Opening a bank account in Canada

Chapter 4 of 5

There are two types of bank cards in the Canadian banking system: the debit card and the credit card.

Debit cards

The debit card is linked to your current account and allows you to spend the money you have in your account. Overdrafts are not permitted. You will be able to pay in stores and withdraw cash with your debit card.

Your transactions will be charged to your account immediately. A debit card is given to you as soon as you open your Canadian bank account.

Your employer will also pay your wages into this account.

Credit cards

When you open your bank account and request a credit card, your bank will apply to the Visa or Mastercard credit agencies. Depending on the collateral you can provide (e.g. a Canadian payslip proving monthly income), your authorised credit will be higher or lower. Generally speaking, you will have a low credit limit as a new customer.

If you wish, you can pay for purchases in stores with your credit card, but it’s not recommended that you make withdrawals with it.

If you use your credit card to carry out transactions, you will have a bill to pay at the end of the month. It’s down to you to pay your expenses at the end of the month and on time. You may wish to set up a direct debit so that you never miss a deadline.

If you have spent money on credit and cannot afford to pay it back, or forget to pay it back, you could end up paying huge interest charges. If you cannot pay your bill, you must make a minimum payment, but you’ll still pay interest.

Using your credit card is important if you’re planning to stay in Canada for the long term. It will allow you to build up a credit rating and be eligible for a credit check. If you have no intention of staying in Canada long-term, there is not as much need for a credit card.

Credit checks

Your credit rating is directly linked to your credit card. If you have a credit card which you use to make regular payments, you will build a credit score (a credit history) which is used as an indicator of whether or not you are a good payer. The credit check may be requested by landlords before letting you rent their apartment, for example.

It is necessary to have a good credit score, and the score will only be good if you pay your credit card bill on time. Your credit score will be poor if you forget to make your credit card payments on time or if you can’t pay them. This can impact your future, so be very careful not to build up a bad credit history!