The Canadian banking system, everything you need to know

The credit rating, the cashback, the checking account and the credit account... what are they? Don't panic, we explain it all to you?

The Canadian banking system is slightly different from the system we are used to in France or Belgium. We therefore offer you a presentation of its specificities to help you familiarise yourself before your arrival!

The Canadian banking system: the different bank accounts

When it comes to bank accounts in Canada, there are two main options: chequing accounts and savings accounts.

The chequing account

A chequing account is an account used to manage your money on a daily basis. It is also known as a transaction account, bank account, deposit account or current account. It is on this type of account that you normally have a debit card and/or a chequebook.
In France, this type of account is often referred to as a
current account where your daily banking activities are carried out.
It is to this account that you will be able to deposit your salary in Canada via a specimen cheque (RIB in France).

The savings account

Conversely, the savings account is an account that earns interest on the money you deposit in it. It therefore allows you to save for your future.

So far, it doesn't seem much different from the French system, does it? Well, in Canada you also have what is called a credit card account.

 

The credit card account

This account is directly linked to your Canadian credit card . This account will need to be paid back regularly to avoid paying interest! It will contain all transactions paid with your credit card.

The Canadian banking system: the different bank cards

In Canada, it is normal to have two types of card: a debit card and a credit card. debit card and a credit card. These are two separate cards and entities.

The debit card

When you open your Canadian bank account, you will automatically receive a debit card (also known as an Interac Card).

This card allows you to make transactions that will be debited immediately from your chequing account. It will also allow you to withdraw cash from ATMs to the same account. The debit card does not have a security code on the back of the card and therefore will not allow you to pay on the internet.

The credit card

For its part, the credit card is linked to a separate account (credit card account) that allows you to make purchases (e.g. online) that have to be paid back on specific dates. It is a type of short-term loan: you make a purchase and the credit card issuer lends you the amount (depending on your credit limit) to pay for that purchase. You then have to pay back the card issuer (Visa or Mastercard) on a monthly basis.

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Having a credit card is a very common practice in Canada and is very important in the Canadian banking system. It allows you to get a cash advance, establish a credit history and build a good credit rating. In the long run, a good credit rating makes it easier to buy a house or a car and to sign a lease if a credit check is required.

Be careful! Don't forget the interest you have to pay if you don't pay your credit card balance on time (this varies depending on your financial institution). 

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The Canadian banking system: the benefits of your Canadian credit card

Your new Canadian credit card will give you access to certain benefits.

Cashback or rewards

The banking system in North America allows you to get what is called cashback.

"Euuuu... the cash what?"

Cashback is a "return on purchase" principle. When you buy with your credit card, the bank will give you a return on your purchases. Some banks call this a discount or reward; this return will be made by reimbursing a percentage of your spending. Depending on the type of bank card you have, the rate of return will be higher or lower. Quite interesting, isn't it?

Shape your credit rating

As mentioned above, your credit card will help you build your credit rating. Your credit rating is a way to check your creditworthiness. Today, it is the only way for Canadian financial actors to check it.

➡️ A credit score is an assessment of your credit history. Simply put, a mathematical algorithm will analyse your ability to manage the credit assigned to you and quantify your risk level with a number!

If you pay your credit account regularly and correctly from your banking application, then your credit rating will be good. The better your credit rating, the higher your authorised credit limit can be.

When you are a newcomer, your authorised credit limit will depend, in part, on your salary. Although your authorised limit is not very large when you first arrive, it can be increased over time as long as you regularly pay off your credit account.

It will be useful if you want to buy a property or a car, for example. It may also be required when renting an apartment.

Are you a newcomer?

Don't worry, you won't be asked for your credit rating when looking for a new apartment, landlords know that you haven't been able to create one yet and are very understanding most ofthe time.

If you want to know more about renting an apartment in Montreal, you can find more information in our article Finding a place to live in Montreal: our advice and tips for expatriates.

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Maplrs' advice for a good credit rating

Pay off your credit card account regularly
Wait at least 6 months before requesting an increase in your authorized line of credit
Spend a maximum of 30% of your authorized line of credit or pay it back more regularly!
Set reminders so you don't forget to pay back your credit card!

Marion

Co-founder of Maplr

The Canadian banking system: Bank transfers

Another common practice in Canada is Interac transfer.

It's a simple and secure way to send money to someone, by text or email in 1 minute flat, regardless of their bank!

It is therefore an alternative to cheques or ATM withdrawals. All you need is a Canadian bank account and the phone number or email address of the person you want to send money to. 

The differences in vocabulary between the Canadian and French banking systems

To help you in your new life in Canada, here is a summary of the differences in vocabulary between France and Canada.

 

France Canada
GNI Specimen cheque or bank draft

Credit card / Blue card

(the term "credit card" is often used incorrectly) 

Debit card / Interac card
No equivalent Credit card
Cash Cash
A way to send money to someone, by text or email Interac transfer
Return on purchases made by your credit card account Cashback / rewards

The cost of living in Canada

To continue learning about finances in Canada and because you are planning an expatriation to this beautiful country, we recommend you to find out now about the cost of living in Montreal.

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