New to Canada? Here are some tips on how to navigate the financial system
Are you a newcomer to Canada? Whether you’re a global scholar, travelling on Canada’s new digital nomad visa, a vacationer, or have just lately immigrated to the nation, it’s necessary to study the fundamentals of how the nation’s monetary system works.
Here’s a fast rundown of the basics, so you’ll be able to higher perceive how Canadian foreign money works, in addition to easy methods to open a checking account, construct your credit score, and file your taxes.
Before lengthy, you’ll be a professional!
Canadian foreign money 101
If you’ve simply arrived within the nation, you’ll be able to go to a international change centre to swap your native foreign money for Canadian foreign money which you can spend on native items and providers.
If you’re visiting from the United States, you’ll discover Canada’s financial system could be very related. The two international locations share lots of the identical foreign money denominations, and the worth of on a regular basis gadgets comparable to milk and bread are additionally related.
If you’re visiting from elsewhere on the earth, although, it might appear fairly totally different than what you’re used to.
The Canadian greenback (CAD) is the nation’s foreign money. We have vibrant payments denoting main denominations, together with:
We even have cash denominating quantities lower than $1, together with:
-
1¢, also called pennies (the Royal Canadian Mint not produces these however they might nonetheless be used as authorized tender) -
5¢, also called nickels -
10¢, also called dimes -
25¢, also called quarters -
50¢, also called half-dollars, a uncommon coin not usually used, but it surely does exist
One of the neat issues about residing in Canada is that we repeatedly use $1 and $2 cash as nicely, with $1 cash known as “loonies” (because of the picture of a loon on the again of the coin), and $2 cash known as “toonies” (a mix of the phrases “two” and “loonie”).
Using credit score and debit playing cards in Canada
Most trendy companies in Canada settle for card funds on the Visa, Mastercard, and American Express networks. As lengthy as your financial institution or bank card firm permits you to use your card in another country, you shouldn’t have any points paying for gadgets together with your card.
Keep in thoughts, although, that some banks and bank cards could cost international transaction charges. Be positive to double-check together with your financial institution or bank card supplier so you’ll be able to finances for this correctly.
How to open a checking account
Once you’re a full-time resident in Canada, you’ll be able to open up a Canadian checking account, which may cut back worldwide transaction charges and make issues easier. Most banks require the next documentation to open a fundamental chequing account for each day spending:
-
Two figuring out paperwork (comparable to a driver’s licence, passport, or social insurance coverage quantity) -
Residency paperwork (rental settlement, utility payments, and many others.)
Some banks are solely open to everlasting residents and residents, whereas others settle for non permanent residents, worldwide college students, and even abroad candidates.
Top banks in Canada
The “big five” banks in Canada are:
-
RBC, or the Royal Bank of Canada -
TD Bank, or the Toronto-Dominion Bank -
CIBC, or the Canadian Imperial Bank of Commerce -
BMO, or the Bank of Montreal -
Scotiabank, or the Bank of Nova Scotia
These are, by far, the largest banks and also you’ll discover ATMs for these all around the nation. There are additionally a variety of smaller, extra native banks and credit score unions in addition to on-line banks which you can apply for as nicely.
Major banks comparable to these listed above are often a primary cease for folks seeking to get a mortgage or different loans in Canada. However, it is best to store round for the perfect charges. You can contact mortgage brokers or different banks and credit score unions for quotes.
How tax-advantaged financial savings accounts work
As a Canadian resident, you may as well open particular registered accounts at many monetary establishments. These accounts are tax-advantaged, which means they’re exempt from taxation or function different varieties of tax advantages. They could will let you construct your financial savings for future bills comparable to your first dwelling, your little one’s school schooling or your retirement.
Some of the most well-liked accounts embody:
How to switch cash internationally
There are a number of methods to switch cash to and from Canada. Here are some in style methods to take action:
1. Bank wire transfers: Most main banks and credit score unions in Canada supply worldwide wire switch providers. You’ll want the recipient’s checking account particulars, together with their International Bank Account Number (IBAN) or equal, and the financial institution’s SWIFT code, also called the Bank Identifier Code.
2. Online cash switch providers: These platforms can supply extra aggressive change charges and decrease charges than banks. Some examples of those are Wise, Paypal/Xoom, and Remitly. You can examine the change charges provided by these platforms and examine them to a few of Canada’s bigger banks. This is my most popular methodology to switch cash, as it’s usually considerably cheaper and faster than different choices.
3. Money switch operators (MTOs): These firms present cash switch providers, however don’t require the sender or recipient to have a checking account. Some examples are Western Union and Moneygram. Companies that supply this service often have larger charges than different choices on this record.
4. Cheques and cash orders: These strategies are extra conventional methods of sending cash internationally, however in addition they are likely to take longer than a few of the different choices on this record. These paperwork could be bought at banks or publish workplaces and despatched wherever on the earth.
5. Prepaid debit playing cards: These could be loaded with funds and used internationally. Some suppliers would possibly supply higher change charges and decrease charges than conventional strategies of transferring cash.
Building credit score in Canada
Canada has two main credit score bureaus – Equifax and TransUnion.
Whenever you apply for a bank card or mortgage, the creditor will run your info by means of these databases to find out your general creditworthiness.
If you’re simply beginning out with no credit score, making use of for a pay as you go “secured” bank card is an efficient method to begin. This will will let you construct good cost historical past, after which you will think about making use of for a conventional line of credit score.
What is a “good” credit score rating?
Credit scores in Canada usually vary between 300 (the bottom) and 900 (the best). Here is how your rating determines your general credit standing:
-
300 – 559: Poor -
560 – 659: Fair -
660 – 724: Good -
725 – 759: Very good -
760 – 900: Excellent
The higher your rating is, the extra seemingly you’ll get permitted for monetary merchandise comparable to cashback rewards playing cards and private loans. Higher credit score scores can also assist you obtain a extra beneficial rate of interest.
If you’re not sure about your credit score, you’ll be able to get your credit score report from both credit score bureau without spending a dime.
Filing your taxes in Canada
Last however not least, Canadian residents are required to file an annual tax return with the Canada Revenue Agency (CRA). On your tax return, you’ll declare your whole annual income, which is able to decide your tax bracket and the overall quantity of taxes you owe to the native provincial authorities and the Canadian federal authorities.
Income earned earlier than somebody arrives in Canada just isn’t topic to Canadian taxes. But as soon as somebody turns into a Canadian resident, for tax functions, they must declare revenue from wherever on the earth on their tax return.
You can file your taxes on-line utilizing software program permitted by the CRA or go to knowledgeable tax preparer that can assist you with the method.
You’ll additionally be capable of apply for eligible deductions, comparable to child-care bills, which might cut back your general tax obligation.
Most jobs routinely take revenue taxes out of your paycheque earlier than issuing it to you. If that is your state of affairs, then you might be eligible for a tax refund on the finish of the yr (should you’ve overpaid taxes).
However, should you’re self-employed or haven’t had your revenue taxes deducted out of your paycheques, then you definitely’ll seemingly owe taxes on the finish of the yr. In this case, it’s necessary to finances for revenue taxes forward of time, setting cash apart in a financial savings account so that you simply’re not caught off guard.
Creating a long-term plan
If you’re new to the nation, studying easy methods to navigate the monetary system can take a couple of weeks or months. However, it can all make sense with a little bit of time and observe.
Start with the fundamentals, and learn to use Canadian foreign money. Once you’ve established your residency, open a checking account, begin saving cash, and construct your credit score. From right here, it’s a good suggestion to talk with a monetary adviser to create a long-term retirement and investing plan for the longer term.
