A credit card is an essential tool in a modern person’s financial decisions. Some people resent the idea of debt so much that they try to do without credit cards altogether, but this is not a financially sound approach. What you should know is that the Canadian system divides debt in two types: good debt and bad debt. A correct and sensible use of credit cards qualifies as good debt, meaning debt that will help you establish a good credit history in Canada.
You can apply for a credit card (i.e., Visa, MasterCard, American Express) when you open your first bank account in Canada. You can also apply online, but it is better to go in person the first time so you can ask all the questions you need. Take with you two pieces of identification, proof of residence, proof of income if you have any and your social insurance number.
You will become acquainted with the tremendous power of credit when you apply for your first Canadian credit card. Since you won’t have a Canadian credit history, the bank may require that you make a significant deposit to cover them in case you fail to pay your credit card bill. The limit on your secured credit card will be equivalent to the deposit or lower. The deposit will be placed into a savings account that will accumulate interest. After a period of minimum one year, you can unblock the deposit, if your credit history shows you are able to keep up with your payments.
Before signing up for a credit card, ask the financial officer who is assisting you to present you with the full range of offers. Some credit cards come with rewards such as air miles, cash back or travel points, while others may not bring any rewards but may have lower interest rates. Enquire about overdraft fees and cash advance (transferring money from your credit card to your debit card) fees and always take your time to read the fine print.
While you will get a debit card on the spot, you may have to wait up to three weeks to receive your credit card. Most credit cards in Canada charge an annual fee.
Department store cards
You also have the option to sign up for a credit card at a major department store. Such credit cards are easier to get, often have attractive rewards and no annual fees; additionally, balancing a store credit card for a while can help you get a regular credit card later. The downside is that their interest rates are much higher, they may have hidden fees and the penalties for missed payments can be staggering.
Using credit safely
Always be careful with your credit card information when shopping online or over the phone. Only shop from respectable websites and, if possible, use a payment processing website to protect your data. Do not read your credit card number out loud over the phone in public places and shred your bank statements before disposing of them. Check your balance regularly and alert the bank immediately if you see any suspicious activity in your account.