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How To Choose The Best Credit Card In Canada?

A credit card, despite being a piece of plastic, serves supremely. It provides you with a form of financial freedom (if used responsibly). Almost everyone nowadays owns one or more credit cards. There are various types of credit cards in the market, and searching for the one that suits your requirements and doesn’t let you fall into a pit of financial distress can be a hefty task. If you are searching for the most appropriate credit card to suit your needs, don’t fret! This article is to help you select the best credit card for yourself, here in Canada!

“My advice is to treat [credit cards] like what they are: little plastic grenades that must be handled very carefully.”

– Elizabeth Warren

This statement holds correct in every sense possible. In 2019, there were around 79.6 million credit cards in existence in Canada, and the total credit card debt was also a whopping 100 billion dollars! Also, you will be surprised to know that households in Canada hold a total debt of 177 percent in 2019 compared to their disposable income. This means, approximately for every $100 dollar they earn, they have a debt of $177. Also, from this debt, the credit card debt accounted for 30 percent. 

Well, enough statistics, let’s talk about how you can choose the best credit card in Canada. The first and foremost thing you need to do is some research on the available credit cards, your needs, your income, and your capability to pay off the debt. 

5 Steps To Help You Choose The Best Credit Card

1. Research the Types of Credit cards

There are a variety of credit cards available in the market for various purposes, thus, to choose the best credit card, you need to get familiar with the same. The following are a few types of credit cards you can get. 

Balance Transfer Credit Card: 

This type of card lets you transfer the balance from one credit card to another at a lower interest rate ranging from 0 percent to 12.99 percent. It comes in handy when you want to transfer your balance from a credit card that charges higher interest to a lower one. 

Low-Interest Credit Card: 

As the name suggests, this type of credit card charges lower interest when you make new purchases. The interest rate ranges from 8.49 percent to 12.99 percent. If you pay off credit card bills on time, this might not attract you, but people that make payments over a few months may want a credit card that imposes lower interest. 

Cash Back Credit Card: 

This is just another kind of rewards card, but here you get cashback in rewards. This type of credit card offers you a percentage reverted when you make purchases from eligible places. The cashback ranges from 0.5 percent to 4 percent. There are credit cards that also offer 10 percent rewards to new cardholders. 

Rewards Credit Card: 

By using a rewards credit card, you get incentives for purchasing things from eligible places. It works like a loyalty program, like rewards for air flights, lounge access, free club access, hotel stays, etc. Depending upon the card, you get to enjoy several benefits. 

Travel Credit Card: 

If you are someone that frequently travels or likes to travel, well, this card is a match made for you. When you earn points using this card, you get to spend it on your trips, hotel stays, flights, various events, etc. A few cards also provide additional points and rewards for specific travel-related things. 

Credit Card Available for Bad Credit: 

If you have a lower credit score and find it hard to get eligible for a credit card, this card might help you. It would help you build your credit score up again. You can get this credit card even if your score is below 659. Unlike other credit cards, you may not get more benefits, but still, you will have a credit card for your usage. 

No Foreign Transaction Charge Credit Card: 

When it comes to foreign transactions, most credit card companies impose a charge ranging from 2.5 percent to 3 percent. So, if you have frequent intentional transactions, this type of card may prove beneficial to you.  

2. Know Your Spending Needs for a Credit Card

This is the second most important step to choose the best credit card. There may be several categories for which you may be using a credit card like, 

  • Utility Bills
  • Gas or Fuel 
  • Grocery Shopping
  • Flight or Hotel Bookings

So, identify such spending patterns, and based on that choose the best credit card. For example, if your work requires you to fly frequently, buying a rewards credit card that gives you benefits for flight bookings and exclusive lounge access will work like a charm. 

Also, look for a credit card that is not too specific and gives advantages over a broad range of categories. 

3. Familiarize Yourself with Your Credit Score

A credit score is like a number that will tell people how much your debt-paying credibility is. To obtain a credit card and to get the best privileges, it is essential that you have a good credit score. 

The below are the main range of credit scores in Canada.

300-574 (Poor): This is one of the lowest credit scores and indicates a bad credit history. 

575-659 (Below Average): With this credit score, you may find a credit card for your daily usage, but the interest rate would be higher. 

660- 689 (Average or Fair): This is a decent credit score and you will enjoy some good benefits if you have this score. It may not give you a lower interest rate, but you can have unsecured credit cards. 

690-740 (Good): This credit score means that you are very responsible when it comes to paying off your debts. You can get rewards and cashback credit cards if you have this score. 

741-900 (Excellent): This is the highest range of credit score and will get you lower interest and premium cards with many benefits. 

In Canada, two agencies provide credit scores which include Equifax and TransUnion. You can check out your credit score from there and based on that choose the best credit card as per your needs. 

4. Know Your Payment Pattern and Interest Rate Structure

Opting for a credit card also requires you to see a pattern in your payment and sooner or later, that will drive the interest rate that you pay on your purchases. Ask yourself the following questions.

  • What is your frequency of paying card bills, monthly, quarterly, etc.?
  • Do I make the payments in full or pay just the minimum?
  • Do I carry forward my balance?
  • Would I need flexibility while paying the card bills?
  • Will I be able to honour my card payments?
  • Would I need to spread my payments over months?

Now, if you are someone that pays off debts every month and in full, opting for a card that gives rewards for such consistency will attract you. Higher interest rates may not bother you much as you don’t have to pay them. But if you are planning to pay the card bills over months, then a higher-cost credit card will make a big hole in your pocket. 

Thus, think through and choose the best credit card that complements your payment patterns in the long run. 

5. Analyze the Perks Offered by the Credit Card

This is also an important point to consider as many credit cards do provide exceptional rewards and offers, but how much those offers would add value to you is what you need to think about. For example, if you don’t travel, what will you do with hotel stay rewards or flight rewards? They may mean nothing to you. 

So, before getting excited over amazing offers, analyze if you would even be able to use them and how much you would need to pay for that credit card annually or how much spending would be needed to get eligible for such rewards. Think smart and choose smart! 

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Devanshee Dave

Devanshee is a staff writer at YourFirst.ca. She is a finance enthusiast and has completed her Master’s degree in Mass Communication & Journalism. She is currently pursuing CFA (Chartered Financial Analyst) and has worked as a journalist in a local business newspaper, multiple start-ups as well as finance and economy-related online media houses.

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1 Comment
  • Nancy Wheeler
    11:40 AM, 12 May 2021

    Hey – I saw the credit card comparator on your website. It is really helpful. I mean I can compare all of the credit cards of Canada according to my filters as well as can apply also for free… Really loved it! I had shared it with my friends also:) I personally use a travel credit card as I keep traveling frequently so the travel credit card always helps me while booking flights & hotels!

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