What to Do When You Can’t Open a Bank Account in Canada

You’re off to the bank to open a new account. Maybe you’re a newcomer to Canada or you just want to switch financial institutions to take advantage of a promotional incentive. Either way, you have a plan. But, as we all know, not everything goes smoothly and according to plan. What happens if the bank does not accept your application?

It might be surprising, but this situation is more common than you think. All Canadian banks must follow specific rules for identity verification and fraud protection. They each must also consider the risk they’re taking by having you sign on as a new client. If you receive a denial, it likely means that the bank needs more information or views something in your application as a potential risk. You still have options, though.

Why Banks Might Deny an Account Application

If you receive a rejection on your banking application, it’s for a reason. Most of the time, the issue comes down to information that the bank can’t verify. In other cases, you may be perceived as a risky client.

Here are a few examples of why you might get a rejection notice:

• Identity verification. Your valid ID must match your application exactly. Even a slight mismatch or an expired ID can halt the process.
• Previous banking history. You may receive additional scrutiny if you have a history of unpaid overdrafts or repeated non-sufficient funds (NSF) transactions. As a result, the bank may see you as a higher risk client. This doesn’t mean you have a permanent disqualification from opening a bank account in Canada though. It often just means more questions need answers before you receive an approval notice. The Government of Canada even allows you to open an account if you’re not a Canadian citizen.
• Fraud prevention rules. Inconsistent details on your application or unusual financial behavior can trigger an automatic review. While this red flag might be a mistake, it still matters when it comes to having your application approved.
• Credit concerns. While a negative credit history won’t block you from opening a basic chequing or savings account, it can become an issue when you apply for additional features like overdraft protection. With this in mind, it’s always a good idea to focus on ways to improve your credit score.
• Housing instability. If you do not have a fixed address, you live out of the country, or if the bank’s system can’t verify your place of residence, then you may also see your application stall.

While it may complicate your plans, it’s important to remember that most denials are for administrative reasons. It’s not personal.

Your Rights Under Canadian Law

Even if you receive a “no” on the application, it doesn’t mean you are powerless. Canada has clear rules under the Access to Basic Banking Services Regulations that protect your right to open an account. These rules apply even if you have a less-than-perfect financial situation.

As per the Government of Canada, “you have the right to open a bank account… either in person, by electronic means or by telephone. The bank must be able to confirm your identity through proper identification,” though. In this case, ID requirements mean original documents (not copies). There are two ways to provide your identity:

1. Show two documents. One document will need to have your name and address while the other will have your name and date of birth. These can be documents from a recent utility bill in Canada, a bank or credit card statement or the Government of Canada (like a passport or tax assessment). You can also use a foreign passport as one of these documents.
2. You can have someone whose account is in “good standing” with the bank or community confirm your ID. If they do, then you have the option to use one piece of identification as long as it shows both your name and date of birth. This form of ID could be a passport, a provincial ID card or driver’s license.

To be prepared, consider bringing in multiple pieces of ID. Even a small mismatch in the information can slow the process or prompt a rejection. Consider visiting a branch in person, as automated systems can reject an application quickly if the details don’t match, while in person services can help to smooth the process.

If a bank does not approve your request, they must provide the decision in the form of a written statement.

Alternatives to Traditional Banks in Canada

You are not out of options just because the bank turns down your application. You can still access financial services through alternative institutions.

Option 1: Credit unions

Though they seem similar, credit unions operate differently from the big Canadian banks. They fall under different rules and focus on serving the local community. While there are still documentation requirements, they might have more flexibility to look past your old banking history.

Option 2: Fintech and online providers

Fintech accounts through companies like KOHO and Neo make it easy to open an account online. The tradeoff is that not all fintechs operate like a conventional chequing account at a bank. Additionally, most don’t have a physical branch or take cash deposits. They are also not exempt from traditional screening requirements.

Learn more: What Is Canadian Online Banking?

Takeaway

If you receive a rejection when trying to open a bank account in Canada, it doesn’t mean you are out of luck. You have options. Begin by bringing in additional ID, visiting a physical branch, and clearing past issues with any other institutions. Each step helps strengthen your application. If a traditional bank still says “no”, then you can turn to Canadian credit unions, fintech tools or secured credit cards as an alternative.