Moving to a new country brings countless opportunities, but it also comes with significant challenges—particularly when it comes to understanding and navigating an unfamiliar financial system. As a newcomer to Canada, establishing your financial foundation is one of the most crucial steps in your settlement journey. Understanding Canadian currency, banking practices, credit-building strategies, and tax obligations may seem overwhelming at first, but gaining this knowledge early will help you build financial stability and security in your new home.
In this guide, we’ll walk through everything you need to know about the Canadian financial system as a newcomer. Whether you’ve just arrived in Canada or are planning your move in the coming months, this information will help you make informed financial decisions and set yourself up for long-term success.
Canadian Currency
The official currency of Canada is the Canadian dollar (CAD).
When shopping online it is common to see CAD or C after a dollar amount to indicate that it is being charged in Canadian dollars to help distinguish charges in Canadian dollars or United States dollar (USD).
The Canadian dollar is divided into 100 cents. Canadian coins include the penny (1¢), nickel (5¢), dime (10¢), quarter (25¢), loonie ($1), and toonie ($2). Officially the penny is no longer used in Canada. Retailers will round purchases up or down to the nearest $0.05, but the copper coloured coins are still a common sight. It is very common to find quarters that have replaced the typical moose picture with a variety of symbolic images from a red poppy, to different animals, or scenery. The loonie is a gold-colored coin named after the loon depicted on one side, while the toonie is a bi-metallic coin with a gold-colored center and silver-colored outer ring. The toonie typically has the image of a polar bear on it but it’s name is a combination of two and loonie because it is worth two loonies (or $2).
Canadian banknotes (bills) come in denominations of $5 (blue), $10 (purple), $20 (green), $50 (red), and $100 (brown). Canadian bills are made of polymer rather than paper, making them more durable and harder to counterfeit. Each denomination features distinct Canadian historical figures and cultural elements.
When using cash, watch your bills for the shiny metallic strip and transparent areas. These are some of the first give-aways of a fake or counterfeit bill.
Canadians are increasingly prioritizing cashless payment options. Debit (bank) cards, credit cards and mobile payment options such as Apple Pay and Google Pay are accepted almost everywhere. Interac e-Transfer, a service that allows Canadians to send money directly to others using their email address or mobile phone number, is also extremely popular for person-to-person payments.
The Canadian Banking System
Canada’s banking system is widely recognized as one of the most stable in the world.
Types of Financial Institutions
The banking landscape in Canada is dominated by the “Big Five” banks:
- Royal Bank of Canada (RBC)
- Toronto-Dominion Bank (TD)
- Bank of Nova Scotia (Scotiabank)
- Bank of Montreal (BMO)
- Canadian Imperial Bank of Commerce (CIBC)
These major banks offer comprehensive services through extensive branch networks across the country. However, they’re not your only options.
Credit unions are provincial financial cooperatives that offer comparable products to banks.
In recent years, online or digital banks have gained popularity. Examples include Tangerine and Simplii.
Types of Bank Accounts
When establishing your banking presence in Canada, you’ll likely need to open at least two accounts:
Chequing Accounts serve as your primary transaction account for day-to-day banking needs. Features typically include a debit card, the ability to write cheques, bill payments, direct deposits, and withdrawals. Most chequing accounts charge monthly fees ranging from $4 to $30, depending on the features included and the number of transactions permitted.
Savings Accounts are designed to help you set aside money while earning interest. These accounts typically offer higher interest rates than chequing accounts but may limit the number of free transactions you can make each month.
As you become more established in Canada, you might explore registered accounts like the Tax-Free Savings Account (TFSA) and Registered Retirement Savings Plan (RRSP), which offer tax advantages for savings and investments.
Newcomer Banking Packages
Most major Canadian banks offer special newcomer banking packages designed specifically for new immigrants. These packages typically include:
- No-fee banking for 1-2 years
- Free or discounted international money transfers
- Credit cards with relaxed approval requirements
To open a bank account in Canada, you’ll need:
- Two pieces of identification (ID), one must be government issued with a photo, name, and date of birth.
- Proof of address (utility bill, lease agreement)
- Immigration documents (work permit, study permit, or confirmation of permanent residence)
When choosing a bank, consider factors such as branch and ATM locations, online and mobile banking capabilities, transaction fees, and available newcomer benefits. It’s worth visiting several financial institutions to compare offerings before making your decision. All banks have detailed information about their offerings on their websites.
Building Credit in Canada
One of the most challenging aspects of settling in Canada is establishing a credit history. Your credit history from your home country does not transfer to Canada, which means you’ll be starting from scratch, regardless of how strong your credit was previously.
Understanding the Canadian Credit System
In Canada, credit scores range from 300 to 900, with higher scores indicating better creditworthiness. Generally, scores above 700 are considered good. Your credit score impacts your ability to borrow money, the interest rates you’ll receive, and can even affect your housing options.
Two main credit bureaus operate in Canada: Equifax and TransUnion. These agencies collect information about your credit accounts and payment history from lenders, which is used to calculate your credit score.
Key factors that influence your credit score include:
- Payment history
- Credit utilization or how much credit you use
- Length of credit history
- Types of credit used
- New credit inquiries
Strategies for Building Credit
Building credit takes time and consistency. Here are some effective strategies for newcomers:
Secured Credit Cards: These cards require a security deposit that becomes your credit limit. Since the card is backed by your own money, banks are more willing to issue them to newcomers without established credit. Using a secured card responsibly by making small purchases and paying the balance in full each month is an excellent way to start building credit.
Newcomer Credit Card Programs: Many major banks offer credit cards specifically designed for newcomers, often with lower qualification requirements. These cards may have lower limits initially but provide a pathway to building credit.
Other Methods:
- Utilities, specifically cell phone plans, may be reported to the credit bureaus
- Some landlords report rent payments to credit bureaus
- Apply for a small personal loan or line of credit
Best Practices for Maintaining Good Credit
Once you begin building credit, follow these practices to maintain and improve your score:
Do:
- Pay all bills on time, every time.
- Keep older accounts open to build credit history length
- Check your credit report annually for errors
- Use different types of credit (loans and credit cards)
Don’t:
- Apply for too many credit products in a short time
- Miss payments or pay late
- Max out your credit cards or use more than 70% of the available balance
- Co-sign loans for others
- Close old credit accounts unnecessarily
Remember that building credit is a marathon, not a sprint. It typically takes about six months of credit activity to generate your first credit score, and 1-2 years of consistent, responsible credit use to build a solid credit history. Be patient and focus on consistent, responsible financial behavior.
Credit history is only built for the person who owns the credit account, therefore it is advisable for all adults in a family or household to work on building their own credit history.
Understanding the Canadian Tax System
The Canadian tax system operates on a self-assessment basis, meaning you’re responsible for reporting your income and calculating your taxes owed each year. Understanding your tax obligations is essential to avoid penalties and access the benefits and credits you’re entitled to.
Tax Authorities and Filing Basics
The Canada Revenue Agency (CRA) administers tax laws for the federal government and most provinces and territories.
The tax year in Canada runs from January 1 to December 31. Income tax returns must be filed by April 30 of the following year. If you or your spouse are self-employed, the filing deadline is extended to June 15, although any taxes owed are still due by April 30.
Canada uses a progressive tax system, with higher income earners paying a higher percentage in taxes. There are federal tax brackets and provincial/territorial tax brackets, which vary by region.
Filing Your First Tax Return
For your first tax return in Canada, you may want to use the services of an accountant to ensure everything is done correctly. In following years, you can file your taxes yourself through an approved software, visit an accountant, or use a tax filing service. If you have a modest to low income and a simple tax situation, you may be eligible for free assistance through the Community Volunteer Income Tax Program (CVITP).
Even if you had little or no income in your first partial year in Canada, filing a tax return is beneficial as it:
- Establishes your presence in the Canadian tax system
- Makes you eligible for various benefits and credits
- Starts your contribution history for programs like the Canada Pension Plan
Tax Benefits for Newcomers
Filing taxes is needed for eligibility for many tax benefits, including:
GST/HST Credit: Quarterly payments to help offset the Goods and Services Tax/Harmonized Sales Tax for individuals and families with low to moderate incomes.
Canada Child Benefit (CCB): Monthly payments to help with the cost of raising children under 18. The amount varies based on your family income and the number and ages of your children.
Retirement Planning in Canada
Canada has a three-tier retirement system:
Tier 1: Government Benefits
- Canada Pension Plan (CPP)/Quebec Pension Plan (QPP): Retirement benefits based on your contributions throughout your working years in Canada
- Old Age Security (OAS): A monthly payment available to seniors aged 65 and over who meet residence requirements
- Guaranteed Income Supplement (GIS): Additional support for low-income OAS recipients
Tier 2: Employer Pensions
- Defined Benefit Plans: Provide a specific monthly retirement income
- Defined Contribution Plans: Retirement savings based on contributions and investment performance
- Group RRSPs: Employer-sponsored retirement savings plans
Employer pension programs are losing popularity and not all employers offer pensions or matched savings programs any more.
Pillar 3: Personal Savings
- Registered Retirement Savings Plans (RRSPs): Tax-advantaged accounts for retirement savings
- Tax-Free Savings Accounts (TFSAs): Flexible savings accounts with tax-free growth and withdrawals
- Other investments: Non-registered (accounts without tax advantages) investment accounts, real estate, etc.
As a newcomer, the earlier you can start contributing to the Canadian retirement system, the better positioned you’ll be for financial security in your later years.
Education Savings for Children
If you have children, the Registered Education Savings Plan (RESP) is a valuable tool for saving for their post-secondary education:
- Tax-sheltered investment account specifically for education savings
- Government matches 20% of your contributions up to $500 per year through the Canada Education Savings Grant (CESG)
- Additional grants available for lower-income families
- Tax-free growth until withdrawal for educational purposes
Housing in Canada
Housing will likely be one of your largest expenses in Canada. Understanding the housing market and your options is crucial:
Renting:
- Typically requires first month’s rent and a damage deposit (may be equal to a month’s rent)
- May require a credit check (another reason to build credit quickly) and employment or income verfiication
- Rental rates vary significantly by city and neighborhood
- Lease terms are typically 6 or 12 months
Buying:
- Minimum down payment of 5% for homes under $500,000 (higher percentages required for more expensive properties)
- Mortgage loan insurance required for down payments under 20% (CMHC Insurance)
- First-Time Home Buyer incentives available to help with the purchase
- Pre-approval process helps determine your budget
Consumer Protection and Financial Literacy
Canada has strong consumer protection regulations in place to safeguard your financial interests.
Consumer Protection Agencies
Financial Consumer Agency of Canada (FCAC): Ensures that federally regulated financial institutions comply with consumer protection measures and provides educational resources.
Canadian Deposit Insurance Corporation (CDIC): Insures eligible deposits at member institutions up to $100,000 per account, protecting your money if a bank fails.
Provincial Securities Regulators: Oversee investment markets and protect investors from fraudulent practices.
Common Financial Scams Targeting Newcomers
Be vigilant about potential scams, which often target newcomers who may be less familiar with Canadian systems:
- Immigration scams: Scammers posing as immigration officials demanding payment
- SIN number scams: Requests for your Social Insurance Number for illegitimate purposes
- CRA impersonation scams: Fake tax collectors demanding immediate payment or payment through unusual methods.
- Banking verification scams: Phishing attempts to obtain your banking credentials
- Job training programs: high cost programs from disreputable schools that do not result in employable credentials
Protecting Yourself
Follow these guidelines to protect your financial information:
- Government agencies never ask for payment by gift cards or cryptocurrency
- Never give out your Social Insurance Number (SIN) – only your employer needs it for taxes and payroll
- Never share passwords, PINs, or verification codes
- Be suspicious of urgent requests for money or personal information
- Verify callers by hanging up and calling the company or agency’s official number
- Banks and the CRA will never send you a link. Do not click any link that is emailed or texted to you.
- If they threaten the police, RCMP, or jail, it’s a scam.
- If in doubt, consult with a trusted advisor or settlement worker
Conclusion
Navigating the Canadian financial system may seem daunting at first, but with the right knowledge and preparation, you can establish a strong financial foundation in your new home. Be patient with yourself, ask questions, and seek guidance when needed.
By taking proactive steps to understand Canadian currency, banking practices, credit-building strategies, tax obligations, and fraud protections, you’re investing in your future success and prosperity in Canada.
Welcome to Canada, and here’s to building a bright financial future in your new home!