After I arrived from the UK on a two-year visa in 2019, I rapidly bumped into one of many much less apparent hurdles: Canada’s credit score system. Regardless of having a powerful credit score historical past at dwelling, it didn’t carry over. I needed to begin from scratch.
That lack of credit score historical past impacts all the things. Getting a fundamental bank card is difficult. Necessities like telephone and web, too, since they usually require a credit score test. And if an utility is rejected, reapplying can ding your credit score report somewhat extra, making the subsequent try much more tough.
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 regularly exploring comparable approaches. Extra on that later.
A credit-obsessed nation
One of many greatest 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 simple to stay comfortably with out ever counting on a bank card. Debit playing cards are broadly accepted, transactions are sometimes limitless, and even fundamental chequing accounts don’t normally include minimal steadiness necessities. Money withdrawals are additionally typically free at ATMs, even outdoors your personal financial institution.
The expertise is totally different in Canada. Many on a regular basis chequing accounts include month-to-month charges except you preserve a minimal steadiness—usually within the low hundreds of {dollars}—and transaction limits are frequent.
After 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 have been charged at $1.25 every. There was a $3,000 minimal steadiness requirement to keep away from a month-to-month charge.
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 rapidly proved impractical. Many companies have 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 identical 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 lessons at Second Metropolis, required one (a minimum of in 2019).
It rapidly grew to become clear that in Canada, a bank card isn’t simply handy, it’s usually important.
A chicken-and-egg drawback
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 brief resident, I discovered the necessities particularly tough to satisfy. Banks usually require latest Canadian pay stubs or proof of employment, that are laborious to offer whenever you’ve solely simply arrived and are nonetheless in search of work. My visa allowed me to discover a job after coming 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 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 in case you 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 may 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 House Belief. Some secured playing cards provide rewards, however their most important objective helps newcomers construct credit score.
