When I arrived from the UK on a two-year visa in 2019, I quickly encountered one among the less obvious hurdles: Canada’s credit system. Although the country has a superb credit history, it has not transferred. I had to start out from scratch.
This lack of credit history affects the whole lot. Getting a basic bank card is a challenge. Also essential items akin to telephone and web, as these often require a credit check. And if an application is rejected, reapplying can do a bit of more damage to your credit report, making the subsequent attempt even tougher.
However, there are signs that that is starting to vary. In 2023, Scotiabank became the primary major Canadian bank Recognize credit history abroadand others are regularly exploring similar approaches. More on that later.
A credit-obsessed country
One of the most important early surprises was how central credit is to Canada’s economic system and the way much on a regular basis banking encourages it.
In the UK it is straightforward to live comfortably without ever having to depend on a bank card. Debit cards are widely accepted, transactions are typically unlimited, and even basic checking accounts typically don’t require a minimum balance. Cash withdrawals from ATMs, even outside of your individual bank, are generally freed from charge.
In Canada the experience is different. Many on a regular basis checking accounts have monthly fees unless you maintain a minimum balance — often within the low 1000’s of dollars — and transaction limits are common.
When I arrived, I selected TD Canada Trust due to its branch and ATM network, which made day by day access easier. Still, my checking account was limited to 25 transactions monthly, after which each additional transaction was charged $1.25. To avoid a monthly fee, a minimum balance of $3,000 was required.
Cash or credit?
In my first few months in Canada, I attempted to get across the 25-transaction limit by withdrawing larger amounts of money—for instance, $200 at a time—but this strategy quickly proved impractical. Many stores were already cashless, which meant I had to make use of my debit card for small purchases and “waste” my limited monthly transactions on things like a $4 coffee.
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At the identical time, there have been situations by which money or EC cards were simply not accepted. A bank card was required to rent a automotive. Even signing up for certain services, akin to courses at Second City, required one (at the least in 2019).
It quickly became clear that a bank card in Canada isn’t only practical, but often essential.
A chicken and egg problem
For many newcomers, getting their first Canadian bank card generally is a difficult process. You need a credit history to qualify for a card, but you wish a card to construct that history.
As a brief resident, I discovered it particularly difficult to satisfy the necessities. Banks often require current Canadian pay stubs or proof of employment, which could be difficult to offer if you will have just arrived and are still in search of work. My visa allowed me to get a job after entering the country, however the banking system was not designed for this reality.
There are several ways to get around these strict requirements.
Secured bank cards
One of essentially the most common ways to get around this hurdle is with a secured bank card. These cards require you to deposit money right into a linked account, which the bank can use as collateral should you don’t pay back the balance.
In my case, I deposited $1,000 to secure a card. It finally freed me from constant worry about transaction limits and made on a regular basis life much easier – including renting a automotive so I could see more of the country I had just moved to.
In addition to providers like Neo Financial, Capital One and Home Trust, most major Canadian banks offer secured bank cards. Some secured cards offer rewards, but their primary purpose is to assist newbies construct credit.
