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Every credit card is different, which is why it is important to find out which credit cards work for you so that you can build a solid credit file. Because there are so many credit card accounts available, it can be hard to decide which card is the best for your individual situation and lifestyle. Knowing what to look for and how to compare cards can help you make that decision.
Unfortunately, the best credit card for another person may not be the best for you. That is why it is sometimes hard to find the right card based upon referrals alone. You may need a card that offers merchandise rewards rather than travel rewards, but a friend may benefit more from the travel rewards. Then again, you may be a student looking for a way to establish credit without going far into debt. If you are neither one of these and you are looking to not go into debt, one of the first areas to evaluate is whether to opt for a regular credit card or a prepaid credit card.
The reason why a person may opt for prepaid over a regular card is, perhaps, due to lack of credit or bad credit. These cards do not have any bearing on the cardholder's credit rating and can be reloaded with cash any time the cardholder wishes. This is a wise choice for use on online transactions and when traveling so that credit and personal details are not put at risk. It is important, however, to realize that this is not a way to build credit in Canada. However, a secured credit card is a similar way to build credit, as you fund the card and payments are made to re-fund the card so they are reported to the credit reporting agencies as on-time payments. The following four card types are also ways to build credit in Canada.
Frequent Flier Cards
This type of credit card gives frequent flier miles as rewards for purchases and is one that helps build credit and gives points that are redeemable for flight miles. The miles can result in a discount on a flight or a flight can be completely free. Some of these cards, such as the Aeroplan card, have yearly fees, but there are many travel benefits. Frequent flier cards also offer cardholders travel insurance for vacation and business. The insurance does have limitations, so it may be beneficial to purchase additional coverage that may not be offered by the credit card company.
Some of the cards may also allow miles to be redeemed for hotels, car rentals, and much more. It is important to compare the details of each card to see if the rewards are exactly what you need. Even if you don't travel often, you may find that the other perks are worth it. Some cards have other benefits, such as protection for the purchases made on the card and exclusive access to events. However, having a card with miles that will never be used means that another card should be chosen, such as a standard rewards card.
Rewards Cards
The rewards card is like a frequent flier card in that it rewards points for purchases. The points can be redeemed for rewards provided by the credit card company or through partner merchants, hotels, and many others. This, as well as frequent flier cards, is ideal for individuals who will be using their credit a lot. If credit will not be used a lot, then it may be difficult to earn rewards fast enough. There are some cards that have rewards points that expire. It is best to find a card that has points that don't have expiration dates.
It is also important to make sure you wouldn't be paying an annual fee just to have a card with rewards versus having a card with no rewards and no annual fee. You will need to evaluate whether or not you will use the rewards and, if you won't be using them much, it may not be worth paying an annual fee.
Balance Transfer Cards
Balance transfer cards are ideal for the person who needs to improve their credit by opening up some of their credit lines. When credit lines are entirely consumed and there is no available credit, this can hurt a credit score. By acquiring a credit card with a lower interest rate, it is possible to transfer the balances of other cards to it and pay much less for the borrowed funds. If you transfer a balance from a 19.9% interest card to a 9.9% interest balance transfer card, the savings is in the hundreds of dollars, depending upon the amount of the balance.
Be sure to take a look at the small print on the credit card agreement because there may be additional fees associated with the transfer of a balance from one card to another. Also make sure the rate is not astronomical, as balance transfer rates can sometimes be different from the purchase rate.
Student Credit Cards
Student credit cards are very popular in that they help students build their credit. Many of the cards made specifically for college students have benefits that are made just for them. The rates are typically low and students can use them to buy food, purchase their books, rent DVDs, and much more. The limits tend to be low in order to keep the student from spending too much. Spending too much could place a student in extreme debt before they ever have a career. The goal is to have an established credit rating before graduating so that such items as cars and homes are much easier to acquire once a career is established.
Final Word
To build credit, ensure you choose the right card. Choosing the right one for your unique position financially will ensure you can build credit successfully. Do this by reading the small print and being realistic about what you will or will not do with the card.
Simplii Financial Debit Card
Tangerine® World Mastercard®
Neo Money™ Card (Prepaid)
Tangerine® Money Back Mastercard®
Refresh Financial Secured Visa® Card
KOHO Prepaid Mastercard®
Neo Secured Card