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One of the main financial hurdles for newcomers getting established in Canada is building a credit score from scratch. But a host of financial institutions – from the big banks to credit unions and fintechs – are competing to make that easier with credit card options targeted at new Canadians.

Canada set an annual immigration record in 2022 when 431,645 people became new permanent residents, and it plans to go even further in the coming years. This year the government said it’s aiming to welcome 465,000 newcomers and 500,000 a year as of 2025.

All of Canada’s major banks now have newcomer programs that look to capitalize on that growth, with credit card offers that waive the usual requirement of previous credit history for new Canadians who open bank accounts.

“The banks have realized the value of newcomers as a good source of business,” said Tina Tehranchian, a certified financial planner and senior wealth adviser at Assante Capital Management Ltd. in Richmond Hill, Ont.

Royal Bank of Canada RY-T, Bank of Nova Scotia BNS-T and Toronto-Dominion Bank TD-T offer credit cards for newcomers with a spending limit of up to $15,000. Both Scotiabank and TD say on their website that international students can also obtain a credit card without a credit history, though Scotiabank’s limit is lower, at $5,000.

All five banks offer credit cards with no annual fees, but have varying interest rates on purchases. Both the Bank of Montreal’s BMO-T NewStart program credit cards and the Canada Imperial Bank of Commerce cards for newcomers have an interest rate of 20.99 per cent, while TD’s and Scotiabank’s are 19.99 per cent.

Applying for a credit card is fairly straightforward for certain newcomers, particularly for those who are permanent residents, said Enoch Omololu, founder of the personal finance website Savvy New Canadians. However, he said it can be more “hit or miss” for international students applying for an unsecured card.

Newcomers typically need to provide their employment details and how much they pay monthly in rent or their mortgage as part of the application process. They’ll also need to provide immigration-related documentation such as a permanent resident card, confirmation of permanent residence or a work or study permit.

But for refugees arriving from countries such as Afghanistan, Syria and Ukraine, some of that necessary information is much harder to produce, said Jamillah Mananghaya-Poernama, a senior manager at the Agincourt Community Services Association’s newcomer and settlement department.

The backlog of refugees who’ve arrived in Canada to receive work permits is months-long and sometimes up to a year, which she said not only prevents them from obtaining work but also from finding their own place to live. While she said refugees waiting on their work permit tend to work under-the-table jobs for cash, these income sources wouldn’t be accepted as part of a credit application.

Historically, Ms. Mananghaya-Poernama said, financial institutions have been reluctant to extend credit cards to asylum-seekers who haven’t yet been granted permanent residency, as their status in the country is up in the air while they wait for their court hearing.

“That’s a big barrier in itself,” she said. “How do you build credit history if, first of all, you don’t have stable status, you’re in a precarious situation, and you don’t have a job or it doesn’t register in any way?”

The Catch-22, of course, is that a good credit score is essential for renting an apartment, eventually getting approved for a mortgage, and receiving better terms and rates on loans. And getting a credit card – and using it responsibly – is the easiest way to build that score.

However, Ms. Mananghaya-Poernama credited the banks’ newcomer programs with becoming more flexible toward refugees’ situations in recent years.

Last year, some financial institutions moved to make unsecured credit cards available to Ukrainian refugees. BMO requires applicants to demonstrate they’re Ukrainian citizens who arrived in Canada on or after Jan. 1, 2022, based on their passport and entry stamp or relevant immigration forms. Scotiabank said Ukrainian new permanent residents, refugees and work or visitor permit holders can qualify if they’re a Canadian resident and older than age 18.

Mr. Omololu suggests that if the initial credit limit is too low, newcomers could consider credit cards offered by retailers such as Loblaw Cos.’s L-T President’s Choice Financial, Canadian Tire CTC-A-T, or Walmart WMT-N, which tend to have lower barriers to entry.

For those who may not be able to access one of the newcomer programs, getting a secured credit card is another way to access credit and build a Canadian credit score.

Unlike unsecured credit cards, secured cards require the user to guarantee the card with their own funds held in an account at the bank. While some cards may require the borrower to put down a deposit that matches their desired credit limit dollar-for-dollar, Ms. Tehranchian noted that some providers allow for just part of the amount to be held on deposit.

Mr. Omololu, who acquired a secured credit card when he came to Canada, said these can be good options for people with low or no credit scores, because secured credit card providers report to the credit bureau every month. But they come with a cost that, depending on the deposit size required, can be significant.

Capital One’s secured credit card requires security funds of between $75 and $300, depending on the card’s limit. The card has a $59 annual fee and comes with an interest rate of 19.8 per cent.

Fintech startup Neo offers a secured credit card with no annual or over-limit fees. Mr. Omololu’s website said the card has the lowest starting security deposit and credit limit at $50. To increase their credit limit, borrowers must make a larger deposit.

Mortgage lender Home Trust also offers a secured credit card with a limit set at the amount of the cardholder’s deposit, which can be between $500 and $10,000. The card has no annual fee and a 19.99-per-cent interest rate – though users can pay a $59 annual fee to get a lower interest rate of 14.9 per cent.

Ms. Tehranchian pointed out that some international financial institutions such as American Express AXP-N have programs that honour credit history from another country and are worth considering. American Express in particular also has a global card transfer program that allows clients to transfer their card from their home country to Canada and maintain a reasonable credit limit even with no Canadian credit history.


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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 23/04/24 4:00pm EDT.

SymbolName% changeLast
RY-T
Royal Bank of Canada
+0.35%136.41
TD-T
Toronto-Dominion Bank
+0.3%80.51
BMO-T
Bank of Montreal
+0.59%128.11
L-T
Loblaw CO
-0.17%150.33
CTC-A-T
Canadian Tire Corp Cl A NV
+1.26%136.61
WMT-N
Walmart Inc
-1.75%59.09
AXP-N
American Express Company
+2.56%238.96

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