# Question about Credit Cards & Chequing Accounts for Non-Resident Canadian Citizens



## GoLeafs (Apr 21, 2013)

*Question about Credit Cards & Chequing Accounts for Non-Resident Canadian Citizens*

Hi everyone.

I'm Canadian citizen who's been living in the US since I was quite young. Actually, I have US citizenship as well, but I don't think that's really pertinent to my question. In any event, I've considered moving back to Canada at some point in the future, and since at the moment I have absolutely no Canadian credit history, I'd like to apply for a credit card and open a chequing or savings account at a Canadian bank so that I can start establishing a Canadian credit history. From my research, some Canadian banks don't allow non-residents to open accounts, but evidently TD does allow Canadian citizens residing outside of Canada to open accounts and hold credit cards, provided that the application is done in person. I'll be visiting Canada in a couple of months, so I'm hoping to open an account and apply for a credit card during my visit later this summer. I'll probably go with one of their US dollar credit cards, since foreign exchange fees would definitely add up if I use the card frequently in the US. This wouldn't by any means be my primary credit card, but I'd charge some things to it occasionally, then pay off my bill on time and in full each month just to get the ball rolling for my Canadian credit history. 

I'm sure the bank will be able to answer all of my questions, but here's one that's of particular concern to me. If I were to open a chequing or savings account and credit card account at TD, under what (if any) circumstances would I be required to file any sort of annual taxes in Canada? The only situation I can think of is if I were to open an interest bearing account, but my goal is to stick with a non-interest bearing account for the very reason of not accruing any taxable interest or income that would need to be reported. I'd probably open the account with around $2k, so we're not talking big money, but I'm just trying to handle this properly so that, if at all possible, I won't need to start filing Canadian taxes each year.

Any thoughts or suggestions would be appreciated. Thanks!


----------



## Numbersman61 (Jan 26, 2015)

GoLeafs said:


> Hi everyone.
> 
> I'm Canadian citizen who's been living in the US since I was quite young. Actually, I have US citizenship as well, but I don't think that's really pertinent to my question. In any event, I've considered moving back to Canada at some point in the future, and since at the moment I have absolutely no Canadian credit history, I'd like to apply for a credit card and open a chequing or savings account at a Canadian bank so that I can start establishing a Canadian credit history. From my research, some Canadian banks don't allow non-residents to open accounts, but evidently TD does allow Canadian citizens residing outside of Canada to open accounts and hold credit cards, provided that the application is done in person. I'll be visiting Canada in a couple of months, so I'm hoping to open an account and apply for a credit card during my visit later this summer. I'll probably go with one of their US dollar credit cards, since foreign exchange fees would definitely add up if I use the card frequently in the US. This wouldn't by any means be my primary credit card, but I'd charge some things to it occasionally, then pay off my bill on time and in full each month just to get the ball rolling for my Canadian credit history.
> 
> ...


Not sure where you live but TD US has a number of branches in the eastern US - actually I believe they have more branches in US than in all of Canada. If you open an account in Canada, you have two options for US funds transactions. I believe the borderless checking account has no fee for a US dollar credit card provided you maintain a minimum monthly balance of US$3,000. Just check the TD website. With regards to Canadian taxes, interest income is subject to a 15% withholding tax which you can use as a foreign tax credit when filing the 1040. No other filing requirements in Canada. However, remember that US citizens must file FBAR return with the IRS if they have at any time in the year over $10,000 in funds in a foreign bank.


----------



## james4beach (Nov 15, 2012)

I think you should meet with a cross border tax expert and ask them. Actually not due to the Canadian question, but the US question. Between the two countries, US is very aggressive on matters of taxation, and Canada is comparatively easy (and reasonable) to deal with.

i.e. I'm saying you should be more concerned with the US side of your taxes, and when consulting with an expert, ask them your Canadian questions too. For instance as a US citizen, you will now *never be free* of having to file US taxes. They're one of only two countries in the world that do this.

Every year you will have to file an FBAR disclosure of your foreign (i.e. Canadian) accounts; you will have limitations on your ability to use a Canadian TFSA; you will have to avoid Canadian mutual funds and ETFs; and you may have to file a length form 8938 too. Penalties for failing to file these are $10,000 per violation so you really have to be careful with these.


----------



## brad (May 22, 2009)

james4beach said:


> Every year you will have to file an FBAR disclosure of your foreign (i.e. Canadian) accounts; you will have limitations on your ability to use a Canadian TFSA; you will have to avoid Canadian mutual funds and ETFs; and you may have to file a length form 8938 too. Penalties for failing to file these are $10,000 per violation so you really have to be careful with these.


Yes. This is the major implication of moving back to Canada from the US: you'll have a lot more paperwork to do each year. I'm a dual citizen as well and moved back to Canada 12 years ago. The FBAR disclosure form is not a big deal; it takes an hour or less to fill out and file (the first time you do it it'll take longer), but the TFSA thing is a headache: those are considered taxable trusts in the US at this point and there's a lot of paperwork (and potential tax payments). I ditched my TFSA a few years ago because of it. 

There's no problem with you having Canadian mutual funds and ETFs as long as they're in an RRSP. If they're in taxable accounts, there's a lot of paperwork and tax liabilities involved. Also if you own a home here in Canada and its value appreciates by more than a certain amount, you will have to pay capital gains taxes in the US when you sell it.

On the other hand, moving back here means you don't have to worry about health insurance. :apathy:


----------



## Eclectic12 (Oct 20, 2010)

brad said:


> Yes. This is the major implication of moving back to Canada from the US: you'll have a lot more paperwork to do each year.


 .... my impression is that it's going to be an issue regardless of what country one moves to as the US wants a tax return and likely the country being moved to will want one as well.




brad said:


> ... There's no problem with you having Canadian mutual funds and ETFs as long as they're in an RRSP ...


While in the US with only interest being paid as a non-resident ... I don't believe an RRSP will be an option. If it is, I'm doubting the interest paid is going to generate much RRSP contribution room. After moving back to Canada, where there is a reasonable amount of "earned income" to generate RRSP contribution room - this will become more workable.


I like james4beach's recommendation to see a tax specialist as I was startled to read:



> For U.S. tax purposes, an RRSP is treated as an investment account, and an election to defer taxation of accrued income must be made annually, on form 8891. This election, if properly made, defers taxation of income earned within an RRSP, as long as the contributions were made while a resident of Canada.
> 
> Department of the Treasury form 90.22.1 should also be filed to disclose foreign bank accounts, and the appropriate disclosure should be made on Schedule B of Form 1040.


http://www.serbinski.com/working-in-usa/rrsp.shtml


Add in ...



> Complicating the matter though for U.S. citizens residing in Canada is that the IRS taxes income, whether distributed or accrued, in Registered Retirement Savings Plans (RRSPs) and Registered Retirement Income Funds (RRIFs) in the same year in which it is generated. Tax is not deferred until distribution, like in Canada, unless the beneficial owner of the RRSP or RRIF filed an IRS Form 8891 with a timely filed IRS Form 1040 income tax return.


http://altrolevy.com/all/us-citizen...t-to-new-easier-filing-compliance-procedures/



The G&M chimes in with:



> US domestic law considers RRSPs to be foreign grantor trusts, and the income is taxable to the contributor as earned.
> This can cause compliance problems for Canadian-resident US citizens who assume that RRSPs do not need to be specifically dealt with on the US tax side and therefore do not report them.


http://www.theglobeandmail.com/glob...irs-is-looking-at-your-rrsps/article19218140/


So despite the Canada-US tax treaty that I was thinking would simply things for the RRSP ... it is sounding complicated.


----------



## Guban (Jul 5, 2011)

GoLeafs said:


> I'm Canadian citizen who's been living in the US since I was quite young. Actually, I have US citizenship as well, but I don't think that's really pertinent to my question. In any event, I've considered moving back to Canada at some point in the future, and since at the moment I have absolutely no Canadian credit history, I'd like to apply for a credit card and open a chequing or savings account at a Canadian bank so that I can start establishing a Canadian credit history. From my research, some Canadian banks don't allow non-residents to open accounts, but evidently TD does allow Canadian citizens residing outside of Canada to open accounts and hold credit cards, provided that the application is done in person. I'll be visiting Canada in a couple of months, so I'm hoping to open an account and apply for a credit card during my visit later this summer. I'll probably go with one of their US dollar credit cards, since foreign exchange fees would definitely add up if I use the card frequently in the US. This wouldn't by any means be my primary credit card, but I'd charge some things to it occasionally, then pay off my bill on time and in full each month just to get the ball rolling for my Canadian credit history.
> 
> I'm sure the bank will be able to answer all of my questions, but here's one that's of particular concern to me. If I were to open a chequing or savings account and credit card account at TD, under what (if any) circumstances would I be required to file any sort of annual taxes in Canada? The only situation I can think of is if I were to open an interest bearing account, but my goal is to stick with a non-interest bearing account for the very reason of not accruing any taxable interest or income that would need to be reported. I'd probably open the account with around $2k, so we're not talking big money, but I'm just trying to handle this properly so that, if at all possible, I won't need to start filing Canadian taxes each year.


Interest is taxable in the country of residence by treaty, so you would not have to file a Canadian tax return even if you received a lot of interest. You would have to notify the bank that you are a non-resident, however, so they don't send you a T5, and cause the CRA to wonder when your tax return would be filed.

If you deposit over $10k US, then you'd open yourself up to FBAR reporting too. As brad has indicated, this is not too big a deal, but it is a minor inconvenience.

Your plan to establish a Canadian credit card sounds like a good one, but even if this fails, have you thought about just using your US credit cards when you are in Canada until you establish a Canadian credit history? You'd have to pay the FOREX fee, but in a pinch, this should work. Also, it sounds like there are some US credit cards that have some pretty good reward plans that we Canadians can't get!

Will TD (or another Canadian bank with a US presence such as RBC) allow you to carry your US credit rating into Canada? I recall reading something about going the other way for Canadians trying to get a mortgage with a US bank for property purchases. It may be worth asking.


----------



## GoLeafs (Apr 21, 2013)

Thanks to everyone for all of the information...much more of a response than I expected! 

While I can and do use my US-based credit cards when I'm visiting Canada (a couple of which even have no FOREX fee), my main purpose for acquiring a Canadian-based credit card is to start establishing a Canadian credit history while still living in the US. The US-based TD bank does have a number of branches in the US (primarily along the east coast, though), but a credit card from the US-based TD bank would be associated with my credit history in the US and wouldn't help toward my goal of establishing a credit history in Canada. 

Unfortunately, I don't think Canadian banks (or at least those with a presence in the US) will take into consideration US credit ratings when considering someone for a loan or extending credit. In my case, it would definitely work to my advantage as my US-based credit score is quite good. I've found conflicting information on whether or not US credit ratings can be taken into consideration when applying for credit in Canada, but judging from some information I found online from Experian and TransUnion, it doesn't look too promising.

I guess the bottom line I'm taking from all of the responses is that if I open a Canadian chequing or savings account with a maintained balance of less than $10k, I shouldn't have to worry about any tax or revenue reporting in the US or Canada, assuming the account isn't interest bearing. As I mentioned, I'd probably start with no more than $2k in the account, just enough to meet any minimum balance requirements and to pay off my monthly credit card bill, and with the option of transferring money from one of my US accounts to the Canadian account, if necessary. While a credit card from TD certainly wouldn't be my primary card for purchases here in the US, I'd still make a few charges every month just so that I can get in the cycle of having a balance and paying it off in full and on time every month, thus establishing a Canadian credit rating.


----------



## brad (May 22, 2009)

GoLeafs said:


> While I can and do use my US-based credit cards when I'm visiting Canada (a couple of which even have no FOREX fee), my main purpose for acquiring a Canadian-based credit card is to start establishing a Canadian credit history while still living in the US. The US-based TD bank does have a number of branches in the US (primarily along the east coast, though), but a credit card from the US-based TD bank would be associated with my credit history in the US and wouldn't help toward my goal of establishing a credit history in Canada.


It probably depends on the bank, but in my case when I moved to Canada my credit history basically started out at zero: I was given the bare minimum ceiling on my credit card (about $500, while the previous credit card I had in the US had a ceiling of something like $25K). However, when it came time to buy a house, I explained my situation to my mortgage provider and they were able to look into my US credit history to establish a longer record. So not having a Canadian credit history didn't really affect me, although it was inconvenient for a year or two when I had such a low limit on my credit card.


----------

