Every Day Canadian Banking as a Newcomer

I had landed in Canada on last X’mas night. Joyeux Noel!, my little French skills paid off immediately when I greeted the dude sitting next to me. He was from Montreal. It turns out he is a descendant from a Chinese immigrant family some decades ago. We ended up talking on immigration, my motive to do so, what it means to uproot from one culture and get planted on another one etc. And he told me, one of the important things as a newcomer to Canada, and also the toughest is to learn how to manage and wade through the maze of the Canadian financial industry and its nuances.

Taking a cue from his advice, I ended up researching a bit more about the differences between banking in India and banking in Canada. Amazingly, we all end up thinking of being shrinking into a ‘global village’, it turns out there are a quite a lot to learn and quite a lot differences between, how banking is done in two different nations.

So, here is your primer on starting with banking in Canada and various nuances of banking in India and in Canada.

Canada has five big banks- Royal Bank of Canada (RBC), Canadian Imperial Banking Corporation (CIBC), Toronto-Dominion Bank (TD), Bank of Nova Scotia (Scotia Bank) and Bank of Montreal (BMO). Almost all of them offers varied products and are very stable and are unlikely to fail. In addition, any deposits you make up to $100,000 are protected by the Canada Deposit Insurance Corporation, so know that your money is safe.

For the purposes of this article, I am assuming you are going to open a bank account in Canada after landing and not before. The article will be limited to your everyday banking purposes and not investing. This would mean, I am going to discuss a chequing account, savings account and your basic credit card and other nuances associated. You’ll understand the difference between them, as you read on.

So, the obvious question, with which bank should I open my account?

Simple answer, the one nearest to your present address. You can always shop around to see which bank offers you the most value for your needs. But, as a newcomer to Canada, you might be making more visits to the bank than an average Canadian, so convenience and location should be your priorities at first.

I did the same and I moved to the bank near me, which was the RBC bank at Fairview Mall, North York. There was also a TD Bank opposite to my RBC branch and I didn’t opt for it- Why? RBC offers one-year FREE banking for newcomers while TD only offers for first six months.

FREE BANKING? Is it not always Free? In India, we had the luxury of Free Banking if we had a minimum deposit of INR 1000–5000(Approx 20-95 CAD) in our account or better yet, if it was a ‘Salary Account’- zero minimum balance and free banking nonetheless. Well, those days are over, amigo! You’re in Au Canada now.

Shocked? This brings me to the next goal of this article, which is to help you understand the everyday banking in Canada in comparison with that of banking in India.

For everyday banking in Canada, you will require an account called a ‘Chequing account’. This is the account that you use for your everyday banking purposes like payment of bills, payment at shops etc. Get it, where you ‘check out’ buying groceries etc. The counterpart to this in India would be your ordinary ‘Savings account’ or ‘Salary account’. The money kept in your chequing account earns NO interest. Also, unlike in India, you are required to pay a MONTHLY FEE on your chequing accounts in Canada. Shocker!

Then you will have your ‘Savings Account’ in Canada. Contrast to the Indian scenario, where the Savings Account is your every day, day to day, banking account, a ‘Savings Account’ in Canada means an account where you earn interest. The money kept in a Savings Account can accumulate steadily over time and earn interest. However, these accounts generally impose restrictions on withdrawals. For a lack of a better comparison, let’s compare this with your ‘Fixed Deposits’ or ‘Recurring Deposits’ back at home, where you place money in an account for a fixed time and earn interest accordingly basis the time period. Though, a far better-comparing product to a ‘fixed deposits’ in India would be the ‘GICs’ in Canada, which will be discussed in a bit.

How much is this interest in Savings account anyway? The rates vary but not more than 2%. I know you’re now pretty bummed. In India, my ‘chequing account’ have 4% interest rate. While the ‘fixed deposits’ offered rates anywhere between 7% to 10% depending upon time and age. In Canada, inflation is not so high as in India and hence the interest rates tend to be pretty low. Contrast this with Japan, where there is no interest rate on your banking account.

So now that you’re introduced to the basic everyday banking accounts in Canada, let’s move on.

I had chosen to go with RBC’s no fee banking ‘newcomer package’. This meant I had opened RBC No Signature Banking where I could get-* and No Monthly Fee for the First Year.

  • Unlimited debit transactions;
  • 3 withdrawals from other bank ATMs in Canada refunded per month
  • Unlimited free Interac e-Transfer transactions
  • Free personalized cheques.

*For Terms and Conditions visit-this link (Not so hidden charges, I placed it for the legal reasons).

So I had opened three accounts basically,-

a) RBC No Limit Banking (Chequing Account)

b) RBC High-Interest eSavings Account (Savings Account)

c) RBC U.S. High-Interest eSavings (Savings Account denominated in USD)- To keep your money in USD

Credit Card and Credit Score

As a newcomer to Canada, you need to rebuild your credit scores from scratch. If you’re unfamiliar with the idea of a credit score, as many are in India, it’s a number between 300–900 that determines how creditworthy you are. The higher your number, the more likely that you’ll be approved for a loan in the future for more important financial goals like mortgage, car etc.

A credit score can be gradually built up by using a credit card and paying the monthly balance off consistently.

So in RBC, I had given the options to choose between- two no annual fee RBC Credit Cards and other Premium Cards.

No Annual Fee Cards

a) RBC Master Card- Cashback Card

Major benefits include:

  • Collect 2.00% cash back for every $1 spent on grocery store and gas station purchases;
  • Receive 1.00% on all other purchases
  • Purchases are covered with insurance against damage and theft for 90 days after purchase, and those products that already come with a manufacturer’s warranty can get the warranty period doubled (for up to a year).
  • Pro Tip 1: Its a Master Card with cashback, Costco only accepts Master Card I am told, so if you purchase your groceries from Costco- You can use it there to build credit faster and additionally get cash backs.
  • Protip 2: The cash backs are credited at the end of the year and not before. So you can ‘bank’ on receiving some cash for the new year after you have blazed through your holiday shopping.

b) RBC Rewards+

  • Earn 1 RBC Rewards point for every $1 spent on gas, grocery and drug store purchases;
  • Earn 1 RBC Rewards point for every $2 spent on all other purchases;
  • No annual fee
  • ProTip1: 100 RBC Rewards points to $1 CAD. (100 points = $1 CAD).
  • ProTip2: If you are someone, who is into giving gifts on special occasions, RBC Rewards could help you buy gift vouchers.
  • Protip3: On approval, you could get up to 2500 points, that’s 25 dollars for you.

Now next nuances of Canadian banking;

Void Cheque or Deposit Form

Think of this as the particulars of your account details. A document which lists out the details of your account, which is used to give to your employer(s) to let them know this is the bank account to which they have to payroll the money. It is more of a North American practice, just roll with it. Don’t let the name fool you, it is NOT a Cheque.

Why did I choose to go with RBC?

One answer, Banking Fees. There is no way around it in Canada. You have to pay some banking fees on chequing accounts in Canada unless if you’re using online banks. So what makes RBC attractive over the others is that RBC offers a Multiple Product Rebate whereby you could substantially reduce your banking fees to as low as Zero!

Take the account I have opened, RBC No Limit Banking, it has a monthly fee of 10.95 CAD, which becomes a cool 5.95 CAD, if I choose to opt for an RBC Credit Card. This I could further reduce to Zero, if I choose to opt for a Mortgage with RBC. The financial planner in the branch they told me, RBC offers discounted rates for newcomers, if they choose to go about a mortgage within a period of five (5) years from their date of landing. Whether I would go for the mortgage in 5 years, I am not sure about it, but it never hurts to have that option and save some money on banking fees each month for almost the rest of your life.

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