Canadian Banking basics

Financial security is important in today’s day and age! If you are just getting started or even new in the country then this blog is just for you. Step one is to create your bank account. This blog is specifically for Canadian residents; although, the concepts could apply to most countries. Like with everything else, there are pros and cons with both. 

What currencies are supported?

Most Canadian banks support the Canadian dollar (CAD) account and US Dollar (USD) account. So, if you have USD then you can deposit it in the USD currency account. If you have a USD currency bank account in Canada then you need to pay taxes for that account only in Canada. USD account is very useful in the following situations -

• If you are moving from the US and don't want to maintain a US bank account. You could transfer all your money in your USD bank account in Canada. 
• You can trade on US stock exchanges like NYSE, ARCA etc. with USD currency. Having a USD currency account can be handy.
• You get your paycheck in USD.
• If you have company offered stocks (like Employee Stock Purchase Plans or Employee Stock Options etc.) held at a US brokerage firm like Fidelity Investments then having a USD account in Canada  is handy. If you decide to sell the stocks then the proceeds can be moved to your USD bank account in Canada.

What are traditional banks?

Traditional banks are those that have been around for decades. Most of them date back to the pre-internet era. In Canada, Scotiabank, BMO (Bank of Montreal), CIBC (Canadian Imperial Bank of Commerce), TD (Toronto-Dominion Bank) and RBC (Royal Bank of Canada) are the oldest banks. Here are some of their characteristics

1. If you are new in the country then you will not have a SIN yet. You might not be able to activate your account online and will have to visit the retail branch.
2. Very useful if you have immigrated recently - 
• Staff and tellers can advise you. Especially international transfers can be complex.
• You could deposit an international check too. If the check belongs to a bank account that has non-USD or non-CAD currency then you might have to make multiple trips to the bank.
3. Typically there is a daily minimum balance requirement and so you have to maintain that minimum balance daily! For Scotiabank, it was 3000 CAD for the Canadian dollar account and 200 USD for our US Dollar account. 
4. Typically these banks don't have a great online experience. We had to call in a few times because the online experience was not so good. 
5. Something to note - Typically these banks have too many competing offers (eg: 300 CAD for account opening) and it is easy to get carried away. So decide carefully.

What are digital banks?

Digital banks are those that offer most of their services online and typically have very few retail branches. Tangerine and WealthSimple are good banks that offer great digital experience. Here are some of their characteristics -

1. You can open the account online in a few easy steps.
2. There are no minimum balance requirements.
3. You get awarded for referrals.
4. Online experience on desktop and mobile is much better. 
• Service wise - you have chat, phone and email. 
• Transfers within Canadian banks and mobile check deposit are easy.
5. Not all these banks don't support international online transfers.  
• It might not be easy to get international transfers if you have to those by phone or chat.

What do you need to open a bank account?

Typically these are the things you need to open a bank account in Canada -

1. SIN - Social Insurance Number 
2. If you are not a citizen then you need your CoPR or work permit document as proof of legal presence
3. You need to provide proof of income like your employment joining letter.
• If you don't have a job yet, then check with your bank about what they accept.

Our experience

Before landing in Canada, we did a lot of online research and consulted with a few friends who had accounts in traditional banks. So we chose Scotiabank initially. We were moving from US and so the USD account in Scotiabank was a good decision. We opened it as a joint USD account so that we didn't have to maintain double the minimum balance. The teller and advisor helped us transfer the USD funds from our bank in the US to the Scotiabank USD account in Canada. Now, we also opened individual CAD accounts. That was not a good idea because for initial 3-4 months, we were maintaining the minimum balance of 6000 CAD as a family. We then found Tangerine and opened CAD accounts there so that we didn't have to maintain such a big minimum balance as a family. We were used to having a great online experience in the US and Tangerine was a good choice.

Our recommendation 

1. Open the CAD account in a digital bank if you are used to doing things online. Tangerine or WealthSimple are good choices. Tangerine was acquired by Scotiabank.
2. Open the USD account in a digital bank unless you have international transfers from USA for USD currencies. This is great especially if you just want to trade on US stock exchanges
3. Open the USD account in a traditional bank that supports international transfer from USA. If you want to transact with banks or financial institutions in the US then choose a traditional bank. More on international transfers in a later post!

Think long term while choosing a bank. If you are comfortable with online customer service and do your banking online, then digital banks are the way to go. If you feel more comfortable with face-to-face consultations in retail branches then traditional banking might be for you. 

Disclaimer - We are only stating our experience and recommending based on the research we did. We are not financial advisors and are not marketing for any financial firm.