Credit cards can be a bit overwhelming, especially for Canadians who are new to using them. In Canada, there are many types of credit cards available, each with its own set of benefits and drawbacks.
One type of credit card is a cash back credit card, which rewards users with a percentage of their purchases back as cash or other rewards. For example, the article mentions that the Scotiabank Momentum Visa Infinite Card offers 4% cash back on grocery purchases.
To qualify for a credit card, you typically need to have a good credit score, which is based on your credit history and other financial factors. The article notes that a good credit score is generally considered to be 660 or higher.
In Canada, credit cards are regulated by the Credit Card Act, which sets out rules for credit card issuers, such as the maximum interest rates they can charge. This helps protect consumers from unfair practices.
How Credit Cards Work
A credit card allows you to charge purchases to your card, which you'll then pay for later. Each month you'll get a statement showing what you spent over the previous month.
You can either pay off your balance in full or pay the minimum monthly payment, typically 2% to 3% of your outstanding balance. This flexibility is one of the main reasons people use credit cards.
Credit cards are open-ended, meaning the credit's there when you need it, and you can pay off your debt as fast or as slowly (within reason) as you like. This can be a good option for those who need to make large purchases but don't have the cash on hand.
Here's a breakdown of what you need to know about credit card payments:
Some credit cards come with annual fees, but these cards often come with more perks, such as bigger rewards or comprehensive travel insurance. It's essential to weigh the benefits against the costs to decide if an annual fee credit card is right for you.
Benefits and Features
Some credit cards offer cash back rewards, while others offer points that can be redeemed with participating merchants. These rewards can add up quickly, with some cards offering up to $500 in value in the first 3 months.
You can earn Aeroplan points with certain credit cards, which can be used to redeem against flights, companion tickets, upgrades, and more. These points can be earned on all your day-to-day spending.
Some credit cards have no annual fee, making them a great option for those who want to avoid extra costs. The TD Cash Back Visa Infinite Card has no annual fee, for example.
Rewards
You can earn rewards through various credit cards, including cash back and points. The Discover it Cash Back Credit Card offers 5% cash back on everyday purchases at different places you shop each quarter, up to the quarterly maximum when you activate.
Some cards offer a sign-up bonus, like the TD Cash Back Visa Infinite* Card, which earns up to $500 in value, including 10% in Cash Back Dollars in the first 3 months on Bonus Eligible Purchases up to a total spend of $3,500.
Rewards cards often have no annual fee, such as the Discover it Cash Back Credit Card and the TD Rewards Visa* Card. The TD Rewards Visa* Card also offers a value of $50 in TD Rewards Points to use on eligible Amazon.ca purchases.
Travel rewards credit cards are affiliated with a specific airline, so they’re best for customers loyal to those brands, such as the TD® Aeroplan® Visa Infinite* Card and the TD® Aeroplan® Visa Infinite Privilege* Credit Card. These cards earn points or miles on all your day-to-day spending to redeem against flights, companion tickets, upgrades and more.
The Visa Infinite concierge service offers rewards and benefits to help make your life easier while you travel, including the TD Cash Back Visa Infinite* Card.
Low Interest
Low interest cards can help you spread repayments over a longer period of time using a lower interest rate.
If you're anticipating a hefty expenditure, a low-interest card can be a great option.
A low-interest card can provide more flexibility in your finances, allowing you to make larger purchases without breaking the bank.
The TD Low Rate Visa* Card offers an 8.99% promotional interest rate on Purchases for the first 6 months from Account opening.
This means you can enjoy a lower interest rate for a limited time, making it easier to manage your finances during a specific period.
Cost
Cost is an important aspect to consider when using credit cards. You're free to repay as much as you like as often as you like, subject to a small monthly minimum that'll be outlined when your statement is issued – usually about 2% of your outstanding balance.
You'll pay a late payment fee if you don't make the minimum repayment by the statement due date, and this can also damage your credit score. This is a good reason to make timely payments and avoid late fees.
Credit cards can have various fees, including annual/monthly account fees, interest rates, and cash advance fees. Some credit cards come with no annual fee, but more premium options can have one.
You can avoid interest charges by clearing your full balance each month, but if you carry a balance from month to month, interest will kick in. This is why it's essential to understand your credit card's fee structure and make timely payments.
Here's a breakdown of some common fees associated with credit cards:
- Monthly repayments: You'll be charged a late payment fee if you don't make the minimum repayment by the statement due date.
- Annual/monthly account fee: This fee can be deducted from your available credit and accrues interest at the purchase rate if it isn’t paid in the first statement period.
- Cash advance fees: Withdrawing cash on a credit card is usually a bad idea, as it comes with a one-off fee and a higher rate of interest.
- Other fees: Additional card fees, balance transfer fees, and fees for misuse, like going over your credit limit or failing to make a repayment by the scheduled date, can also apply.
Frequently Asked Questions
What are the 4 major credit cards?
The four major credit card networks are Mastercard, Visa, American Express, and Discover. These four networks process the majority of credit card transactions worldwide.
What credit card abbreviation is CA?
CA stands for Cash Advance, a credit card service that provides cash, often with high fees
Does closing a credit card hurt credit score?
Closing a credit card can negatively impact your credit score by shortening your credit history and increasing your credit utilization ratio. Consider the potential effects before making a decision.
What is the #1 credit card to have?
The #1 credit card to have is the Wells Fargo Active Cash Card, offering 2% cash rewards with no annual fee. This card outperforms the average cash rewards card, which typically offers 1% back.
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