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You want a credit card, but you’re not sure of the best way to go about getting one.
This guide covers how to get a credit card, but first let’s review the benefits of having a credit card.
If you’re a newcomer to Canada or a young Canadian who lacks a credit history, credit cards can be a great way to build or improve your credit when used responsibly.
Stephen Weyman, founder and CEO of creditcardGenius and HowToSaveMoney.ca, explains that credit cards also offer consumers more protection than paying for a product or service with cash.
“If a company you purchase a product or service from doesn’t deliver or misrepresents themselves, then you can petition your credit card company to charge them back,” Weyman says.
Credit cards also offer cardholders various forms of insurance. Weyman explains, “Insurance coverage ranges from extended warranty and short-term protection for the physical items you purchase with your credit card all the way to travel medical and trip cancellation insurance for non-cancellable travel arrangements.”
Now that we’ve seen some of the benefits credit cards offer, let’s discuss how to get a credit card, including how to find and apply for the right one. Here’s the step-by-step process:
- Decide what you want from a credit card
- Understand the different types of credit cards
- Know what features to consider when choosing a credit card
- Evaluate which cards you are likely to be approved for based on your credit profile
- Apply for the credit card
- Use the card responsibly
Before choosing a credit card to apply for, it helps to know your needs and what you intend to use your credit card for.
Do you want to open a credit card so you can start building credit? Or perhaps you already have excellent credit and you want to be rewarded for your purchases?
If you’re looking to earn credit card rewards, it’s helpful to evaluate where you spend the most money. There are cards that give higher rewards for spending at grocery stores, gas stations, restaurants, as well as on travel. When you know where you spend the most, you can pick a card that gives extra rewards for that type of spending.
Perhaps you’re looking for a credit card with specific features or benefits. When you know what you want to get out of a card, you can narrow down what kind of card you’re looking for.
Now that you have determined what is most important to you in a credit card, check out the different types of credit cards on the market and who they’re designed for. This can give you a better idea of what kind of card meets your needs, helping you to further narrow down which card is right for you.
Here’s a chart of some of the most common types of credit cards.
|Credit Card Type||Ideal If You…|
|Cash back||Regularly pay off your balance in full and want to be rewarded for your spending|
|Travel rewards||Frequently travel and want to earn travel rewards|
|Balance transfer card with 0% intro APR offer||Carry a balance on another credit card and want to transfer your balance to save on interest|
|Secured credit cards||Want to build your credit and may not qualify for a traditional, unsecured credit card|
|Student Credit Cards||Are young, have less credit experience and are looking to build your credit history|
Now that you’ve chosen your ideal credit card type, you’ll want to narrow down your credit card search even further by choosing a credit card with features that you’ll benefit most from.
If you regularly carry a balance on your credit card, consider choosing a card that offers a low interest rate. Note that you won’t get to choose your exact APR since the issuer determines it once you are approved for the card. But you can see what the APR range is and how it compares to the other cards you’re considering.
(The APR is less important if you always pay your monthly balance in full and on time.)
Credit cards aren’t just a great way to earn rewards — they can offer additional perks. Common travel perks include travel insurance, trip cancellation insurance, roadside assistance and car rental insurance. Some credit cards also offer extended warranties on goods beyond the manufacturer’s warranty.
To entice you to sign up, many credit cards offer you a sign-up bonus. Some credit cards also offer higher reward accrual for the first few months when you sign up. However, make sure you read the fine print. You often have to spend a certain amount within a specific timeframe to qualify.
Choose a credit card with rewards that you’ll not only value, but are easy to redeem. There are many different types of reward programs to choose from, including cash back, reward points and travel rewards.
It’s important to note that some reward programs are simple, while others are more complicated, but may earn you more rewards. You should consider this tradeoff when shopping for a card.
This is important to consider, especially if you’re a big spender or you and your partner plan to share the same credit card. You’ll want a credit limit that’s high enough to meet your spending needs.
You don’t get to choose the exact credit limit you’ll get as this is something the issuer decides based on their evaluation of your application. But you can look at the minimum and maximum credit limit offered for a card to get an idea of what credit limit you might get if you’re approved.
Some credit cards charge you an annual fee to keep your account open (often in exchange for a more valuable rewards). Make sure the rewards are worth it for the annual fee you’ll be incurring, otherwise you might be better off with a no-annual fee credit card.
Foreign transaction fees
If you travel a lot for business or pleasure, consider a credit card that has no foreign transaction fee. This will help save money when making purchases outside Canada or any purchase you make in a foreign currency.
Be aware of any other additional fees you may be required to pay. Before you open a card, knowing what fees a credit card has and how much they are can help you avoid surprises. Here are some common fees to be on the lookout for.
- Late fees: If you’re late paying your credit card bill, you may be charged a fee and/or pay a higher interest rate.
- Over limit fee: You may have to pay this fee if you exceed your credit limit.
- Balance transfer fee: If you transfer a balance from another credit card, you may have to pay a fee.
- Cash advance fee: You’ll be charged this fee if you take a cash advance from your credit card.
- Inactive fee: A fee you may incur if your credit card is inactive for a certain number of months.
To improve your chances of being approved for a credit card, you’ll want to know what types of credit cards you should apply for based on your credit profile. Each credit card is designed for a specific credit score range, so you want to apply for cards that you are likely to be approved for.
One way to do this is to look at the featured credit cards on Credit Karma’s credit card page. If you’re a member and logged into your account, the “Top Picks” section presents you with recommended offers based on your credit score from TransUnion, helping you find cards that you may be more likely to be approved for.
Once you’ve decided on the right credit card for you, it’s time to actually apply.
In many cases, you can apply for a credit card online, and sometimes you’ll know within seconds if you’ve been approved.
Before you apply for a credit card, take the time to read the credit card application disclosure agreement to make sure you know the terms and conditions of what you’re signing up for.
Once you start completing the application, you’ll be asked for basic information. This could include your:
- Phone number
- Employment status (including income)
- Housing status (homeowner, renter, living with parents, etc.)
- Monthly housing payment amount
- Number of years at current address
You’ll want to have your Social Insurance number handy, as you may be asked for it (although providing it is optional in many cases).
A credit card can be a powerful tool when used responsibly. Weyman offers several tips on how to use your credit card responsibly.
- Pay your balance on time and in full every single month. One way to do this is to set calendar reminders.
- Never think of your credit card balance as “extra money”. You should treat it similar to your debit card or cash.
- Don’t chase after rewards by making purchases you normally wouldn’t. Ask yourself before every purchase if this is something you would buy anyway if there were no rewards involved.
There are so many credit cards to pick from, so it can be easy to feel overwhelmed. But after going through the above steps outlining how to get a credit card, you have the tools to choose a card well suited for you.
Being responsible with your credit card can also help you build a strong credit history, which in turn can help you achieve milestones later in life. For example, with a good credit profile, you may be able to borrow money at lower interest rates to buy a car or home.
Picking a credit card that best meets your financial needs is one exciting step in your larger financial journey.