Applying for a credit card in Canada is not an easy business. Many offers on the market are proposed by banks, such as HBC, Capital One (Hudsons Bay credit card), RBC, Scotiabank, Tangerine Bank, CIBC, TD Bank, BMO Bank; and also retailers, online shops, airlines and credit unions, like: Walmart credit card, Sears, Home Depot, Costco, Amazon, Future Shop, IKEA, Westjet and other companies. Each of them has a lot of credit cards, including: balance transfer, travel, lowest interest and no foreign transaction fee credit cards, guaranteed, in USD, rewards cards, with different privilege programs (air miles, aeroplan, etc). Doing some research at the beginning will help you not only to choose the one which fits your demands and finance opportunities the most but also to save some money because of lower card tariffs. Bankchart.ca gives you some advices to help to make the right choice.
Step one. What are your loan desires and financial habits?
There are a lot of different credit cards in Canada, providing many benefits from cash back to various rewards points. Such loans are offered in the most convenient and a rapid way - credit card debt in Canada increases constantly, but also the ones are the most expensive forms of credits as the real rate can equal 30% or is even higher. What one should you choose from a great many? First of all, you must estimate your loan desires and financial habits.
The first case which can happen is that you are going to purchase expensive goods or services, and you will not be able to redeem the liabilities during the grace period. So, you will pay a minimum repayment sum or little higher during several months or more. Thus, a low rate credit card will be the best choice for you in such a situation.
But, commonly credit cards are applied not for a loan purpose but also for making transactions. It is convenient to combine payment possibilities with access to credit limits, using of which can be interest free whether you zero the card during a grace period. In such a case low fee credit cards fit you the most.
If you usually shop groceries, entertainment goods, petrol or eat at the same network, or buy air tickets at one company – you should ask your bank about availability of reward, travel or cash back credit cards with discounts on such items.
The first credit card applying for worth mentioning separately. Especially because a loan providing refusal can complicate your application in the future. In such a case you should apply for a secured credit card, which is easier to receive. After building a good credit history, you will be able to apply for higher-grade credit cards.
Step two. Specify your credit score
There’s no sense to apply for a credit card which doesn’t fit your credit score. So, you should get known your credit rating before applying. Remember, that if you are a resident of Canada, you have the right to one free credit score annually from the largest credit bureaus, like: Equifax and TransUnion. Their sites are:
Rewards, cash back, VIP and credit cards for travelling usually requires the maximum credit level - about 760 or even higher. On the other hand, the lowest credit score is for secured cards. Below are the conditional credit score levels and recommended for applying for credit cards types:
- 760 & above (perfect): you can apply for credit cards with the highest limits
- 720-759 (very good): the majority applications will be approved
- 719-660 (good): low fee cards fit you the best
- 659-580 (average): apply for low fee or secured credit cards
- 579 & below (poor): only secured card probably will be approved
Do not despair if your credit rating is low. Make out a secured credit card and work to improve the credit score. In order to make it you should:
- establish automatic payments to your credit card
- pay bills on time
- use your credit card frequently and always repay monthly payments on time
- expand your secured card credit limit
- monitor your credit score regularly
Step three. What should you know about a credit card before applying?
Before choosing a credit card, you should make sure, that you understand all the price and non-price features in order not to overpay and to apply for the card, which fits your desires and financial habits more than others.
Probably, the most important price parameter of a credit card is its interest rate. There are several types of interest rates, charged by Canadian banks, depending on how a card is used.
- Balance transfer interest rate – is applied, when the holder transfers his liabilities from one credit card to another one
- Purchases rate – is charged, when you buy commodities or services with POS-terminal or Internet
- Cash advantage rate – applies, when a person withdraw money from ATMs or in banks branches
- Promotional interest rate – is used in marketing purposes and is applied during a limited period of time, which usually doesn’t exceed one year
Credit cards interest rates are usually calculated on a variable basis, but rarely fixed rates can be set, especially for advertising offers.
Different one-time and periodic commissions are the other important price parameter of credit cards. It is very important to get known about all the tariffs in order not to overpay later. They are:
- annual servicing fee – often varies from zero to 899 CAD and depends on a credit card class. Elite cards with large credit limits generally have higher annual fees
- cash advance commissions – may reach large sums if you withdraw a lot. Besides, withdrawals can lead to a higher interest rate for your balance, so not withdraw cash if you can do without them. The fees often varies from 2% to 3,5% and have minimum tariff restrictions, as a rule, 7,5-10 CAD
- balance transfer fee – is a tariff charged by banks to transfer a debt from one credit card to another. Usually equals to several percent of the transferred sum, but sometimes can be null, especially, for balance transfer cards
- overspending fees – are applied, when the holder exceeds its credit limit. As a rule, according to our investigation vary from 25 to 29 CAD
- late payment commission – usually does not exceed 38 CAD and is charged, when the owner doesn't transfer the minimum required sum till the maturity date
- foreign transaction fee – often equals 2,5-5% but for some cards can be lower, or no fee can be charged
- reward programs fees – are charged for using loyalty programs of a bank.
Besides interest rates and various fees, you should taking into account many other parameters of offered credit cards to select the one, which fits your needs the best, like:
- Credit limit – is the maximum amount, which a holder can use on his credit card without penalties
- Grace period definition – is the period, during which interest rates are not charged if the owner pays off credit cards debts. Is not provided for all credit cards in Canada. According to ca investigation the indicator usually varies from 21 to 28 days
- Minimum repayment sum – is the lowest sum which a credit card owner must pay monthly to avoid fines
- ATMs – you should examine whether the applied bank and its partners have many ATMs for you to use. Are they near from your home or place of work? You should remember that withdrawal from other Canadian banks’ machines has higher fees, while servicing at your bank is cheaper
- Location – find out whether the nearest branch is not far from your place of living or work
- PayPass – will faster your payments, but this way of clearing-off is more risky, if you lose the card
- Extra credit card benefits – addition various rewards, like travel insurance, price protection and extended warranty, free lounge zone in airports and others - can be valuable for you
Step four. What credit card to choose?
There are a lot of types of credit cards from Canadian banks, so, you should choose the one, which fits you best of all.
These ones often have the lowest interest rates compared to other available cards, varying from 8,99% to 15% according to Bankchart.ca rating, but commonly in such a case larger fees are charged. Besides, credit cards with low interest rate in Canada frequently don’t have rewards like cash back, discounts on goods and services, insurance cover, free air tickets and others. So, it make sense to get the lowest rate credit cards, when you need a large sum of money and will not be able to zero the balance during the grace period and do not demand discount programs from the bank and its partners.
In Canada 0 balance transfer offers usually have low interest rates only for some period, as a rule from 6 to 18 months depending on a financial organization. The rates level can be rather low, or even zero fees can be charged. But, after the promotional term has gone, the regular percentage rate will be accrued, which is much greater.
Thus, it is worthwhile applying for balance transfer credit cards, when you can redeem the debt during the advertising period. Also this type of cards is frequently used to consolidate all short-term loans of a person into one credit card with the best conditions. Best zero fee balance transfer credit cards in Canada can be compared by this link.
Bankchart.ca investigation shows, that in Canada there are many no annual fees credit cards. But, such proposals have a large flaw – higher interest rates. Besides, low fee credit cards as a rule do not have rewards programs and other perks. Thus, it makes sense to apply for such a card if you can redeem your liabilities permanently during the grace period.
Apply for this type of cards if you have large periodic costs on which the bank enrolls reward points, and also you can zero the debts regularly during the grace periods. When a certain sum of points is reached, it can be changed to different discounts on petrol, grocery, pharmacy and retail goods, etc. Investigate conditions of such programs carefully, because some types of costs double or even triple enrolled points. But, credit cards with rewards in Canada as a rule are not free and even have higher yearly commissions and percentage rates and claim a good credit score for an application affirmation. Thus, you should study accurately privileges, provided by the offered rewards card in order not to overpay for it, especially, if such bonuses are expected to be used not fully.
It is helpful to find answers for such questions, before choosing a reward credit card:
- What perks and bonuses are being offered?
- Are there any additional commissions for reward programs?
- How much is it required to expend to get the privileges?
- Do you normally spend that amount of money?
- Are there any blackout dates which complicate exchanges of accumulated points to rewards?
- Are the rewards points regular or temporal?
- What other than points benefits does the credit card offer?
Best reward credit cards in Canada can be compared by this link.
Credit cards for travelling are very useful for cardholders, who go on journeys frequently, especially by using planes. Paying with the travel credit card, the owner as a rule obtains rewards points (Air Miles credit cards, Aeroplan, Velocity programs and others), that can be changed to discounts on air tickets, hotels, vehicles hire, etc. If you regularly fly by the same airline, you ought to verify first whether it is included in your bank’s reward program – in such a case the rebate will be the highest. Besides, top travel cards often have low or even 0 commission for some operations, for example, foreign exchange. Best travel rewards credit cards in Canada can be compared with a link.
Such offers will return you some percent from your card particular transactions, like purchasing of goods and services. The volume of repaid cash can be limited by a certain amount. Rewards cash back rate often isn’t great and doesn’t go beyond 3%. The rate can be constant or may depend on the cost directions, for example, 3% cash back on dining, 2% on groceries, 1% on all other purchases. More information about the best cash back credit cards in Canada you can see in Bankchart.ca survey.
Such proposals have a premium class card (Visa and MC Gold, Visa and MC Platinum, Visa Infinite, MC World Elite, Visa Signature, Visa Black and others) and fit for high income individuals, who expend a lot, so, are able to collect enough points to cover the cards servicing commissions, at least partially. According to Bankchart.ca investigation the yearly fee varies from 0 to 699 CAD. The rates are also higher comparing to other types of cards - till 30%. On the other hand, VIP credit cards in Canada have extended reward programs, which include concierge, travel insurance cover, free airport lounge access, purchase protection and others.
In Canada this type of credit cards is rather popular because of minimum clearance requirements, and it is usually used for bad credit rating to build or repair it. Secured credit cards require a partial or full deposit cover depending of conditions of the financial organization and the client’s credit score. Before applying make sure, that the sum deposited will be insured. Usually secured cards have one-time fees, sometimes annual commissions.
The ones are similar to secured cards and are useful for free credit score clients, but instead of depositing the insurance amount, the financial organization may request a third party guarantee. These cards are also easy to achieve, but their credit limits are small.
These cards are useful for individuals, who visit the USA a lot and often purchase goods or services there.
Retail credit cards
Such offers are proposed by large retail networks (trading food, computer and consumer electronics, furniture) and gas stations, providing rewards points, when you pay with the card in the shops. After a particular amount of points is collected, it can be changed to discounts on goods and services of the network or their partners. The most well-known store cards in Canada are Walmart credit card, Sears and Future Shop credit cards. It makes sense to apply for these cards if you are used to make shopping constantly in one of these networks.
Such cards provide the best way for students to manage their finances and to build a good credit score in order to get approval, for example, on car or home loans in the future with a lower rate. The annual fee for student credit cards in Canada often is zero, but the interest rates are higher comparing to other cards. Set automatic payments and pay off debts in time, otherwise, using such a card just hurts your financial reputation.
MasterCard and Visa are the largest card processors in the world and American Express is a great player in Canada. All of them ensure a card owner a worldwide acceptance, payment security, insurance cover, travel privileges, emergency card replacement and other rewards. Thereby, your choice better to do based on the parameters of credit cards, proposed by a bank, not selection of the payment system.
Step five. How to apply for a credit card?
In order to apply for a credit card an individual commonly must be a resident of Canada and to be over the age of 18 or 19 years, depending on the province a client live in. Submit an application online to accelerate the approval or visit a bank’s branch. Also, a client can apply by mail or by phone, but these ways are not the fastest methods, especially the first one, which can occupy several weeks.
You must be prepared to give such information in a card application:
- name and your mother’s maiden name
- social insurance number
- current and one previous address
- phone number
- personal and your household annual revenue
- rent or mortgage payment
- place of work and employer’s address
- other data
Then, the financial organization will make authentication, for example, ask your Canadian social insurance number and analyze your financial opportunities. Classic credit cards usually demands annual revenue of 15 000 CAD, but elite cards can require 50 000 CAD or even higher. Some of credit cards have instant approval, but commonly you will have to wait not long.
An approval usually takes several minutes, especially if the application was filled out during business hours. Sometimes the bank can ask you for additional data. If the decision is affirmative, the credit card will be delivered during 2-3 working days, but sometimes it can take 7-10 days.
Financial organizations will refuse your application if you belong to individuals with bad credit history in Canada, but also in other cases, such as:
- if you are a youth person or a senior
- if you have low income or large expenses
- if you apply for many credit cards in a short period of time
- you are out of employment
- data in your application is incorrect (for example, you made a mistake in your level of incomes)
Do not urgently switch to another credit card issuer, if your application was rejected. This will make the situation only worse, as any credit card refusal influents an individual’s credit score. In such events you should turn to a credit bureau and demand a copy of your credit record. If mistakes in the data took place, you may contact the credit agency to correct them. Improvement of your credit score is more difficult business. In such a case you may apply for a secured card - they are provided for almost everyone, and try to build up your credit score newly. Perhaps, the fortune will be on your side next.
Step six. How to get best out of a credit card?
Besides different tariffs and non-price parameters of credit cards, you should have in view such advises in order to get best out of your card:
It is profitable for you to pay off the credit card as fast, as it is possible. Don’t wait for the maturity date, because the interests on the card liabilities are calculated on a daily basis. Deposit money several days before the due date in order not to pay a missed payment commission. Sometimes the transfer crediting can be delayed, and the commission is rather high and can exceed 30 CAD. It is very useful to set automatic payments from your current account to the credit cards. Thus, you won't have to worry about a missed payment, but also the bank can decrease the interest level, in such a case.
Do not apply for a lot of credit cards
If you got several credit cards, the interest rate and commission payments will grow up proportionally. The probability to miss to transfer monthly payments will increase also. Thus, experts don’t advice to get more, than two credit cards. Nonetheless, if you got into large credit cards obligations – do not despair; just consolidate the liabilities by transferring the debts to one card with the lowest rate.
If your card was stolen or was subject to fraud operations
Strictly keep the following information confidential:
- your card number
- personal identification number (PIN)
- secure code
If you share these data, you hold financially responsible for unauthorized transactions.
If you lose your credit card, you should call your issuer’s 24/7 client assistance as soon as it is possible and block it. Below are phone numbers of some of the largest credit card providers in Canada:
- HBC: 1-800-844-8131
- Canadian Tire: 1-866-746-7287
- Scotia Bank: 1-888-472-6842
- TD Bank: 1-888-751-9000
- BMO Bank: 1 800 361-3361
- Home Depot: 1-800-628-0525
- Westjet: 1-888-937-8538
- Sears: 1-800-815-7701
Also, American Express, Visa and MasterCard have single fraud protection programs - Zero Liability Agreement, and will compensate for stolen funds whether appropriate requirements are fulfilled.
So, it makes sense to use credit card limits in order to build a good credit history, for example, for mortgage financing in the future, or in the case when you can constantly repay the credit card liabilities during the grace period. Set automatic loan repayment and strictly follow your finance budget. Never use more than two credit cards and do not get fooled by advertising tricks of Canadian banks and retailers. You must keep in mind, that wealthy people do not spend more than they earn, but, on the contrary, regularly save some money from their revenue to provide financial independence in the future.