Credit Cards: All You Need To Know

All You Need to Know About Credit Cards

Many credit card users today, carry their card(s) all around or use it to make purchases but, only a few cardholders have the full depth of what they’re carrying or involved in. So, in this article, I will be taking you through all you need to know about a credit card, the benefit of a credit card, how to use them the proper way and I will also outline all possible best credit card available in Canada.

In This Article

°What is Credit Cards
°Best Credit Card in Canada 2019
°Features of Credit Cards
°Benefit of Credit Cards
°How to use a Credit Card
°How Credit Cards Works
°Eligibility and Document to Apply for Credit Card
°Element on a Credit Card
°Credit Card Application Online
°Different types of Credit Cards in Canada
°What to look for in a Credit Card
°Credit Card interest rate Canada
°Best Low-Interest Credit Cards in Canada
°Credit Card statement
°Credit Cards companies in Canada and their cards

What is Credit Cards

The word credit card is a card issued out by authorized financial institutes. According to Wikipedia credit card is defined as a payment card given to users (which are the cardholders) to enable them pay for goods and services rendered to them, based on the cardholders’ (credit card users) promise to the card issuer (usually a bank) to pay them for the amounts plus the other agreed charges.

Credit cards can also be said as a card issued by credit card companies to enable the credit card user to borrow fund from the issuer with an agreed fee (interest rate) being charged by the issuer.

Credit card, unlike charge cards, allows its users to a continuous balance of debt which is subjected to an agreed interest being charged either monthly or annually. On a credit card, the issuer usually has a preset borrowing limit which varies on the individual’s credit score.

Credit cards companies have major affiliate they work with in rolling out their cards. The major credit card affiliates are; Visa, MasterCard, Discover, and American Express. Most credit card comes with an incentive which makes them differ from card to card with many having rewards tailored at a particular interest cashback, airline miles, hotel rooms, and travel reward.

Best Credit Card in Canada 2019

Choosing the best credit cards could help you save a whole lot of cash a year. Either it’s through lower prices, higher reward points on credit cards or simply valuable perks such as travel, or even car rental savings, every single dollar out of your pocket counts.

Credit CardCredit Card TypeSpecial Card FeatureAnnual Fee
Scotiabank Momentum Visa Infinite Cash Back 10% for 3 months 4% on grocery and gas 2% on pharmacy and bills 1% on the rest $99 First Year Fee
American Express Gold Rewards Rewards 25000 bonus pts, 2 pts/$ on grocery, gas, pharmacy, and travel, 1 pt/$ on everything else $150
The BMO® World Elite™ Mastercard® Rewards 35000 bonus pts, 2 pts/$ on any purchases $150
Western Rewards® Mastercard® Rewards 20000 bonus pts, 1 pts/$ on any purchases $0
Scotiabank Passport Visa Infinite No Foreign Transaction Fee 25000 bonus pts, 0% foreign fee, 2 pts /$ on grocery, dining, and entertainment $139
American Express Essential Card Low Rate 8.99% interest rate on both purchases and cash advances $0
MBNA True Line Mastercard Balance Transfer 0% balance transfer rate for 10 months $0
Refresh Financial Visa Establish Credit Secured card with lowest security deposit ($200) $48.95 - $12.95 annual + $3 monthly fee
BMO SPC Cash Back MasterCard Student/Establish Credit 5% on all purchases (first 3 months), 10-15% discount at retailers $0

Best Credit Cards in Canada for 2019

Features of Credit Cards

Alternative to cash

The introduction of credit card into the financial world has revolutionized the ways human transact and go about our daily activities. Credit card as served as a better alternative to cash.

With just a card, it takes away the worries of going around with huge about of money or different currency denomination. It’s quite easy and faster to use a credit card.

It helps card user travel anywhere in the world with less worries about converting their local currency or traveling with a huge amount which on the other hand reduce the risk of money thieves.

Credit limit

This is the maximum amount of credit that a lender can offer to a credit card user on a particular credit line. Most financial institution that offers credit card has a set limit on each card they issue out.

The credit limit for a credit line includes the accumulated amount on finance charge, fees, cash advances, purchases, and balance transfer. Some credit card issuers tend to charge you for going over your credit limit or increase your balance interest rate.

Credit cards charges

Every credit card out there comes with some sort of charges which range from annual fee, balance transfer fee, over-the-limit fee, late fee, cash advance among other fees. This fee is part of every card out there as each comes with one fee or the other.

Though, some of this fee can be avoided base on the way you utilize your card. For example, the over-the-limit fee can be avoided if you keep a watch of your credit limit and didn’t go above the limit.

Reward points

Competition among credit card companies are tough, so offering various type of incentive is one of their mode of improving product sales. Many credit cards come with some incentive when you use their card for purchases.

Credit card rewards come in different packs: cash back, miles point to redeem, and discounts on future purchases. All these reward points can be redeemed once it’s accumulated to a certain amount. Remember not all credit cards offers reward point.

APR (annual percentage rate)

Annual percentage rate is the interest rate a credit card provider charge you on all your balance that exceeds the provided grace period. The interest rate varies from card to card.

Some card has a fix interest rate while some have a variable rate. Your credit APR may change depending on the usage. For example, Balance transfers and cash advances often have higher APRs than for purchases.

Grace period

This is the number of days credit card provider give to her customers to pay all balance in full before a fee (interest) is applied to it. Most credit card issuers give their users some days to pay off all their debt with no interest.

This does not apply if you carry a balance from the previous month, and also cash advance does not have any grace period.

Credit Card Repayments

The credit card repayment is the minimum repayable amount. It’s most times 2-3% of the closing balance a cardholder pays the credit card company form their balance. The monthly repayment if not paid in full within the grace period it will incur some fee (interest).

Benefits of Credit Cards

Universal Acceptance

Credit card since it’s a digit currency works and it’s accepted both locally and internationally. So, you can take your credit card overseas to make purchases in foreign countries.

Grace Period

One of the great benefits of having a credit card is the grace period most credit card companies gives to their customer. Within this period, you can make purchases and pay up in full without an interest being added.

Most credit card has an interest rate of 18% (on average) which is why it is advisable to pay up your debt during the grace period to avoid this high fee.

Build your Credit Score

Having a credit card can be useful in building your credit score. Credit card companies send your payment history to credit bureau so paying up your balance monthly could help build up your credit score.

Building a good credit card won’t just help you in getting approval for a new card application but, also helps in other various types of loans in the future, such as car loans and home loans.

Read our article on how to keep & maintain a good credit score and build up your credit score.

How to improve your credit score

Emergencies

Having a credit card will make you have quick access to cash anything an emergency issue arose. While it is advisable not to spend outside your budget, some emergency spending (like hospital bill or fire incident) met lead some huge purchases.

How to use a Credit Card

Credit cards can be used in a wise manner. If you’re just getting into the credit card world, using your credit card for small purchases and paying off your balance in full will help build up your credit score.

If you’re a new credit card user and make small purchases it gives the credit card company that you can responsibly pay back your balance which will, in turn, boost your credit score.

Possible place to use your credit card includes but not limited to

– POS terminals

– At the ATM for cash withdrawal

– For online purchases and at stores.

How Credit Cards Works

Credit card is a short-term loan from the credit card issuer to the cardholder. If you’re not conversant with how credit card work, they can be intimidating and complex to use.

But, if you’re able to understand them, you will get to see them as a financial tool you can control to suit your spending habit. However, if you’re not careful, you can miss it and charge more fee than you can actually repay (on time).

Below are some credit card basics to help you understand how they work.

Balance – This can also be referred to as credit card debt, it is the amount that you’ve spent on a card and have not paid back.

Credit limit – This is the amount you’re allowed to spend on your card at a time. Credit limit is determined by the credit card company base on your credit history.

APR – This is an acronym for Annual Percentage Rate. If you are unable to pay up all your debt before the grace period end, this is the interest (usually 18%) you will be charged on your credit.

Credit card fee – This is an important type of credit card worthy of knowing. This helps you understand what your card is costing you.

All credit card fee will the outline during the process of application, make sure you read through to understand what you’re going into. Different credit card comes with fee while some will also charge for some transaction such as:

Late payment fee

Foreign transaction fee

Balance transfer

Minimum payment – This is the amount on your credit you’re expected to pay each month. The minimum repayment fee is usually a little fraction (usually 2 – 3%) of your total balance.

Eligibility and Document to Apply for Credit Card

To get an approval for a credit card there are some requirements which must be met before the credit card company can issue you a card. All credit card applicant must all the document listed below before their application can be approved.

Requirements:

– All credit card holder must be 18 years and above

– Meet the minimum income requirement

– Permanent Canada resident or eligible visa holder

Document:

Proof of identity – Passport, Drivers’ License, Voters’ Card

Proof of Address – Passport, one previous address,

Proof of Income – Evidence of income, Payslip, Tax return

Expenses – Monthly bill payment, current rent or mortgage payment

Other Requirement – social insurance number, mother maiden name, spouse’s income

Element on a Credit Card

Every credit card comes with some printed logo and other vital information, but most cardholders don’t give more attention to this or don’t know their use. This section will help you understand what each element (both the front and rear side) stands for and their usage.

Front Side

Chip – The chip as your credit card number and expiry date. The chip interacts with the machine that reads it then encrypts the data and authenticates it.

Issuer Logo – This is the logo at the top part of the card, it carries the logo of bank or credit union that issued the card.

Card Network Logo – It’s the network logo some credit card has it at the top part while some close to the card number. The network logo mostly Mastercard, Visa or American Express

Card Number – It’s a 16-digit number and it’s one of the most important elements of a card. The numbers are segmented into section and provide specific information about the card.

The first two digits represent that of the card network. That is Visa, MasterCard or American Express.

The third to sixth number indicate the financial institution that issues the card

The next six digits are the card number

The sixteenth digit is usually to check if the number is valid

Holder’s Name – That’s the section that carries your name as the cardholder

Card Expiry Date – It refers to the month and year which your card will expire

Rear Side

Magnetic Stripe – The magnetic stripe carries all the crucial account information about your credit card and transmit your card number and expiration to any machine that can read it

CVV – It’s the acronym for Card Verification Value. All card has the cvv, it is the three (for Visa and MasterCard) while four (for American Express) security number at the back of your card.

Credit Card Apply Online

Applying for a credit card online is as simple as booking a flight ticket online. All you need to do is just go to the credit card issuer of choice website, select the card you want and fill out all necessary information.

Upon completion and submission of the application online, you will wait 3-5 working day to get either approved or denied of your application.

How to get your Credit Card Application Approved

Different types of Credit Cards in Canada

Travel credit card

Low-interest credit card

Reward credit card

No fee credit card

Secure credit card

Balance transfer credit card

Business credit card

Student credit card

Cashback credit card

What to look for in a Credit Card

Understanding that credit card is a financial tool that you can control first, gives you insight on what to look out for when getting a credit card. Different individual has what they look at for when applying for a card.

Definitely, someone who travels to different countries often will what to get a card with no foreign fee or someone who use is card more at the store will want to go for a reward credit card that gives them some incentives on every purchase they use their card for.

The basic thing to look out for when applying for a credit card:

Value for Money – The most important is value for money because everyone would love to get value on what their hard earned money is on. Going for a card that suits your spending habit will help you save a lot of money.

Discount – Most credit card gives you a discount when you shop at selected stores or a reward point for using your card. So, choosing the right kind of card that will make you save some money on your purchases is key.

Customer Service – When choosing your credit card, you will want to choose from a company with easy to navigate website and also good representative. Using a card for a long time will means you calling their customer representatives.

Whether it’s calling in for a simple question or you notice any fraudulent activity on your card, you want to get in touch with someone who could help, so choosing a company with good customer service or one that makes it easy to speak to a human when you have very complicate questions is very key.

Annual Percentage Rate (APR) – This is the interest you will have to pay on any balance you carry on your card. Though contrary to many people believe, you can actually avoid this when you pay up all your balance in full each month.

If you plan to carry a balance, try to keep it to the barest minimum and find a card that offers low APR.

Annual Fee – With a wide range of credit card out there, some require you to pay a certain amount (usually between $19 – $100) as an annual fee on the card, but you can avoid this by going for a card with no annual fee required.

But the exception about some of these cards is, they offer reward which sometimes could outweigh anything you pay as annual fee but if not, going for a card with no annual fee would be better.

Credit Card Fees and 10 Ways to Avoid Them

Credit Card Interest Rate Canada

If you make a purchase with your credit card and do not pay up in full before the due time, automatically the credit card company charge you an interest rate on the balance you carry on the card.

The interest rate which will be communicated by the issuer will be charged at a monthly percentage rate or annual percentage rate. So, paying up all you balance in full before the due date is advisable as to avoid the huge amount credit card company will charge you as interest.

Best Low-Interest Credit Cards in Canada

Credit Card: American Express Essential Card

Interest rate: 1.99% for 6 months BTR 8.99% APR

Annual fee: $0

 

Credit Card: Scotiabank Value Visa

Interest rate: 0.99% for 6 months BTR 12.99% APR

Annual fee: $29

 

Credit Card: Capital One® Low Rate Guaranteed Mastercard®

Interest rate: 14.9% APR 19.8% CAR

Annual fee: $79

 

Credit Card: MBNA True Line® Mastercards®

Interest rate: 0% for 10 months (conditions apply) BTR 12.99% APR

Annual fee: $0

 

Credit Card: MBNA True Line® Gold Mastercards®

Interest rate: 0% for 6 months (conditions apply) BTR 8.99% APR

Annual fee: $39

 

Credit Card: BMO Preferred Mastercard

Interest rate: 3.99% for 9 months BTR 12.99% APR

Annual fee: $20

 

Credit Card: Modulo Visa Desjardins

Interest rate: 10.9% APR + free mobile device insurance

Annual fee: $50

Credit Card Statement

Credit card statement which is also called credit card bill usually is mail to every cardholder every 30/31 days. Credit card statement usually comes in one or two pages that shows vital information like your name, how much you’re charged, the payment you need to make, and more.

The statement is the summary of every activity (both spending and payment) on your account for a set period usually a month. Every credit card statement comes with the information listed below.

Account Summary

Previous payment – This shows the amount you pay on your credit.

Purchases – This is the accumulated purchase made on the card for the month in review.

Fee – What you’re being charged on your credit card

Interest charge – (Usually 13 – 25%) is the APR on the balance carried on your credit card.

Payment Information

New balance – The new balance on your credit card for the month in review.

Minimum payment – The minimum amount which will be paid monthly to the credit card company which is usually 2-3% of your total balance.

Minimum payment due date – The expected date you’re to pay up at least your monthly minimum payment.

Credit Cards Companies in Canada and their Cards

Royal Bank of Canada (RBC)

– RBC Visa Infinite Avion

– RBC Avion Visa Infinite Privilege

– Signature RBC Rewards Visa

– RBC Visa Platinum Avion

– RBC Visa Business Platinum Avion

President’s Financial Choice

– PC Financial MasterCard

– PC Financial World MasterCard

– PC Financial Elite World MasterCard

Toronto-Dominion Bank (TD Canada)

– TD Cash Credit Card

– TD First Class Visa Signature® Credit Card

– TD Business Solutions Credit Card

– TD Aeroplan Visa Signature® Credit Card

– Secured Credit Card

Bank of Nova Scotia (Scotiabank)

– Scotiabank Visa® Classic

– Scotiabank Gold MasterCard®

– Scotiabank MAGNA MasterCard®

– Scotiabank Platinum MasterCard

– Scotiabank AERO* Platinum MasterCard®

Bank of Montreal (BMO)

– BMO AIR MILES World Mastercard

– BMO CashBack World Mastercard

– BMO SPC CashBack Mastercard

– BMO SPC AIR MILES Mastercard

– BMO World Elite Mastercard

Canadian Imperial Bank of Commerce (CIBC)

– CIBC Aventura Visa Infinite Card

– CIBC Dividend Visa Infinite Card

– CIBC Aventura Visa Card

Rogers Bank

– Fido Mastercard

– Rogers Platinum Mastercard

– Rogers World Elite Mastercard

Simplii Financial Bank

– Simplii Financial™ Cash Back Visa* Card

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