Thursday, September 4, 2008

Advice - Banking Issues #1

Guess what? 
You are moving out of the U.S. and into another country. If you haven't yet contemplated the ramifications of that, allow me some 'splaining. It's all done a bit differently across the border. There will be different laws, rules, and expectations. Your new living situation will look and feel very similar to the one you had in the states, until you examine it up close. Ok, so back to banking...

Credit History and Rating
Neither your U.S. credit rating nor history will follow you across the border. You will be starting from scratch. This may elate you if it wasn't so good. Or, if it was stellar, cause you (like Eric and myself) to shake your head, roll your eyes to god and try not to think about it. Alas.

That being said, come prepared with several copies of your U.S. credit reports with FICO score from all three agencies (Experian, Trans Union, and Equifax). I know Equifax has a product that contains all three including one's FICO score. Canadians who are not familiar with these U.S. reports will not have to rely on your explanation of them as they contain an extremely precise explanation of the financial details. One can be purchased inexpensively on-line; hard copies easily made on a home printer.

If your history is long enough and your risk score (FICO) is high enough (sounds contradictory but that is how it works) those reports will clearly show a prospective landlord or Canadian Creditor that you are financially responsible.

We have also been told by other U.S. to Canada immigrants that their credit history/rating from The States was used to obtain a Canadian mortgage. So, it might be worth your time to continue to maintain good credit standing with your remaining U.S. creditors.

Where to Bank?
Unlike the U.S., which has hundreds, Canada basically has only five retail banks. These five dominate the Canadian Banking scene - which isn't to say there aren't other banks or Credit Unions to choose from. However, if you value an abundance of branches and ATMs, chances are you will choose one from "The Big Five." A Canadian Social Insurance Number (SIN-the equivalent of a U.S. Social Security Number) is not required to open a bank account. If you don't yet have a Canadian abode use your current U.S. address as a residence and have your statements sent temporarily to the bank. Bring your picture ID (passport/PR card) and/or your immigration documents such as a work permit.

Banking Fees
Canadian banks are fee happy. There are per transaction fees, per check fees, per branch visit fees, per Interac purchase fees, etc. You get the idea. Keeping a minimum dollar amount in an account or having multiple account types at the same bank usually eliminates or reduces Canadian Bank fees. Somewhat.

Debit Cards
Canadian debit cards do not carry the MasterCard or Visa logo as many do in the U.S. The logo you will find on the back of the card is that of Interac. Interac is the financial network associated with debit cards in Canada. Many Canadian retailers and supermarkets allow purchases with debit cards via the Interac network.

Regarding logos, displayed on the back of one's debit (and credit) card will be the symbols of the financial networks with which it is associated. If you need to obtain money from a Canadian ATM using a U.S. debit card, the challenge may (will?) be finding an ATM that displays the same symbol. Networks may include STAR, PLUS, CIRRUS, INTERAC (Canada) and others (See "Transferring money..." below).

Remember also that:
  1. there is usually a maximum daily withdrawal amount - usually between $200-$500, and
  2. for security purposes, your U.S. bank may (will?) freeze your account (and use of your card) if you don't notify them beforehand that you will be withdrawing large sums of money while traveling in a foreign country.
Bank Account Numbers
U.S. creditors and purchases must be paid with U.S. dollars. Canadian banks have a product called a Canadian U.S. Dollars Checking Account. Canadian bank account numbers, including Canadian U.S. Dollars accounts, are not compatible with U.S. on-line banking. They have a different number of digits. Your Canadian U.S. dollars checking account will be no use to you for paying your remaining U.S. bills directly on-line.

Transferring Money Across the Border
This process can take up to twenty one (21) days. If you can do this ahead of the time you might need access to the money, great. Research the process with both your U.S. and Canadian banks. Proper routing and account numbers will be required. Withdrawing money from Canadian ATMs with your U.S. debit or credit card is also possible but, in our experience, can be challenging at best and over-the-top frustrating at worst (see "Debit Cards" above).

U.S. Credit Card Bills and Other Accounts
Be aware that you may have an agreement with your U.S. creditors to pay their bills in U.S. dollars from a U.S. bank account. American Express doesn't seem to have any problems accepting U.S. Dollars from a Canadian U.S. dollars account but your MasterCard and Visa might. Check into it.

My advice is to call each U.S. creditor to confirm if they will accept payment in U.S. dollars drawn from a Canadian bank account. Don't assume anything. Also, remember that transferring money from Canada to the U.S. usually takes a minimum of 21 days. This process can be agonizingly slow and cross your fingers nothing goes awry. More on transferring funds, here.


MSEH said...

Nice post! A couple of thoughts. One exception to the credit issue seems to be mortgages. I say this on this basis of my experience as well as that of others who have bought in Canada. They had no problem pulling a US credit report and using that. Not so with other types of consumer credit.

Also, I've been very happy with, both the rates and service. If anyone wants to know more, email me.

And, yes, Canadian banks are definitely fee happy. We're paying a fee for the first time in years, but we are debit (Interac) hogs and between that and a joint account "unlimited" was the only way to go!

I don't have the link handy, but the Canadian government also has a useful page that allows you to enter your "bank usage" habits. From that you get a menu of different banks' account types. I found it a useful starting point.

Happy Banking! Nah, no such thing...

cls said...

There are ways to get around some of the fees. The package we put together at our bank seemed expensive at the time but because it was tied in with aeroplan we figure that Air Canada pays us to bank with all the free airplane tickets we get. Check out the credit unions. They're provincially legislated so the range of service depends on where you are. BC has very powerful credit unions such as Vancity which has a community run board and funds green and social welfare projects like housing for single parent families.

Adam said...

Thanks for the comments. We won't be going down the mortgage road for a while yet, so have no experience to share.

"All the free airplane tickets..." Hmmm. Nice. I just signed up for Aero miles and if doing so really gets me free anything, I am all for it.

Vancouver Isle Doug said...

I agree completely with the comments on bank fees (HSBC) but an additional path we took was through a credit union. No fees and we can get money from ABM's at any BC credit union fee-free. We also have both US$ and CDN$ accounts, which helps with paying US credit cards. Our mortgage officer pulled out US reports no problem, so don't give up hope on that front.

ErinOrtlund said...

Oh, the bank fees drove me crazy! We switched to PC Financial a couple months after arriving--no fees! We do all our basic checking/savings through them. However, they wouldn't deal with us for a mortgage (due to the temporary SIN), so that's with RBC, as is our RRSP and credit card.