If you are considering applying for a credit card in Canada, there is a lot more to choose from than you might think. Although they can be broken down into two basic card types — bank-issued and store issued — there are what one might call “subcategories” as well.

It is also common to hold more than one credit card to help increase the credit limit available to you, helping to enhance your credit score. You might also choose a number of different cards to enjoy the many rewards programs available. Here are the types of credit cards available to help you find the card that is best for your needs.

Low-Interest Credit Cards

As the name implies, the low-interest credit card is available at a lower interest rate. If it is likely you will be carrying a balance, a low-interest card is the way to go. They are also suited for you if:

• You want access to lower interest cash advances
• You have a balance on a high-interest card and wish to transfer that balance to a lower-interest card

Considerations for the low-interest card include:

• A lower interest rate on your purchases, cash advances, and balance transfers
• Low annual fees
• Fewer rewards or benefits
• Higher risk of building debt

No-Fee Credit Cards

Credit cards without an annual fee are great if you rarely use your card. They tend to come with fewer or no added benefits. They can save you as much as $99 to $120 per year if you are looking for a basic credit card. They will charge interest on balances — usually in the 19% range — and in some cases, credit card fees may still apply.

Considerations for no-fee credit cards include:

• No annual fees
• No added benefits
• Poor to no rewards programs benefits

Rewards Credit Cards

Referred to as “rewards” these cards offer benefits to using the card including:

1. Travel cards
   With these types of credit cards, loyalty points are collected and then redeemed for flights, hotels, car rentals, attractions, etc. These cards are a good option if you are planning a major trip, although it does take some time to build up your points after the initial bonus. Insurance products can also be attached to rewards credit cards. This comes by way of a discount, but it can also be related to your purchases to cover damages, cancellations, collisions and more. These cards usually have no fees so can be beneficial for travellers.
2. Cash back cards
   With cash back cards you receive cash rebates on whatever you spend. This card can work well and is often preferred over debit cards as long as you pay off your balance each month. You may find the amount you get varies based on the type of purchase made and only up to a certain amount of money spent.
3. Store rewards cards
   Store rewards credit cards are offered by specific retailers. In their case, points are collected with your store purchases and can only be traded in for store merchandise. These cards can provide great rewards but do come with a higher interest rate. If you pay off your balance monthly it can provide substantial savings, especially when you first sign up. You can also find bank-related store rewards cards that provide cash back at a particular retailer, and then a lower cashback rate when shopping elsewhere.

Balance Transfer Credit Cards

A balance transfer card offers a lower interest rate to users as an enticement to reduce interest on an existing credit card debt. They allow you to pay off your existing balance to clear the debt, and the new debt is added to your new card. This can work well as it allows you to acquire a lower interest rate or often a zero interest rate so you can pay off your debt faster.

Some considerations:

• Cards are usually offered with a limited low-interest charge, so debt must be paid quickly to avoid the increase
• Good if you can pay down your debt before the interest rate changes
• Can save you money, for example, on a balance of $3000 at 19.9% you would save almost $600
• Balance transfers include fees ranging from 1% to 5% of the balance transfer total
• You still pay interest on new purchases
• Some cards will charge you interest on the full balance transfer amount if it is not paid off before the new interest rate kicks in

Secured Credit Cards

Secured credit cards require a security deposit. You can only spend as much as you have deposited on the card. In most cases, you will be expected to provide one to two times the amount of your credit limit to protect the lender if you can’t pay the balance.

Secured credit cards can be used when you don’t have an established credit history. They are a common choice for new arrivals in Canada. They help establish credit when the balance of the secured card is paid. They are also a good choice for those with bad credit.

Some considerations for secured credit cards include:

• They provide a credit card option for people not eligible for other types of credit cards
• They can help repair bad credit
• Some banks pay interest to you on the deposit made on your card
• The interest rate does tend to be higher
• You must have the cash available to make your deposit which for some people defeats the purpose
• They have low credit limits
• In 12 to 18 months your deposit is returned and you can get an unsecured card

Business Credit Cards

Business credit cards are only available if you own a business. They have the same terms and conditions as a personal card. As a small business owner, you are personally responsible for all charges incurred on your business card.

It does provide an easy way to keep your business and personal expenses separate while offering the following benefits:

• They offer higher credit limits
• They offer emergency funds when waiting for customer payments
• They help maintain healthy cash flow when used properly
• They offer business tailored rewards programs ideal for business travel and discounts for certain retailers
• You can track expenses easier than with individual receipts for tax purposes
• You can establish good credit for your business, allowing you to borrow to expand

There are some other considerations including:

• It could affect your personal credit score if you are not making payments
• You might overspend due to the higher credit limit
• The interest rates can be higher
• You will require proof of your business to apply in some cases

U.S. Dollar Credit Cards

U.S. credit cards are denominated in U.S. funds. This card is only worth it if you are spending a lot of money in the U.S. as it saves you money as they do not require a foreign currency conversion.

U.S. credit cards make sense if:

• You frequently purchase from U.S. retailers online
• You are an avid cross-border shopper
• You travel to the U.S. often for business, to visit family, for vacation or as a snowbird

Student Credit Cards

Student credit cards can help you establish a good credit rating before you graduate. This will help in the near future to help obtain a mortgage, rent a home, or apply for further credit and loans.

Some things to consider:

Low to no annual fee

Helps establish your credit history

Learn money management skills

Can lead to overspending and debt

High-interest rates on balances

High-interest rates on cash advances

Can ruin your credit rating if you are not repaying your balance

As long as you are able to use your credit card responsibly, having multiple cards can help you maintain a healthy credit score.

For more information about the different credit cards available to you, call Charles Advisory Services at (416) 915-9007 or contact us here.