It seems fewer and fewer Canadians carry cash. It is barely necessary after all, given the widespread acceptance by retailers of credit cards. A Bank of Canada survey suggests that 92 per cent of retailers accept credit cards as a form of payment.
If you're in the market to get a credit card, you have many options; it is a matter of selecting the credit card that is right for you.
Why do you want a credit card?
Choosing, and applying for, the right card means you need to understand exactly why you want a credit card. Is it to:
- build your credit history,
- consolidate credit card debt and transfer the balance of other cards to one new card,
- have emergency-only access to funds, or
- to earn rewards?
Assess your credit card needs
Before choosing a credit card, pinpoint how you expect to use it. Are you planning to:
- use it mostly to make purchases, or
- use it for cash advances?
- use it to consolidate credit card debt and transfer the balance of other cards to one new card?
- pay the credit card's full balance each month, or
- often carry a balance?
The annual interest rate of a credit card is the amount you are charged on purchases, cash advances and balance transfers. Although purchases may enjoy an interest-free period (if you qualify), typically credit cards do not include an interest-free period for cash advances or balance transfers. This means, for example, you are charged interest from the day you take that cash advance.
Interest rates vary between cards. But did you know that interest rates may also vary within one card? You may be charged one rate for purchases, one for cash advances and another for the balance you transferred onto your card. That's why it's important to know in advance how you will use your credit card. You will save money when you get a credit card that offers you the best interest rate for how you plan to use it.
Benefits, features, rewards and introductory offers
If you're looking to get a credit card that offers you extra features, benefits or rewards, it goes without saying that you should pick a card that in the end is useful to you. After all, if you are afraid to fly, why would you get a card that only offers you points that can be applied to the purchase of an airplane ticket?
Benefits and features
When comparing credit cards, you will want to know the day-to-day details of the credit card, like:
- The annual interest rate charged on purchases, cash advances and balance transfers
- When purchases qualify for an interest-free period (some cards only require that your previous month's bill was paid on time and in full; others require that your two previous statements were paid in full and on time)
- How long you are given from the statement date to make a payment
- The minimum payment you are required to make each month
- Any fees you may be subject to if you make purchases in a foreign currency
- The card's overlimit charges and fees should you go over your credit limit
- The card's annual fee, if any
- The fees to obtain additional cards, if any
- The maximum credit limit available through the card; while you may not need or want it now, you'll want to know what it is should you ever decide to request a higher limit
- Whether or not the card includes extra features like emergency medical travel insurance, trip cancellation or interruption insurance, or rental vehicle insurance.
Rewards come in many shapes and sizes; there's practically something for everyone. The most common involve redeeming points that, depending on the card, can go towards travel, merchandise or receiving cash back.
Travel rewards credit cards typically offer you the opportunity to accumulate points that can be redeemed for flights, vacation packages, hotels, car rentals, trains or cruises. Each card will be different, so if a credit card with travel rewards is important to you, make sure you compare how you earn points and what the points can get you.
Credit cards with merchandise-style rewards offer you the chance to earn points so that you can redeem them for gift certificates, groceries, gas and even other reward program points. Again, each card will vary in how points are accumulated and how they can be used which is why it is important to make sure if you get a credit card with these types of rewards you pick one that offers merchandise that makes sense for you.
Credit cards with cash back rewards give you the ability to earn a certain percentage of cash back on purchases you make with the credit card. With this type of reward program, you will want to make sure you know what purchases qualify, if there is a maximum amount you can earn, when it is paid out and if the cash back percentage is tiered based on how much you spend each year.
Many credit cards include an introductory offer of lower than normal interest rates and can save you money if you tend to carry a balance on your credit card.
Introductory offers can vary; some apply the low interest rate on balance transfers and/or cash advances only, while others will include purchases too. With credit cards that have an introductory offer, it is important to know when the offer will end. Typically, an introductory offer is for a limited time only; anywhere from four to 15 months.
To take full advantage of introductory offers, find out:
- What purchases or transactions qualify for the low introductory interest rate
- When the offer ends
- What the interest rate will be after the introductory offer ends
- If the introductory interest rate can be revoked or cancelled
Compare credit cards
The best way to find the credit card that is right for you is to shop around. Compare credit card features, benefits and rewards easily online today at KANETIX.ca
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