Once I arrived from the UK on a two-year visa in 2019, I shortly bumped into one of many much less apparent hurdles: Canada’s credit score system. Regardless of having a powerful credit score historical past at residence, it didn’t carry over. I needed to begin from scratch.
That lack of credit score historical past impacts every little thing. Getting a primary bank card is difficult. Necessities like telephone and web, too, since they usually require a credit score examine. And if an utility is rejected, reapplying can ding your credit score report a bit extra, making the subsequent try much more troublesome.
There are indicators that that is beginning to change, although. In 2023, Scotiabank grew to become the primary main Canadian financial institution to acknowledge abroad credit score historical past, and others are step by step exploring comparable approaches. Extra on that later.
A credit-obsessed nation
One of many largest early surprises was how central credit score is to Canada’s monetary system, and the way strongly on a regular basis banking nudges you towards it.
Within the UK, it’s straightforward to dwell comfortably with out ever counting on a bank card. Debit playing cards are extensively accepted, transactions are sometimes limitless, and even primary chequing accounts don’t often include minimal steadiness necessities. Money withdrawals are additionally typically free at ATMs, even exterior your personal financial institution.
The expertise is totally different in Canada. Many on a regular basis chequing accounts include month-to-month charges until you keep a minimal steadiness—usually within the low hundreds of {dollars}—and transaction limits are frequent.
Once I arrived, I selected TD Canada Belief due to its department and ATM community, which made day-to-day entry simpler. Even so, my chequing account got here with a 25-transaction month-to-month restrict, after which extra transactions had been charged at $1.25 every. There was a $3,000 minimal steadiness requirement to keep away from a month-to-month price.
Money or credit score?
In my first couple of months in Canada, I attempted to work across the 25-transaction restrict by withdrawing bigger quantities of money—$200 at a time, for instance—however that technique shortly proved impractical. Many companies had been already cashless, which meant utilizing my debit card for small purchases and “losing” my restricted month-to-month transactions on issues like a $4 espresso.
On the similar time, I bumped into conditions the place money or debit merely weren’t accepted. Renting a automotive required a bank card. Even signing up for sure companies, like courses at Second Metropolis, required one (no less than in 2019).
It shortly grew to become clear that in Canada, a bank card isn’t simply handy, it’s usually important.
A chicken-and-egg downside
For a lot of newcomers, getting a primary Canadian bank card can really feel like a catch-22. You want credit score historical past to qualify for a card, however you want a card to construct that historical past.
As a short lived resident, I discovered the necessities particularly troublesome to satisfy. Banks usually require latest Canadian pay stubs or proof of employment, that are exhausting to supply once you’ve solely simply arrived and are nonetheless in search of work. My visa allowed me to discover a job after getting into the nation, however the banking system wasn’t designed round that actuality.
There are a few methods round these strict necessities.
Secured bank cards
One of the vital frequent methods round this hurdle is a secured bank card. These playing cards require you to deposit cash right into a linked account, which the financial institution can use as collateral for those who fail to repay the steadiness.
In my case, I put down $1,000 to safe a card. It lastly freed me from consistently worrying about transaction limits and made on a regular basis life a lot simpler—together with renting a automotive so I might see extra of the nation I’d simply moved to.
Most main Canadian banks provide secured bank cards, alongside suppliers like Neo Monetary, Capital One, and Residence Belief. Some secured playing cards provide rewards, however their foremost goal helps newcomers construct credit score.
