Critical to building a credit history, credit cards are a rite of passage into financial adulthood.
Even if you’re debt-phobic or have heard too many horror stories of people maxing out their cards, you can’t skip this step.
Cindy Marques, certified financial planner and director at Open Access Ltd., had one client in their 30s preparing to buy a home—while completely missing this piece of the puzzle.
“They went to see if they’re eligible for a mortgage, and their (credit) score was non-existent, because they just never had credit cards,” Marques said. “And they thought they were doing themselves a favour—‘I never had debt. So this shouldn’t be a problem.’”
Credit cards, however, are important tools to build credit history and maintain a good credit score, Marques added. Thankfully most of them come with perks too, catering to almost every lifestyle.
Many people default to picking a card from their bank because it’s easier, says Shannon Terrell, a finance writer and spokesperson for NerdWallet Canada. But it’s better to shop around, especially with online-only banks.
Best for travel card
Scotiabank Passport
Visa Infinite Card
Earn points on every purchase, pay no FX fees, and receive complimentary airport lounge access (with 6 annual passes).
GO TO SITE
Annual Fee: $150
Interest Rates: 20.99% purchase, 22.99% cash advance, 22.99% balance transfer
Welcome offer: $350 value
Earn up to $1,350 in first year welcome offers, rewards and savings, including up to 45,000 bonus Scene+ points¹.
Anniversary bonus: $100 value
featured
Best for cash back
SimplyCash Preferred Card from American Express
Earn 4% cash back on groceries and gas. Plus get a flat 2% on all other everyday purchases.
GO TO SITE
Annual Fee: $120
Interest Rates: 21.99% purchase, 21.99% cash advance, N/A balance transfer
Welcome offer: $250 value
Earn a bonus 10% cash back on all purchases for your first 3 months (up to $2,000 in purchases). Plus, earn a $50 statement credit when you make a purchase in month 13. This could add up to $250 in bonus value in your first 13 months.
featured
Best low APR card
MBNA True Line Mastercard credit card
An ideal option for cardholders looking to manage debt, the card’s low 12.99% APR is almost half the conventional interest rate found on most cards.
GO TO SITE
Annual Fee: $0
Interest Rates: 12.99% purchase, 24.99% cash advance, 17.99% balance transfer
“Because they don’t have those same overhead costs as a traditional financial institution, they’re often able to offer better interest rates, lower fees, and better perks overall,” Terrell said. “So honestly, you have nothing to lose and everything to gain by shopping around.”
Marques agreed: just getting a credit card with your bank is a wasted opportunity.
Consider your lifestyle—where you are likely to do the most spending, where you might use rewards—to find your fit. A simple Google search will find many “best of” lists for cards in every category.
“They will do all the comparisons for you, across all the different providers, and you can organize a list based on: I prioritize Air Miles, I prioritize cash back, I prioritize low interest rates,” Marques said.
“They’ll compare all the providers with best in class in those categories, and show you their current rates, their current signup offers, et cetera.”
As for younger consumers, Marques said low interest rates aren’t typically a priority, assuming you aren’t already managing a lot of credit card debt and you’re not transferring a balance.
Instead, travel rewards and cash back from your favourite retailers are likely the biggest returns on your spending, she said. Options with no annual fees are also valuable for someone just starting out, although there will be fewer rewards.
When getting a new card, there isn’t much room for negotiation, Terrell said—what you see is what you get. If you want different or better perks, the provider will just point you to another card that offers them.
Negotiations come into play if you already have debt, Marques said, or are transferring debt between cards to take advantage of the lowest rate.
Using signup offers—such as zero interest for the first 12 months—with a balance transfer means you can get a break from interest and pay down your balance faster, she said. Or if you want to keep your current card, you can simply call your provider and move your balance to a lower-interest option.
“There is an opportunity to negotiate their interest rates or even negotiate on your annual fees,” Marques said. “I think a lot of consumers don’t realize that if you just call and ask … in a lot of cases, they will.”
In terms of hidden fees, Marques said most costs are upfront—annual fee, interest, ATM withdrawal fees, and so on. Read the full details about the card.
But some add-on insurance, such as balance protection, can be costly and challenging to claim. For many, Marques said, it’s better to skip. Often people sign up because they don’t know what the insurance is for, and lack the savvy to understand it’s unlikely they will ever claim it, she added.
Late and over-limit fees are penalties that young consumers should become familiar with quickly, Terrell said. You can be dinged as much as $60 for going over your credit limit.
The other “sneakier” cost, she said, is the foreign transaction fee—not something people think about upfront, but many use their credit cards when they travel.
Even a card hyped up for travel rewards often still charges a percentage, usually around 2.5 per cent, on the transaction amount, Terrell said. Frequent travellers should seek out cards that advertise no fees for shopping while out of country.
As for hidden perks, many cards automatically carry insurance for purchases or travel, and Marques said these are usually under-claimed in the industry.
Credit card providers often have unused budgets for this coverage because people forget to claim them. Read the booklet that came with the card. Rental car company asking for extra insurance? New laptop broke down? If you paid with your credit card, Marques said, call them up.
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The post Benefits, fees, hidden perks: Choosing the right credit card for your lifestyle appeared first on MoneySense.
Even if you’re debt-phobic or have heard too many horror stories of people maxing out their cards, you can’t skip this step.
Cindy Marques, certified financial planner and director at Open Access Ltd., had one client in their 30s preparing to buy a home—while completely missing this piece of the puzzle.
“They went to see if they’re eligible for a mortgage, and their (credit) score was non-existent, because they just never had credit cards,” Marques said. “And they thought they were doing themselves a favour—‘I never had debt. So this shouldn’t be a problem.’”
Credit cards, however, are important tools to build credit history and maintain a good credit score, Marques added. Thankfully most of them come with perks too, catering to almost every lifestyle.
Where to get a credit card
Many people default to picking a card from their bank because it’s easier, says Shannon Terrell, a finance writer and spokesperson for NerdWallet Canada. But it’s better to shop around, especially with online-only banks.
Featured credit cards
featured
Best for travel card
Scotiabank Passport
Earn points on every purchase, pay no FX fees, and receive complimentary airport lounge access (with 6 annual passes).
GO TO SITE
Annual Fee: $150
Interest Rates: 20.99% purchase, 22.99% cash advance, 22.99% balance transfer
Welcome offer: $350 value
Earn up to $1,350 in first year welcome offers, rewards and savings, including up to 45,000 bonus Scene+ points¹.
Anniversary bonus: $100 value
featured
Best for cash back
SimplyCash Preferred Card from American Express
Earn 4% cash back on groceries and gas. Plus get a flat 2% on all other everyday purchases.
GO TO SITE
Annual Fee: $120
Interest Rates: 21.99% purchase, 21.99% cash advance, N/A balance transfer
Welcome offer: $250 value
Earn a bonus 10% cash back on all purchases for your first 3 months (up to $2,000 in purchases). Plus, earn a $50 statement credit when you make a purchase in month 13. This could add up to $250 in bonus value in your first 13 months.
featured
Best low APR card
MBNA True Line Mastercard credit card
An ideal option for cardholders looking to manage debt, the card’s low 12.99% APR is almost half the conventional interest rate found on most cards.
GO TO SITE
Annual Fee: $0
Interest Rates: 12.99% purchase, 24.99% cash advance, 17.99% balance transfer
“Because they don’t have those same overhead costs as a traditional financial institution, they’re often able to offer better interest rates, lower fees, and better perks overall,” Terrell said. “So honestly, you have nothing to lose and everything to gain by shopping around.”
Marques agreed: just getting a credit card with your bank is a wasted opportunity.
What type of credit card is best?
Consider your lifestyle—where you are likely to do the most spending, where you might use rewards—to find your fit. A simple Google search will find many “best of” lists for cards in every category.
“They will do all the comparisons for you, across all the different providers, and you can organize a list based on: I prioritize Air Miles, I prioritize cash back, I prioritize low interest rates,” Marques said.
“They’ll compare all the providers with best in class in those categories, and show you their current rates, their current signup offers, et cetera.”
As for younger consumers, Marques said low interest rates aren’t typically a priority, assuming you aren’t already managing a lot of credit card debt and you’re not transferring a balance.
Instead, travel rewards and cash back from your favourite retailers are likely the biggest returns on your spending, she said. Options with no annual fees are also valuable for someone just starting out, although there will be fewer rewards.
Can you negotiate with credit card issuers?
When getting a new card, there isn’t much room for negotiation, Terrell said—what you see is what you get. If you want different or better perks, the provider will just point you to another card that offers them.
Negotiations come into play if you already have debt, Marques said, or are transferring debt between cards to take advantage of the lowest rate.
Using signup offers—such as zero interest for the first 12 months—with a balance transfer means you can get a break from interest and pay down your balance faster, she said. Or if you want to keep your current card, you can simply call your provider and move your balance to a lower-interest option.
“There is an opportunity to negotiate their interest rates or even negotiate on your annual fees,” Marques said. “I think a lot of consumers don’t realize that if you just call and ask … in a lot of cases, they will.”
Credit card fees and costs to watch for
In terms of hidden fees, Marques said most costs are upfront—annual fee, interest, ATM withdrawal fees, and so on. Read the full details about the card.
But some add-on insurance, such as balance protection, can be costly and challenging to claim. For many, Marques said, it’s better to skip. Often people sign up because they don’t know what the insurance is for, and lack the savvy to understand it’s unlikely they will ever claim it, she added.
Late and over-limit fees are penalties that young consumers should become familiar with quickly, Terrell said. You can be dinged as much as $60 for going over your credit limit.
The other “sneakier” cost, she said, is the foreign transaction fee—not something people think about upfront, but many use their credit cards when they travel.
Even a card hyped up for travel rewards often still charges a percentage, usually around 2.5 per cent, on the transaction amount, Terrell said. Frequent travellers should seek out cards that advertise no fees for shopping while out of country.
As for hidden perks, many cards automatically carry insurance for purchases or travel, and Marques said these are usually under-claimed in the industry.
Credit card providers often have unused budgets for this coverage because people forget to claim them. Read the booklet that came with the card. Rental car company asking for extra insurance? New laptop broke down? If you paid with your credit card, Marques said, call them up.
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subscribe nowRead more about credit cards:
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The post Benefits, fees, hidden perks: Choosing the right credit card for your lifestyle appeared first on MoneySense.