worthiness; the higher your score, the lower the risk for the lender.

Equifax
1-800-465-7166

TransUnion
1-866-525-0262 (All provinces except Quebec)
1-877-713-3393 (Quebec)

How to Build Your Credit History Wisely?

Your credit history is a record of, among other things, 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. It will be a record of your debts - how much you borrowed - when you borrowed - how much you still owe - and when you paid off debts. Once you receive credit, use it wisely to build a good credit history:

- 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 the interest rate charges if you do not pay the balance in full each month.
- Don't go over the credit card limit.
- If you can't pay the full balance on your credit card, at least pay the minimum balance and make regular payments, with the goal of paying off debts as quickly as possible.
- Don't apply for credit too often since too many credit cards can hurt your credit rating.

Transfer your credit history

Some international banks allow you to keep the credit history you have worked so hard to establish, and make your transition to Canada easier.
Without your transferred credit history, as mentioned earlier, you'll need to start from scratch proving to others that you can be counted upon to make monthly payments on time.

An established Canadian credit rating makes it easier to:

- Obtain a credit card
- Purchase a home
- Apply for a loan to cover moving expenses

Other ways to build your credit history in Canada:

In order to establish a credit history, you need to borrow money and pay it back over time. Here are two ways to do this:

Apply for a retail store or gasoline credit card

They're a good start to help you build a credit history if you always pay your balances, or minimum payments, on time. By making timely payments, you'll start building a credit history.

Apply for a major credit card like MasterCard® or VISA®

Making purchases on a credit card and repaying the balance or minimum payment on time is another way to build your credit history. Interest rates on major credit cards are usually much lower than those on retail store and gasoline credit cards.

Open a Canadian Bank Account before you move to Canada:

You can open a Canadian Bank Account even before make your first landing in Canada. Some international banks like Scotiabank, HSBC, etc has special packages for new comers. Some of these banks may even have a tie up with your local bank for enrolling into this program. The topic on 'Opening a Canadian Bank Account before you arrive' will be posted in detail separately.

Hope it helps.

Sources and References:

http://www3.weforum.org/docs/WEF_GlobalCompetitivenessReport_2010-11.pdf
http://www.cba.ca/en/media-room/65-news-releases/536-good-news-for-all-canadians-world-economic-forum-again-ranks-canadas-banks-as-the-worlds-soundest-
http://www.scotiabank.com/ca/en/0,,5165,00.html
http://www.hsbc.ca/1/2/personal/new-to-canada/moving-to-canada/banking-guide
http://www.hsbc.ca/1/2/personal/new-to-canada/moving-to-canada/credit-history

Very informative and helpful post. Thanks mate.

 

[ASK]

Thank you Hope786 & Z AND Z.