Canada's Credit Card System Totally Confused Me As A Newcomer To The Country — Here's Why
The opinions expressed in this article are the author's own and do not necessarily reflect the views of Narcity Media.
Canada has several helpful initiatives and systems in place that are just wonderful for newcomers to the country.
That being said, I'm going to go out on a limb and say that getting used to the country's credit system can be a little bit confusing, especially if you're from a place that never actually required you to have a credit card.
Now, I know that having credit cards and borrowing money from the bank isn't a system that's unique to Canada, and it's similar in many other countries. But, that doesn't mean it’s the norm around the world.
In fact, I've lived in three countries and I never had to get a credit card before I moved to Canada!
Here are several reasons Canada's credit card system totally confused me when I relocated here in 2022.
You absolutely need a credit card to function
As I mentioned earlier, I've lived in a number of different countries before and never needed to get a credit card.
While I completely understand needing a credit card if you're making big purchases, I simply wasn't making significant purchases when I was new to the country.
But, I had to get a credit card anyway.
In Canada, it can feel like a credit card is almost like another version of an identity card. You need it for so many things, from finding an apartment to renting a hotel room.
In the UAE, Oman or India, if you're booking a hotel room, you can simply use a debit card to make the payment, and show a separate identity card when checking in. There's no need to use a credit card or for anyone to check your credit score.
Borrowing isn't just normal, it's necessary
This might be controversial but the entire system of getting a credit card, borrowing money against it, and then paying it off to build a credit score sounded wild to me the first time I heard it.
Before you judge, just hear me out.
Growing up — with a banker as a parent no less — it was instilled in me to always live within my means.
This doesn't mean not making big purchases, but rather saving up so that I can make big purchases in the most responsible manner — and keep borrowing to a minimum. This also means paying less in interest in the long run.
But, because I needed to build a credit score in Canada, what I ended up doing is borrowing money for everyday expenses by using a credit card. And then paying off those expenses with savings I already have.
It feels like an extra step, especially since I already have the means to purchase these everyday items.
And, of course, on the off chance that I accidentally miss a payment deadline, it all backfires.
Call me old-fashioned, but the idea of owing money to anyone, including a bank, makes me slightly nervous.
Also, a whole system that revolves around proving that you're financially sound by borrowing money? That's just wild to me!Borrowing isn't just for big payments
Of course, I understand the need for a credit system. As many of my Canadian friends have reminded me, "What about when you need to buy a house? Banks need to know how reliable you are with your repayments!"
And that's a valid point.
But it also feels like it might make people inadvertently take on more than they can handle.
In the UAE, where I lived before Canada, most people preferred to use their savings to pay for stuff and keep borrowing to a minimum, to avoid paying interest in the long run.
This is also the case with many other big payments.
For example, I saved up for two years to buy my first car second-hand, and when I sold it, I was paid in full by a buyer who had also saved up.
This is pretty different from Canada, where many big purchases — and in some cases, all purchases — are paid for on credit.
Of course, I do understand why people borrow money for big-ticket items, but the idea of paying for smaller items like homeware products or makeup in installments is still a little foreign to me.
It's also wild to think that you might end up paying interest — which makes it cost more in the long run — just because you don't want to pay the whole amount right away.
It's not just banks offering credit cards
Getting used to credit cards is one thing. Picking the right credit card as a newcomer is a whole new scenario.
There are just so many options out there, and it can get rather confusing. And don't even get me started on learning the difference between secured and unsecured credit cards.
Banks aren't the only companies offering credit cards, either. Other companies, even those you might not expect to, offer their own credit cards too.
Different accounts come with different perks as well, like loyalty points for example. But you have to make sure that you pay off any purchases within the grace period or risk being stuck with pretty high interest rates. Ouch.
At the end of the day, I know that there's a reason behind the system here in Canada.
That being said, it can be slightly confusing for a newcomer to Canada, especially one that hasn't ever had a credit card and that has no big purchases on the horizon.
Does anyone out there have a similar experience?
This article's cover image was used for illustrative purposes only.
