Nothing is more fundamental to establishing a new life in a new country than opening a bank account and obtaining a credit card. But for recent immigrants to Canada, there are myriad barriers to accessing its financial system, from misconceptions about how credit markets work to unfamiliarity with digital banking practices to finding a place to live.
The country is on track to receive a record number of new Canadians in the coming three years, which is expected to boost population growth after a pandemic slump.
The federal government said it expects to welcome nearly 432,000 new permanent residents this year, more than 447,000 in 2023 and 451,000 in 2024. Canada has also approved more than 263,000 Ukrainians for emergency travel to Canada this year, about 65,000 of whom have arrived in the country to date.
But the journey to getting settled in Canada can have some bumps along the way, experts said. The first step to getting financially established in the country is getting a bank account, said Michael Zienchuk, manager of the wealth strategies group at the Ukrainian Credit Union.
Newcomers need two pieces of government-issued identification, such as a Canadian driver’s licence, social insurance number or provincial health card. Three Immigration, Refugees and Citizenship Canada forms also count as valid IDs. Those who only have one piece of government ID can also present a debit or credit card with their name and signature, or a current foreign passport, among other options.
The UCU has been accepting foreign passports and temporary visas to open bank accounts for Ukrainians who’ve come to Canada because of the war, Mr. Zienchuk said. It has been running a program to make no-fee bank accounts, debit and credit cards available to displaced Ukrainians.
While it’s possible to open a bank account without a SIN, the number is necessary for accessing an account that earns interest on a chequing or savings balance.
Enoch Omololu, the Winnipeg-based founder of the personal finance website Savvy New Canadians, said newcomers eager to get a head start can open a bank account while in their home country, but these are typically preliminary set-ups. With the exception of digital banks, where the entire account setup process is online, banks and credit unions tend to require an in-person visit to verify identification.
Mr. Omololu recommended newcomers think about their needs and how they plan to use their bank account before committing to a bank, credit union or digital bank. Many digital banks offer no-fee chequing accounts and an ability to earn interest on a chequing account balance, which can be advantageous, he said, but users have to be comfortable with sharing their identification over the internet and banking exclusively online.
Those who want in-person help or aren’t digitally savvy may be best served by banks or credit unions, he said. Immigrants who expect to frequently send money to family abroad may also prefer a traditional bank or credit union, as online platforms for international money transfers aren’t intuitive to use.
But banks and credit unions charge monthly fees ranging from less than $5 to more than $30 depending on the account type, or transaction fees for ATM withdrawals or e-transfers, so he encouraged newcomers to compare account fee rates. Also, be sure to compare interest rates financial institutions are offering for savings accounts, especially at a time when they have the opportunity to benefit from a rising rate environment.
Newcomers will also need to build their credit score and history, Mr. Zienchuk said, as their credit history from another country won’t transfer over.
Mr. Omololu advises newcomers to quickly get a credit card, pay their bills on time and limit how much of their credit limit they use to a maximum of 35 per cent, though 30 per cent is preferred.
A mix of credit types also helps newcomers build their score more quickly. If someone is purchasing a car and has the money to buy it outright, Mr. Omololu said choosing to finance it instead and pay it off quickly to limit interest payments can help them with their score “because it’s a totally different type of credit” than credit-card purchases.
He said newcomers from countries where the credit system is much different from Canada’s may be concerned that accessing credit products could negatively affect their score. “When they arrive in Canada they’re thinking, ‘I don’t want to get into debt, it affects my credit score.’ The thought process makes sense, but the way it works is different. To establish credit you need credit products.”
A lack of credit history can be the biggest barrier for newcomers looking to secure a mortgage and buy a home, said Joe Bladek, a Barrie, Ont.-based mortgage broker who frequently works with immigration consultants and newcomers.
However, many lenders have alternate ways for new immigrants to prove their creditworthiness. Mr. Bladek said he asks these clients whether they can provide a letter from their current landlord saying they’ve consistently paid rent on time, or 12 months of bank statements to demonstrate they pay their bills. Some lenders do accept an international credit bureau file, but “it’s all on a case-by-case basis.”
It may be difficult for very new arrivals to secure a mortgage, Mr. Bladek said, as most lenders want to see a minimum three months of employment history.
He noted someone’s status in Canada will influence the amount they need to contribute for a down payment. Permanent residents can buy a home with a 5-per-cent down payment, as long as they meet employment and credit requirements. International students or newcomers with a work permit must make at least a 10-per-cent down payment.
Regardless of immigration status, Canadian residents must file an income-tax return every year, said Jamie Golombek, managing director and head of tax and estate planning at CIBC Private Wealth Management.
Filing a return ensures newcomers are able to access government programs they’d benefit from such as the Canada Child Benefit or GST/HST credit – however, Mr. Golombek noted people can apply to these programs directly when they’ve arrived, rather than waiting to file their first return.
Many new Canadians may not realize they’re obligated to report their worldwide income and not just what they earned in Canada during the tax year, he said. This includes any investments or a business in their former country. However, if they’ve paid taxes in another country, they can claim foreign taxes on their Canadian return.
The Canada Revenue Agency also requires residents to disclose any foreign assets worth more than $100,000 through tax form T1135. Failing to report incurs a penalty of $25 a day, up to a maximum of 100 days, though individuals do not have to file this form for their first tax year in the country.
“Even if you’re earning no income [abroad] you must report the existence of that property,” he said.
Mr. Golombek said these assets could include stock investments, a bank account or rental properties overseas, with their original cost valued in Canadian dollars, but doesn’t include personal property such as a home in another country that will be used for vacations.
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