Bank account for newcomers to Canada, and how to build credit from zero

Your right to open a bank account

The Financial Consumer Agency of Canada (FCAC) explains that you can open a bank account in Canada with proper identification even if you are not a Canadian citizen. Under the Bank Act, when you ask in person at a branch to open a personal deposit account, the bank cannot require an initial minimum deposit or a minimum balance. Having been bankrupt does not, by itself, give a bank grounds to refuse you.

A bank may refuse to open an account in specific cases, for example if it has reasonable grounds to believe the account will be used for illegal or fraudulent purposes, if you have a history of illegal or fraudulent activity with financial service providers in the last 7 years, or if you knowingly gave false information.

If a bank refuses, it must give you a written notice. It must also give you its complaint process, the contact details of the Ombudsman for Banking Services and Investments (OBSI), and FCAC's mailing address, website and phone number. Keep that notice: it is what you need to file a complaint.

What ID banks accept

The bank must confirm your identity before opening an account, and you must show original documents, not copies. FCAC describes two options.

1. Option 1: two documents from the accepted list. One must show your name and address, and the other your name and date of birth.
2. Option 2: one document that shows your name and date of birth, plus confirmation of your identity by a customer in good standing at that bank or by a respected person in your community.

• Government-issued ID (federal or provincial), such as your permanent resident card or a provincial driver's licence.
• A foreign passport.
• Recent Canadian public utility bills, tax assessment notices or benefit statements.
• Recent bank or credit card statements.

Newcomer bank packages and choosing an account

Many banks and credit unions advertise newcomer packages that bundle a chequing account, a savings account and sometimes a first credit card. Offers, fees and conditions change often and differ from one institution to another, so we do not rank or recommend any of them. Read the fee schedule and the conditions that end a fee waiver before you sign.

To compare accounts on neutral ground, use FCAC's free Account Comparison Tool, which lists account features and fees. FCAC also explains low-cost and no-cost accounts and who is eligible for them.

Your SIN is not needed to apply for a credit card, but financial institutions need it to report income such as interest to the tax authorities. If you open an account that earns interest, expect to be asked for it. When you open an account, the bank must give you written information that includes its maximum cheque hold periods. Read it closely: some of the Bank Act's limits on cheque holds do not apply to accounts open for fewer than 90 days.

If you open an account by phone, you have 14 business days to close it free of charge. Deposits at federally regulated banks are protected by the Canada Deposit Insurance Corporation (CDIC), up to $100,000 for eligible deposits, separately for each coverage category and at each member institution. Eligible deposits include savings and chequing accounts, GICs and foreign currency deposits. Stocks, mutual funds, cryptocurrencies and losses from fraud are not covered. Credit unions and caisses populaires are covered by provincial plans instead.

Your Canadian credit history starts at zero

Your credit report is a record of your personal, financial and credit history, updated at least once a month by the two main credit bureaus, Equifax and TransUnion. It lists your credit cards, loans, collection referrals, bankruptcies and lender inquiries. Your credit score, which usually ranges from 300 to 900, is calculated from that report. A higher score is better.

FCAC notes that a poor or limited credit history can make it harder to borrow money or get a credit card. This is the position most newcomers start in, whatever their record was abroad. Some lenders may look at your credit history from another country, and some may ask you for a credit report from that country.

Newcomer credit cards and secured cards

A newcomer credit card is usually an ordinary card offered to people without Canadian credit history, often as part of a newcomer package. Credit limits and conditions vary by institution. Compare the annual fee, interest rate and grace period using FCAC's Credit Card Comparison Tool rather than marketing pages.

If you cannot get an unsecured card, a secured credit card is another way to start. You give the issuer a security deposit, which FCAC says may range from a few hundred to a few thousand dollars, and the credit limit is normally equal to or higher than that deposit. If you do not make your payments, the institution can use your deposit to pay what you owe. To cancel the card you must pay the full balance, and you get the deposit back once the account is closed.

• Apply only for credit you need. FCAC advises against applying for several credit products at once, and how often you apply for new credit is one of the factors in your score.
• Use a small part of your limit. FCAC suggests using less than 30% of your total credit limit.
• Set up payment alerts so you never miss a due date.

How to build a good credit score in your first year

Payment history is the most important part of your credit score. FCAC's advice for building and improving credit applies directly to newcomers:

1. Pay every bill on time. If you cannot pay in full, pay at least the minimum.
2. If you expect trouble paying, contact your lender right away. Do not skip a payment, even while you dispute a charge.
3. Keep your balance low compared with your limit, even if you pay in full each month.
4. Keep your first account open once you have others. Closing an older account shortens your history.
5. Only apply for credit you need. When shopping for a car loan or mortgage, quotes from several lenders within a short period count as one inquiry.
6. Check your credit reports for errors and for credit you did not apply for.

Sending money home

You can send money abroad through your bank or through a money transfer business. Money services businesses, including money transfer and foreign exchange companies, must register with the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) before operating in Canada. A provider that cannot show it is registered is a red flag.

Compare the total cost of a transfer, not just the advertised fee: the exchange rate you receive matters too. Double-check the recipient's details before you send, because a transfer to the wrong account can be hard to reverse.

Protecting yourself from banking fraud

Newcomers are frequent targets of scams. If you see a transaction you did not make or approve, notify your bank or card issuer immediately, change your passwords and PINs, and check your credit report for any credit you did not apply for. In most cases you are not held responsible for transactions you did not authorize if you protected your account information. For credit cards, your liability is generally capped at $50 unless you were grossly negligent. For debit cards, you could be liable if you contributed to the loss, for example by sharing your PIN.

Report fraud to your local police and to the Canadian Anti-Fraud Centre, online or at 1-888-495-8501. Never share your banking passwords or one-time codes, and be careful with anyone who asks you to receive money and forward it to someone else.

We don't provide legal opinions; for advice on your file, contact an RCIC-verified consultant or a lawyer.