With so many different types of credit cards being available on the market, deciding which card is the best one for you can be overwhelming. After all, how do you compare two completely different cards? When looking to apply for a new credit card it is important to know what features in a card you value. Once you have a good grasp of the type of a card you're looking for you should shop around to see how those types of cards differ across various credit card companies. Rates.ca can help with the shopping by comparing dozens of credit cards
available on the market. Choosing the right credit card for you
Before beginning your credit card search ask yourself the following questions to narrow down your selection criteria:
1) How is your credit score?
Credit score is an important factor used by credit card companies to determine whether you qualify for a credit card, and if so, at what limit. If you have an excellent credit score, then you are a lot more likely to qualify for a wider range of credit cards. However, credit score is only one of several factors used by credit card companies and having an excellent credit score does not necessarily guarantee approval for a card.
Are you a student with no credit? If so, you may qualify for a student credit card
. You don't need a credit history to be approved for a student card in all cases. They even sometimes come with great rewards.
If you think that you have poor credit as a result late payments, collections, recent bankruptcy, etc. you are most likely going to be limited in your choice of credit cards. Your best bet would be to go with a secured credit card
until you're able to rebuild your credit. Secured credit cards are usually starter cards without rewards. To be approved for a secured credit card you'd have to place a security (up to 100% of the credit limit).
2) Are you planning on carrying a balance on your credit card?
Are you planning on carrying a large balance month to month or paying off your balance before the due date? It is a very important question to ask yourself and can ultimately determine the best credit card for you. If you anticipate carrying a large balance on your credit card then a card that minimizes your interest payments is likely a good fit. Otherwise, the interest rate on the card should not really matter.
It is also important to know how the large balance originates. Is it as a result of making purchases? If so, choose a low interest credit card
. Is it a result of transferring a balance from one card to another card? If so, choose a low balance transfer credit card
. Perhaps it's as a result of withdrawing cash from credit card? If so, choose a low cash advance credit card.
3) How are you planning on using you credit card?
How much you'll be using your credit card and for what purpose would help determine which card is best for you.
Are you planning to make most purchases in Canadian or U.S. dollars? If U.S. dollars is your answer then be sure to choose a U.S. credit card. That way you wouldn't be negatively affected by the exchange rate, something which is the case with credit cards in Canadian dollars.
Are you planning on using it for your business? If your answer is yes, then you should be applying for a business credit card
. You should also however have a personal credit card in order to easily separate your personal and business expenses.
Are you planning on using your credit card on a daily basis or only once in a while? For those that are looking for a credit card that can serve as an emergency fund or as a payment source of last resort, a no-fee credit card
is likely a good option. If you're not going to use your card often then the usually higher rewards on a card with an annual fee become irrelevant since rewards are tied to the usage of the card. For those who are planning on using a credit card on a regular basis, the rewards earned from a rewards credit card with an annual fee can often be greater than the annual fee paid.4) What rewards/benefits do you value?
If you've established that a rewards card is the best card for you then it all comes down to the type of rewards you value the most.
Do you travel a lot? Go with a travel credit card
which will provide you with points (i.e. Air Miles, Aeroplan Miles, etc.) that you can redeem for discounts on flights, hotel, car rental or other travel related expenses.
What if you aren't a big traveller but still want rewards? A cashback credit card
can provide you with periodic cash rebates tied to your level of spending on the card. It is up to you how you want to spend the cash.
There are also credit cards available with more specific rewards, i.e. department store rewards, gas rewards, etc. For people that often frequent the establishments that participate in these reward programs, a more specialized rewards credit card can provide the biggest bang for their buck.
Given that credit cards also come with a lot of great benefits, (i.e. travel insurance, extended warranty, priority bookings etc). the type of benefits you value the most should be taken into account when choosing the right card for you. Some of the benefits are not as heavily advertised as the rewards program on the card so it is important to do your research.