Updated: Sep 3, 2021
finally decided to write an article about opening a bank account in Canada. While the process may seem easy at first glance, it's good to have all the information you need to choose your bank and understand the system here. I wrote this article with the help of my bank advisor at the BMO. I'm putting his contact information at the end of the article. He is really helpful and will be able to answer all your questions if you have any others. Don't hesitate to say that you come from me, there are no partnerships anyway.
Opening your first bank account in Canada
When you have just arrived in Canada, you get the newcomer status. This means that, for 5 years, no matter which bank you go to, you will benefit from the first year without account fees. To be considered as a newcomer, you must have a student visa / work visa with a SIN number starting with 9 and thus benefit from a free year.
Know that in the same bank, when you are a student, you can be offered your bank account for free. This is true for the duration of your studies and for the first year after graduation.
Opening an account without a visa
If you don't have a visa/visitor's visa/no sin number when you arrive, you can open a bank account with a foreign passport. But keep in mind that you will not have any advantages, will not benefit from any offer and will be limited in your banking transactions.
The different offers at BMO (to give you an idea)
After the first year, you will have to pay for your bank account, so ask your banker which one would be the most suitable for you. I'm going to present you here the ones that are at the BMO:
The Premium account (this is the one I have):
It costs 30 dollars per month / free if you leave at least 6 000$ on the checking account
it covers your credit account fees up to 150$ per year
No overdraft fees
No foreign withdrawal fees through BMO
Unlimited transactions (card payments)
Costs $16.95 per month / free if you leave at least $4,000 on your checking account / free for students and one year after graduation
It covers your credit account fees up to $40 per year
25 transactions per month (card payments)
Costs $10.95 per month / free if you leave at least $3,000 in your checking account
Unlimited transactions (card payments)
The practical account
Costs $4 per month
12 transactions per month (card payments)
Interac Transfers: For all of the above accounts they are free and unlimited. It is the fact of sending money to friends or acquaintances only with their email address or phone number. Something that was very useful for me, knowing that in France this system did not exist.
The credit card
You need a SIN number for any credit card. Only, for newcomers, you will have to put a guarantee on the savings account.
Let me explain: for some newcomers, when you arrive in Canada, you do not have a credit score. In order for the bank to trust you and lend you money, it will ask you to block an amount on an account. This is called "collateral damage". Basically, if you choose that your card limit is $2,500, you will have to block $2,500 in your bank's savings account. You will be able to get the blocked amount back from your account after 1 year of card use. To do this, you must contact the Visa/Mastercard department (the department of your credit card), which will consider that you know how to manage your money.
This way of putting money as a guarantee is only valid for newcomers. Canadians can't benefit from it, and I can tell you that it's a big advantage! Someone with a bad credit score who is not a newcomer will not be able to apply for a card with collateral damage.
It is very important that you get a credit card as soon as possible in order to build your credit score. If you want to know more about this, I wrote another article about it.
NB: Never use your credit card to withdraw cash or you will have to pay between 20 and 25% interest.
Once your accounts are ready you will start to ask yourself how to make money! For this purpose 2 basic investment plans exist. And if you come with a certain amount of money, I'll explain to you what each of these plans are for.
What is the TFSA?
The TFSA (Tax-Free Savings Account). It is a tax-free account, you can save without the interest being taxed by the government. You can put 6 000$ / calendar year (from January to December). You can theoretically deposit this amount the second you get the SIN number. However, the CRA may want you to pay taxes once before opening your TFSA. You can use this TFSA to invest in the stock market, a mutual fund, or indexes. Ask your banker for more information.
What is an RRSP ?
The RRSP (Registered Retirement Savings Plan). It is the retirement savings plan, I do not advise to create one as a newcomer. It really depends on whether it's worth it to you. A lot of people think that it is worth putting money into it. It is only worth it for the very long term or if your salary is high (over 80k). In fact, you can deduct the money you put into this account (up to $6000) from your taxes every year. But unlike the TFSA, here the interest is taxed as soon as you want to withdraw from your account. The strategy here is to withdraw your investment little by little once you retire, so as not to be taxed too much. In an RRSP, you must invest in mutual funds (this is the safest in terms of risk).
There is only one way to temporarily withdraw without taxes: You can withdraw $35,000 once as a loan if, for example, you plan to buy a house. However, after 15 years, you will have to return this amount to your RRSP.
At age 71, the government forces you to close your RRSP. You have 2 choices:
You can convert it into a RRIF (Registered Retirement Income Fund), which is a bit like the continuation of the RRSP.
You must take the money from the RRSP. You are still taxed, but less so because you are not supposed to work. You will have to declare your interest as salary.
Advisor to contact
Robby Wang Senior Banker
Bank of Montreal
101 King Street East
Toronto ON M5C 1G3
In your first year as a newcomer, almost all banks offer free service. After that, you can choose to stay or look and compare several of them
If you liked this article and would like me to elaborate more on a part to invest your money don't hesitate to let me know.
Subscribe to my newsletter to be informed of all the latest news by filling out the small form at the bottom of the page.