Best Credit Cards Canada

Credit Card Welcome Bonus Annual Fee Card Benefits Card Rating
American Express Cobalt® Card 30,000 MR Points $155.88 Point Multipliers, Great Value
Marriott Bonvoy® American Express® 50,000 Bonvoy Points $120.00 Marriott Bonvoy® Benefits
American Express® Gold Card 60,000 MR Points $250.00 Multipliers, Strong Insurance
American Express® Platinum Card 80,000 MR Points $699.00 Multipliers, VIP Perks, Concierge
Tangerine Money Back MasterCard® 2% Money Back $0.00 Cash Back On Purchases
HSBC World Elite MasterCard® 80,000 Points $149.00 Travel Perks, No Exchange Fees
TD® Aeroplan® Visa Infinite Privilege 110,000 AP Points $599.00 Strong Air Canada Perks
Canadian Tire Triangle® Mastercard® 4% Cashback Offer $0.00 Canadian Tire Perks
CIBC Costco® Mastercard® 3% Cashback Offer $0.00 Costo Cashback Benefits

Overview of Canadian Credit Cards

For most credit cards are an essential part of life and can be excellent tools to gain rewards for your everyday purchases. In Canada, there are plenty of excellent credit card options for consumers, ranging from generous travel rewards to cash back, low-interest and many more.

How a Credit Card Works

Canadians spend more than $300 million every year on their credit cards, with every active credit card account spending about $9700 on average every year.  While a considerable percentage of adults in Canada use credit cards, many still lack an in-depth understanding of a credit card and how it works. This guide offers insights into how the cards apply in Canada and how you can shop for the best credit that fits your budget and your spending patterns.

A credit card is a sort of unsecured (no-collateral) line of credit. Holders can make purchases and cater to other financial obligations using their credit cards. Once you complete a billing phase, you’ll be issued with a statement of your total expenditure, which is the money you owe your credit company.

Depending on your ability to make repayments, the company will give a credit limit. That is the maximum amount you can spend in a given cycle. Think of it as borrowing money from a bank and spending it using a credit card. Therefore, you’ll need to repay the amount. Failure to pay the debt in time results in interest charges and lowers your credit score [which we will discuss later].

Here’s how you use a credit card

As you continue to spend money using your credit card, the debt accrues interest in case you fail to make payments during the interest-free period, also known as the grace period. Interest rates vary from one company to the other. Typically, financial institutions collect between 9.99% and 23%, although some Canadians spend as low as 1.99% and as high as 39% on interest fees.

If you use your credit card to make any ATM withdrawals or any other transaction that’s considered a cash advance, you’ll pay an interest rate of 24%. A cash advance can be an electronic money transfer from one bank to another, gaming and lottery transactions, travelers cheques, and money orders, etc.

Overview of Credit Score

A credit score is a number ranging from 300 to 900 that depicts an individual’s creditworthiness. A higher credit score compels lenders to offer credit.

A lender or bank will look at your credit history and credit score, which is detailed in your credit file. The document is submitted to credit bureaus and outlines your credit accounts, including credit limits, balances, and payment history. It also contains your personal information such as name, insurance number, address, age, marital status, and occupation.

TransUnion, one of the renowned credit reporting agencies in Canada, recommends a credit score of 650, which makes you an eligible candidate for a standard loan.  The number grows as you purchase using the card and, consequently, paying the borrowed amount in time.

Credit card users with a score below 650 are regarded as subprime borrowers. Lenders often charge them higher interest rates because the credit bears more risk and a relatively shorter billing cycle. On the flip side, a person with a credit score of 750 and above attract borrowers and will generally enjoy lower interest rates and an extended repayment period.

Lenders will usually pull your credit file from a bureau to check your credit rating. The number they get may differ from the one you get through conventional processes because different lenders apply varying risk rules, give and take points for various reasons and preferences. That results in different score numbers. The number you get by yourself is estimated using a consumer algorithm that provides a generalized rating, which should be within the range of the lenders’ score.

TransUnion and Equifax are trusted credit reporting bureaus that calculate and document Canadians’ credit ratings. You can request a credit report via email, telephone, or fax for free once a year. Any subsequent report request forms are offered at a fee.

Types of Credit Cards

Financial institutions and other lenders in Canada provide consumers with different types of credit cards. They include the following:

Rewards Credit Cards – A reward credit card provides an incentive to consumers who make purchases using the cards. For instance, with every purchase, a credit cardholder accumulates points that can be redeemed later for something of value, e.g., flight ticket or vacation. Example of reward credit cards include:

  • Aeroplan Rewards Credit Cards – These cards offer the ability to earn Aeroplan Points for purchases (sometimes with multipliers) that can be used to redeem for flights and/or vacations.
  • Travel Rewards Credit Cards – These cards offer a chance to build up points that you can use to travel. Users can redeem their points for hotel accommodation or travel fares.
  • Store Rewards Credit Cards – A store credit card allows you to redeem your accrued points in a specific store, enabling you to purchase retail products. These credit cards usually come with high interest rates, but they make up for that by providing excellent saving opportunities.

No-Fee Credit Cards – While most companies require credit cardholders to pay an annual fee of $99 – $120 for the subscription, no-fee cards do not require a yearly charge. For that reason, they barely come with rewards.

Small Business Credit Cards – These types of card work similar to personal credit cards; Like individuals, businesses may decide to apply for credit cards allowing them to make purchases on behalf of the enterprise using credit rather than debit cards.

Student Credit Cards – College and university students can apply for a credit card to build an excellent rating while still young. Although they may not pack lucrative rewards, they have lower interest rates, making it easy to maintain a high credit score.

Secured Credit Cards – A lender issues a secured credit card once a borrower deposits a security amount. The deposit amount may be the same as the credit limit or twice that.

Charge Cards – An advantage of charge cards is that they come with unlimited limits. Holders are required to pay the borrowed amount monthly. While they have more extended grace periods, they have higher interest and annual rates.

Tips for Choosing the Right Credit Card

Your choice of credit card will largely depend on your financial capabilities. As you shop around for credit cards, find the right match for you and one that fits your purchasing habits. Below are practical tips for finding the perfect credit card company.

1. Check your credit score

Before applying for a credit card, obtain your credit score first. This rating determines whether you qualify for a specific card. If your score falls short of the required threshold, getting the card you want may be challenging. That’s not to say you cannot get a credit card. Knowing the score helps you narrow down the available options that fit your rating. With a low score, you need a credit card that favours bad credit, although they come with skyrocketing interest rates.

2. Compare interest rates

This is important for people who tend to carry forward a balance on their credit card account. A card with a higher rate means you’ll pay more for your balances. By choosing a lower interest rate, you will reduce your interest expenditure, which saves you money.

3. Check rewards and benefits

As mentioned above, reward cards offer redeemable points that allow you to enjoy discounts on products and goods or a cash-back guarantee when you purchase using the card. Other cards provide insurance plans such as travel and car insurance rewards. You need to ask yourself the several questions:

  • Do my monthly balances have high-interest rates that may reduce my reward points?
  • How does my annual fee compare with the value of the card benefits?
  • How often will I use the credit card’s car-rental or travel insurance?

4. Consider Your Spending

Selecting the right Canadian credit card may be challenging, but knowing the areas where you spend most money can help you decide the best card. Do you spend money on a specific retailer? Are travel-related costs the only entries on your account statement? Do you mostly spend on gas and groceries? Scrutinizing your spending enables you to put a credit card that saves you cash and earns you reward points in your wallet. Earns Commissions From Some Products, See Our Disclaimer For Information.