VFX in Vancouver: Banking

One of the things I forgot to consider when coming up North to Vancouver (or Canada in general) was the fact that the banking system is completely different. Sure, in hindsight it’s pretty obvious but when I was making the move it really wasn’t something on my radar and I was much more focused on things like my work permit, housing, and healthcare (I had a 2 month old at the time). I knew the currency was different, that’s a given, but the actual banking system I just assumed worked exactly like America. In a lot of ways, it’s the same - but there are also quite a few differences.

So let’s dive in shall we?

The Basics

Credit

First and foremost, credit in Canada is separate from the United States. Completely. That means if you have never lived in Canada, then you have no credit history. Zero. Nada. Zilch.

Sounds lame right? It is, BUT there are some possible loopholes you can take advantage of if you happen to have the correct accounts established ahead of time. If you have an AMEX (American Express) card and established history with them in the States, once in Canada you can phone their support and have them open one for you in Canada. This also goes for other banks that operate in both countries. That said, there aren’t many. TD Bank I believe is also one that you can use the loophole for as they have operations on the East Coast. Another one is RBC which operates under the Harris Bank monkier in the United States.

If you aren’t able to go that route, the next best thing is to open an account at a bank that offers some sort of “New to Canada” account. These banks will often times offer a credit card with a low limit such as $500 - $2000 CAD. RBC, CIBC, and TD Canada Trust are a few that offer such accounts. Shop around and you will be surprised in some of the deals that can be had. They change frequently though otherwise I would list some here.

Lastly, if all else fails, check out banks like CapitalOne which offer secured credit cards. These require you to put money down, securing a credit limit, then you can slowly build up credit. After about six months to a year you should be able to get an unsecured, “real” credit card and close the secured account with a refund of your secured money. This was the route I took and it worked out for me without a problem. Roughly 6 months after using a $500 CAD secured card I applied for an unsecured one and was approved for a limit twenty times what I had.

Checking Accounts or Chequing Accounts

Chequing accounts as they are called in Canada work the same exact way as you’d expect. Accounts still function the same way and are CDIC insured (Canada’s version of the FDIC).

The biggest difference is that banking in Canada is much more costly than the USA. There are fees for many things, and checks (sorry, cheques) are generally not free when you order them from the bank. Overall, it seems like if it’s a service from the bank - they want to charge you. Some banks in the States work the same way but to a much lesser degree.

One pretty cool feature that isn’t really used in the States are e-transfers. This nifty type of transaction allows you to email someone money which will automatically deposit into the receivers bank of choice. Why the banks in the States don’t have this is beyond me. Seriously.

I personally haven’t used a brick and mortar based bank in over a decade as I find online banks (like Capital One 360 in the States) perfect for the type of transactions I do. In Canada, there are a few and the one I highly recommend is: Tangerine.ca

Savings Accounts

Overall, savings accounts work the same way in both countries. Like the States, there is a limit of 6 transactions per month for savings accounts due to regulatory requirements, otherwise the account should be classified as a checking account. The same e-transfer options are used and just require an email of the sender to utilize, regardless of banking institution. CDIC also guarantees up to $100,000 per account in the event of the bank’s failure. Lastly, interest rates are low, just like the States and a 0.10% to 1% interest rate (at the time of this post) is what you can expect to get from regular savings accounts. Again, prettyyy straight forward stuff.

Other Accounts

GIC

GICs or Guaranteed Investment Certificates are basically the same thing as Certificate of Deposits in the States (or a CD as it’s normally called). Basically you put in money for a fixed term and receive a specified interest rate over a period of time. Your money is covered by CDIC too. Pretty simple and not different from CDs besides naming.

These following accounts will have their own dedicated posts in the future but for now, here is a simple quick overview.

Mortgages

I have little experience in this department as I’m still a renter (this will likely change in the future) but I know for certain that there are vast differences between a mortgage in the United States and a mortgage in Canada. Here is a link that gives a decent overview. I plan to have a post about this topic in the future so check back!

Retirement and Brokerage Accounts

This is an entire topic unto itself but I will leave a quick blurb here that covers the basics.

First and foremost, in Canada the two main tax advantaged accounts (i.e. Tax advantaged savings accounts) you need to be aware of - the RRSP and the TFSA. The RRSP or Registered Retirement Savings Plan, acts similarly to a 401k or even a Traditional IRA in the States in that money is taxed when withdrawn. The idea being its deducted from your income now while in a higher tax bracket and then when you retire and are in a lower tax bracket, you negate some of the tax. This account method has many considerations but in general, as an American, it’s the only option we have. More on that in a moment.

The TFSA, or Tax Free Savings Account, is similar to a Roth IRA with it consisting of money added to it after it has already been taxed. This allows for your savings to grow untaxed, and allows for withdrawals that are all your money.

Make sense? One account is pre tax, one is post tax. Each has their advantages and disadvantages but like mortgages above, this is an entire topic that I’ll be returning to soon.

Most of this stuff is pretty simple to find out about online and is relatively normal. There are a few things that are different but overall it’s not very dissimilar across the border. Hopefully this post helps!

Comments? Questions? Maybe I missed something? Leave a message below!

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