Financial Planning Canada – part 2

Financial Planning in Canada – Free Banking and How to Build Credit

Free banking is tricky in Canada. Some banks have packages for new arrivals as outlines in the financial planning Canada page. These tend to be temporary and after the initial six to twelve months, monthly fee start trickling in and eating cash up. These are the options we have seen so far which could help:

  • RBC has an offer where if you have three bank products – such as credit card, checking and savings account, they will waive the monthly fee.

  • TD have an offer where if you maintain at least $1000 monthly balance, they stop charging the monthly fees

President’s Choice financial is an interesting concept – they partner with CIBC. They have these kiosks in the Real Canadian Superstore locations and are unusual – there are no monthly fees for anything. No minimum balance, no limitation on transactions, no fine print, online banking is included, bill pay, checks, ATM deposits are done via the CIBC cash machines. What is more, the kiosk locations in the supermarkets are open late all week including Saturday and Sunday. President’s Choice will issue debits cards and have a master card credit card. They offer a truly free checking account in Canada. There are a few inconveniences with their accounts:

  • cash is limited to $200 a day. Special arrangements can be made for more

  • no international outgoing wire transfers

  • kiosks are sometimes in remote locations

Again, major points here are free checking with no monthly fees. I was out of the country for almost two years. They froze the account and when I flew back in, it took one phone call to restore it. I almost never have to go to the bank in person. Customer service is good too – really excellent for a free bank account.

How to Establish Credit in Canada

This is really a catch 22 issue – you really need a credit card to build credit. To build credit, you really need a credit card. What is more, it is really easy to damage one’s credit – an overdue bill, or something you forgot – companies just love to take you to collections agencies who then report you.

Many times financial advisers tell you that paying phone bills and any other utility bills helps your credit score. Bills help establish proof of address. They are of limited help since you are spending your own money. Credit is built when you spend borrowed money. When you apply for credit, account managers look for a few things:

  • income

  • assets

  • debt such as mortgage, car payments etc.

  • how many open accounts vs reported income – sometimes they may deny an application even for a trustworthy customer if they think there are too many open accounts with total credit exceeding income by too much

Getting a secured credit card is the fastest path to starting to build credit. Credit card offers for immigrants are another option – here banks know that you have no credit history and will simply take the risk. Typically, these are small credit limits and they do work well.

Careful financial planning in Canada is key upon and before arrival. Try to have a good concept in your head of what you would like to accomplish. Building credit is an essential and continuous activity. Get to it as soon as you can.