Banking in Canada
Many of the major banks offer bank account and starter credit card for newcomers. Many Canadian employers like to pay their employees via direct deposit to their bank accounts twice a month. The major banks will charge a monthly banking fee if your bank account falls under a certain threshold (ie. $2000) or it exceeds the minimal allowable transactions. Online banks have become increasingly popular as they help newcomers save more by offering competitive interest rates without charging monthly fees. Manulife Bank consistently offers the highest rate among all banks. Come see us so we can assist you with Manulife Bank.
Newcomers are often disappointed to learn that their credit history from their home countries has no value in Canada. Once you arrive here, you have to build your credit history from scratch. Building credit may be a foreign concept to newcomers from certain countries which traditionally value a big deposit in your bank account as proof of your ability to pay, not your payment history.
Credit cards are a convenient method of payment and they help build your credit history if you pay them off on time and in full. We recommend that each person gets his/her own credit card, one card in your name and one card in your spouse’s name. When two people with good credit history apply for a home mortgage, both of you appear to be better risk to mortgage lenders. If you don’t like the low limit from the starter credit cards at the local bank, department stores, such as the Hudson’s Bay and Canadian Tire, offer credit cards which are typically easier to qualify for. These cards have high interest rates, so we do not recommend using these cards if you can’t pay them off quickly.
Immigrants without experience using credit cards may hold the cards in their wallets and not use them until it’s an emergency. This conservative approach is very responsible, yet not useful for those who need to build credit to buy a future home. Your credit history will show how you’ve handled credit since you’ve arrived in Canada, and whether your bills have been paid in full and on time. Repeatedly paying off your bills – in full and on time – will help you build your credit history. Mortgage lenders will evaluate whether you are a good risk to lend money to based on your history in borrowing money and how quickly you pay it back. A good credit score vs. a bad score can be a deciding factor in obtaining a good mortgage rate.
Even using your credit card several times per month and paying it off can help. As you build your credit history over the next few years, you’ll find it easier to qualify for additional credit cards. Too much credit isn’t always a good thing as it may entice some people to act irresponsibly with money. Mortgage lenders will worry about potential home owners who have too much access to credit since there’s a potential risk they may default.