What to do with Credit Cards?

#1

Hi All,
I am relocating to Toronto for good on June 8th. I plan to close my Savings bank account but keep checking account till I am able to open a new Canadian Bank account and gradually transfer funds. I was wondering what could be a good way to close credit cards? Or i should just stop using them? Also, is it safe to keep checking account with min balance? I wont have a status in US once I leave. Thanks in advance.

#2

Based on my brother’s experience who was in the US for a while, your US bank accounts can go dormant if you don’t use them for a while. As long as you’re logging in, doing some transfers, or getting some money in somehow, it should be OK. You won’t be able to do important things for which your physical presence might be required in the branch though, so ask your bank what restrictions you would face once you’re no longer in the country. It’s good to keep your accounts in case you’re expecting certain refunds etc to go to those accounts, or for future use.

If you have not already landed, the first thing you should do is open a Canadian bank account as soon as you get your SIN, and try transfering/wiring between your US and Canadian accounts (you might incur a small fee depending on your US bank). Once you know you’re moving for good transfer the cash to Canadian account.
When I landed I was also able to obtain a low limit credit card (regular, not secured) once I told them I was a new PR.

Regarding credit cards, you can simply pay them off and call customer support to close them. You may have to go through all your subscriptions and other auto-pay/paid things like Amazon, phone billing etc to make sure they have new credit card information.

#3

Thanks for your detailed response, Anshul. Another follow up question regarding currency exchange. Is it advisable to get currency exchange here in US or bring some USD cash and exchange at airport? Does airport give good exchange rates? I will be landing at 6 am in the morning of June 8th (Saturday) so im not sure if they might be open.

#4

Don’t exchange currency at the airport if you’re exchanging a large sum. You may not get the best rates and there might be a fee too. But, once you land, you will need CAD for some basic stuff i.e. food, taxi, … It’s ok to do it for those expenses at the airport. Otherwise, you can do the exchange at your US bank and bring some CAD with you.

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#5

You probably don’t want to shut down yourUS cards right away, since you have to build a credit profile from scratch here in Canada. A lot of banks give new-comers a credit card with a small credit limit as a way to build credit. Also, you can use a lot of US card abroad without incuring any service fees. You just need to check with your card provider

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#6

I’m going to split this response into a few things based on personal experience.

  1. Credit cards - Bank of America and Discover were completely okay with me switching to a Canadian address and continuing to hold their credit cards. Discover did require me to close a savings account I had with them, since those accounts don’t support W-8BEN’s and needed me to sign a W-9. Citibank wanted me to close a card, for example, so a lot of this is vendor dependent. There are good reasons to continue keeping your credit history in the US intact even if you don’t live in the US anymore, so I’d suggest retaining cards that are no annual fees that the banks are okay with you keeping :slight_smile:
  2. Bank accounts - I would personally recommend spending on credit cards in the beginning, and subsequently use something like Transferwise for small amounts that you need. If you are going to convert large amounts from USD to CAD, I would recommend looking up Norbert’s Gambit, since that might be worth it.
  3. Some banks in Canada ( I think RBC and TD, but perhaps the others as well ) may be able to open up an account for you while you are in the US based on your “will be a landed immigrant” status, and also let you transfer a small amount of money into them. You can’t withdraw any funds until you are in Canada and visit a branch to verify ID and complete the process, etc, but this may simplify how you do your deposit for rent, for example. Make sure to ask the bank whether you can indeed transfer funds in while you are in the US.
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#7

Airports have some of the worst exchange rates in my experience, dont even bother. Personally, I wouldn’t bring too much cash as it’s not safe to carry around. I’d stick with bank account transfers, or services like xoom etc, even if for a small fee.

#8

Great answer! Would like to add some things:

  • Rollover your 401k (assuming you’re leaving your US employer) to a US IRA, or to RRSP (Canadian retirement plan) https://www.moneysense.ca/save/taxes/should-i-transfer-401k-into-canada/
    If you have a job in Canada and don’t need the money immediately, this will ensure that the money stays invested and keeps growing. In any case, there is a huge penalty if you withdraw from the retirement accounts early, since it was tax-free (10% early withdrawal penalty + 10% estimated tax penalty + you’ve to report the lump sum amount in next years tax filing = more tax!). At most you can take a loan against the 401k.

  • TD will indeed let you open a new immigrant account and a small limit credit card; you can also do it as soon as you land and have SIN-ed :wink:

  • Contact all your US banks and credit card company’s to ask if your physical presence is required any time in future to close the account, or re-activate dormant accounts etc. Then close the accounts that can prove to be problematic.

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#9

Great answers all of you. Thanks a lot. I now have enough good information to proceed.

#10

Rolling over 401k to RRSP is attractive to me , @avj or anyone , do you have first hand experience on this . Would like to know more about it .

#11

I’d actually advise a bit of caution here, depending on who your previous employer was. If your last previous employer was big and it’s unlikely that they will go away/get acquired, you may have a huge benefit of simply using that employer’s funds and leaving things as is in your 401k. Yes it complicates your taxes at retirement time, but your compounded growth may offset the cost of a tax preparer :slight_smile: For example, I had access to index funds with incredibly low management expense ratios with my US employer’s 401k, and I chose to just leave my 401k money there.

Fidelity and Schwab are both okay with keeping registered accounts open - IRA’s / Roth IRA’s are okay as long as you don’t buy mutual funds ( ETFs are fine ), whereas the 401k is anyway restricted to what your ex-employer’s funds unless they have something like brokeragelink. In my US 401k for example, I did not have to pay a fee to rebalance, whereas I’m not sure you’d get that good a deal here on RRSPs, simply since there is more competition in the US with respect to investment accounts. If you insist on moving funds to completely disconnect ties with the US and you have a sizeable chunk, Interactive Brokers is an interesting option, but that is a whole different conversation :slight_smile: