Banking, Loans, and Credit History
To use the bank or to buy a car or home, it is very helpful to understand how banking, loans, and credit histories work in Saskatchewan.
Banking, getting a loan or mortgage, and your credit history may be different than in your home country. We will explain how you can bank, apply for a loan or mortgage, and understand why you need to build a credit history.
Q: Why do I need a bank account?
You will want to open a bank account soon after arriving in Saskatchewan so that you can keep your money safe and cash any cheques that you receive. You might also need other services the bank provides, such as transferring money between countries.
Some banks allow you to open a bank account even before you arrive in Canada. To find a bank that will help you do this:
For more information including the documents you need to open a bank account, visit Opening a Personal Bank Account: Understanding Your Rights on the FCAC website.
Q: What services will a bank or credit union provide for me?
When you have opened your own account with a bank or a credit union (also known as a financial institution), you will then be able to transfer money, deposit cheques, and pay bills. You can save money in savings and investment accounts. You can also apply for a loan or mortgage.
Canadian bank accounts are protected by the Canada Deposit Insurance Corporation. For more information, please visit the Canada Deposit Insurance Corporation website.
Accounts with a credit union in Saskatchewan are protected by the Credit Union Deposit Guarantee Corporation. For more information, please visit the Credit Union Deposit Guarantee Corporation website.
Q: What is the difference between a credit union and a bank?
Both credit unions and banks offer a variety of services including depositing money, lending money, and investing your money. Before you choose an account, ask about what is available and the cost for services you need.
Credit unions are member-owned and are provincially regulated. A credit union’s operations are focused in one province. If you have an account at a credit union, you are a part owner in the credit union.
Banks are federally regulated. Most banks operate across Canada.
A financial institution’s profit is made from the fees they collect for their services and from the interest they earn from loans. Some credit unions pay part of their profits back to members in cash patronage and some credit unions use their profits to support community programs. Ask the staff at the credit union how their profits are used and how you could benefit from having an account with them.
Banks offer a variety of banking services including depositing money and lending out the money raised to other parties or investing in securities. A bank’s profit is made from interest earned on loans and fees collected for the services they provide.
Credit unions and banks are able to provide you with a variety of banking services. Before you choose an account, ask about the availability and cost for services you need.
Q: How do I choose the right bank or credit union for me?
Consider what your banking needs are before choosing where to open an account.
Choose the right financial institution for you:
Q: What are the main types of accounts?
Chequing accounts and savings accounts are the two main types of bank accounts.
Chequing accounts allow you to write cheques and usually include the use of a debit card. They often have lower fees than a savings account and may not have a fixed monthly fee. You will need a chequing account if your employer uses payroll deposit. Payroll deposit allows your employer to deposit money directly into your chequing account (without being able to take money out).
Savings and investment accounts are helpful if you want to save money because they provide higher interest than chequing accounts. With these accounts you may only be allowed to make certain types of transactions or a certain number of transactions each month. Additional transactions may be expensive. That is why most consumers who open a savings account also have a chequing account for their day-to-day banking needs.
Most financial institutions offer banking packages that combine different account types. Some institutions may even have packages for newcomers to Canada. Check your financial institution’s website or speak to some at your bank or credit union for more information.
There are many investment opportunities available in Canada. To learn more about investments, contact your bank, credit union, or visit Savings and investments on the FCAC website.
Q: How can I choose the right type of account for me?
The bank or credit union should provide more details of the types of accounts, types of banking packages, and the fees on their website. You can also speak with a person at the financial institution to decide which account or banking package would be the best for your banking needs.
You can also learn which bank accounts are right for you using the FCAC’s Banking Tools.
Q: What is direct deposit?
A direct deposit is a deposit of money directly into your account. Employers frequently use this method to pay their employees. It is similar to a bank transfer in that the money is sent electronically to your account. You will be able to use the money as soon as the direct deposit has been completed.
Q: Can I do my banking on the Internet?
Yes. In Saskatchewan it is very common to be able to complete banking transactions by using “online banking”. You can use online banking to pay bills, transfer money, and find more information about loans, mortgages, and investment options.
Q: How can I use an Automated Teller Machine (ATM)?
ATMs are also known as Automated Banking Machines (ABMs). You can use ATMs to take money out or deposit money into your account using ATMs. You can also use ATMs to pay bills and move money to other accounts. You can use ATMs any time of the day or night. They are located in banks, stores, hotels, and other public places.
Some banks charge a fee every time you use an ATM. Find out how much you will pay before you agree to get money from the bank machine. If you use the ATM at your financial institution, there is usually no fee.
Additional fees can apply when you use an ATM that is not from your bank. You may even be charged two fees: one from the ATM and one from your bank. Your bank’s ATMs will show the bank’s logo where you can see it.
Q: Can I use my credit card or bank card in other countries?
Q: What is a loan and why might I need one?
A loan is when a financial institution lends you money for a period of time and charges extra money (called interest) until the debt is repaid. People often use loans to make a major purchase, like a car. A loan will be repaid over a fixed period of time (usually a loan repayment period will range from 12 – 60 months, but this could be longer for some loans).
A mortgage is a type of loan used to buy a home. A mortgage is usually paid back over 25 years, but this depends on the type of mortgage you choose.
Q: How can I get a loan?
Loans and mortgages are available at financial institutions. To be eligible for a financial intuition loan you must have a good credit history.
Q: How and when do I pay the loan?
The loan payment will usually be taken from your account automatically. The payments are usually made once each month, but you can also arrange for payments to be taken more often from your account. You can discuss these arrangements with your financial institution at the same time as you apply for the loan.
Q: Is there a penalty if I miss a payment?
Sometimes. You should discuss the terms of the loan with your financial institution. Missing a payment or being late can negatively affect your credit history. This can also affect your ability to get a loan in the future.
Q: Is there interest or other fees for a loan or mortgage?
Your financial institution should explain the interest rate and also any other fees or costs that are part of the loan or mortgage. Discuss this information with your financial institution before signing a loan or mortgage agreement. This information will also be included in the loan or mortgage agreement document.
Q: How do I find out if I can get a mortgage to purchase a home or loan to buy a car?
Your bank or credit unions’ website will list the requirements or you can talk to an adviser at your financial institution.
Generally, to apply for a loan you must have:
These requirements will show the financial institutions that you are able to make the payments for the loan or mortgage.
If you do not qualify for a loan or mortgage, you can ask a friend or family member who has secure employment and good credit history in Canada to co-sign the loan with you. When someone agrees to co-sign a loan, then they are guaranteeing the payments will be made. If you do not make the loan payments on the day they are due, then the co-signing person will be responsible for making the payment. If no one makes the payment, you could both have a negative mark on your credit history.
Q: What is an amortization period?
An amortization period on a mortgage is the total length of time it will take you to pay off your mortgage. If your down payment is less than 20 per cent of the purchase price of your home, the longest amortization period allowed is 25 years.
The term of a mortgage is the length of time that your mortgage agreement with a financial institution is valid. The term can range from six months to 10 years. At the end of a term, your interest rate may change. Speak to your financial institution to learn more.
For more information, visit Choosing an Amortization Period: What is the impact on your mortgage? on the FCAC website.
Q: Will I get a penalty if I repay my entire mortgage early?
Ask your financial institution for more information about any penalties to repay your mortgage early. This should be discussed before you sign the mortgage agreement.
Q: Are there any other finance options to buy a home in Saskatchewan?
You can meet with a mortgage brokerage to discuss mortgage options. Mortgage brokers have access to a number of financial institutions and may be able to offer other options. Visit the Financial and Consumer Affairs Authority website to find a mortgage broker.
It is also possible to pay for a home in cash. Speak to your financial institution about the benefits of a mortgage or purchasing the home with cash.
Q: How do I get a credit card?
Banks, credit unions, and even big department stores offer their own credit cards. To get a credit card you will fill out an application form. The credit card company will then check your credit history in Canada. Once the credit card company reviews your application and your credit history, they will decide whether to give you a credit card.
Use this Credit Card Selector Tool on the FCAC website to help you choose the credit card that is best for you.
Q: I prefer to pay for my purchases with cash. Do I still need to get a credit card?
A credit card helps you to build your credit history in Saskatchewan. Once you have a credit card, you will establish a good credit history by making your payments at the time they are due and by having a low credit card balance.
Find out how to establish a credit history if the credit card company will not approve your credit card in the Credit History section below.
Q: What are the risks of having a credit card?
It is important that credit cards be carefully managed.
Credit cards are a loan from a financial institution that charges interest on the amount you owe on the credit card. These interest rates are higher than most loans and mortgages.
Credit cards have a monthly minimum payment, but interest will be charged if the total amount you owe is not paid off every month. If only the minimum payment is made, it can take a very long time to repay even if you are not using the credit card! This can also negatively affect your credit history.
Q: What is a payday loan?
A payday loan is a very high cost, short-term loan. These loans are offered by lenders that are not banks or credit unions.
Payday loans must be repaid in 62 days and can cost you up to $23 per $100 borrowed. The payday lender will give you a written explanation of the cost of the loan before you sign the loan agreement.
The high cost and short time period of payday loans can cause additional difficulties. Some people who use these loans take out another loan to repay the first one. Please consider your options carefully before entering into a payday loan.
Visit Payday Loan Borrowers for more information.
Q: How much credit do I need (for credit card limits, loans, and mortgages)?
It is a good idea to discuss the budget that will suit your income with your financial institution. You and your financial institution can develop a budget plan for credit, loans, and mortgages that allows you to make payments according to your income.
You can also use this Budget Calculator on FCAC’s website to help you make a budget for you and your family.
Q: What are credit history and a credit report?
Credit history shows your history. Credit report shows your ability to repay. Your credit history can affect your ability to take out a loan, get a good interest rate, get a credit card, rent an apartment, or get services like Internet, TV, and cellular phones.
Your credit report may include your income, the amount of money you want to borrow, the addresses where you have lived and for how long, your employment or business history, how much debt you have, and whether you have made on-time payments for previous loans.
Credit reporting agencies collect your credit history from landlords, employers, insurance companies, stores, public utilities (like SaskPower or SaskEnergy), court records, and telephone companies. When you apply for any kind of loan, your credit history will generally be checked.
Q: How can I check my credit history and how often should I check it?
There are two major national credit bureaus: Equifax and TransUnion. You can ask to see your credit report any time free of charge. Instant online credit reports may charge a fee. Visit Your credit history for more information.
You should check your credit history at least once each year or any time you think your identity or financial information was stolen (for example, after losing a wallet).
Q: Will the financial institution or credit card company be able to view my credit history from my home country?
Yes. They can view your credit history from another country, but the information can only be used if stored in a repository in Canada. This is why it is important to develop a credit history in Saskatchewan. One way to establish a credit history is to get a credit card from a financial institution in Canada.
Q: How can I establish a credit history if the credit card company will not approve a credit card for me?
You can visit your financial institution and ask them if they have a “secure credit card”. A secure credit card is a prepaid credit card. Once the financial institution is able to see that you are using your credit card responsibly, they will refund the deposit on your secure credit card and then allow you to use the credit card without the deposit. The amount of the deposit will vary and the time that the deposit will be refunded is set by the financial intuition. You can ask for the information from your bank or credit union.
Q: How long does it take to establish a good credit history?
You may have to pay your bills on-time several times to establish a good credit history. There are many ways you can establish a good credit history. For example: