Best Credit Cards in Canada

An credit card allows you to borrow money from a lender to make purchases, which you then must repay over time.

The term “unsecured” means that your lender doesn’t require you to put down a deposit or any collateral to use the card.

4 Best Credit Cards in Canada

1. American Express Cobalt Card

An overall great rewards card, allowing you to earn 1-5 points per dollar spent.
 

2. CIBC Aventura Visa Infinite Card

Exceptional travel card offering 1.5x points on gas, groceries, and drug purchases along with 2 points for every $1 spent on travel through the CIBC rewards centre.
 

3. Scotiabank Momentum Visa Infinite Card

High cash back rewards on a variety of everyday purchases.
 

4. Simplii Financial Cash Back Visa Card

Low interest card with rewards, a strong option for your first credit card.

 

What is a Credit Card?

An credit card is a debt instrument issued by various financial institutions, particularly banks and credit unions. 

There’s a variety of credit cards to choose from in Canada, but they all work in much the same way.

When you use a credit card to pay for a purchase, you draw the money from a credit facility provided by your card issuer.

Since this amounts to a loan, you must repay the money owed at a future date, along with any interest charges and applicable fees.

An credit card is a revolving credit product.

When you contribute a payment toward your outstanding balance, those funds are available for you to spend again.

Each credit card comes with a pre-set credit limit, which is the maximum balance you can carry at any one time before needing to make a payment.

You must make regular payments against your credit card balance like you would with another bill.

Once your card’s billing cycle ends, which lasts 28 to 31 days, your card issuer will send you a statement that contains the following details:

  • A list of transactions processed for the period
  • Fees and interest charged to your account, if applicable
  • Your available credit limit
  • Payment due date
  • Minimum payment due

You must pay at least the minimum payment noted by the due date to keep your account in good standing.

If you fail to do so, your card issuer will report your payment as late to the credit bureaus, resulting in a downgrade to your credit score. 

If you pay your balance in full by the due date, you won’t get hit with any interest.

Conversely, any amount you carry forward into the next billing cycle will incur interest charges.

To acquire an credit card, you’ll need to apply with your card issuer. 

As part of their due diligence, the card issuer will assess your credit report to determine the risk of extending credit to you. 

Some issuers will also consider other aspects of your finances when evaluating your application, such as your income and debt-service ratios.

As mentioned, an unsecured credit card doesn’t require you to place a cash deposit or pledge a personal asset as collateral.

As a result, your card’s outstanding balance is secured only by your general creditworthiness or promise to pay back the amount owed.

Did You Know?

Companies outside the financial services industry also offer credit cards, such as Canadian Tire and Walmart.

Benefits of a Credit Card

Here are some key benefits credit cards offer:

1. Convenience and Flexibility

When you’re short on cash, you can always rely on your credit card to bail you out, especially during a financial emergency like an unexpected and overwhelming medical bill.

Credit cards are a universally accepted payment method, so you can use them almost anywhere.

Plus, you don’t need to carry large sums of cash.

2. Credit Building

Using a credit card responsibly can help you establish or repair your credit score.

Your credit score helps you borrow more significant amounts of money in the future for larger purchases that will require a car loan or mortgage.

3. Rewards Programs and Other Perks

A wide variety of credit cards exist and many are notable for their rewards programs, which allow you to redeem points you earn for cash back, merchandise, travel costs, and more.

Many brands offer perks like purchase protection, extended warranties, airport lounge access, and optional products such as balance protection.

Couple using credit card at restaurant

Drawbacks of a Credit Card

Despite their benefits, however, it’s wise to be mindful of the drawbacks associated with credit cards:

1. Risk of Debt Problems

You can quickly accumulate a mountain of debt using an card to the point where you become financially overwhelmed and struggle to keep up with payments.

In the worst-case scenario, your only option to extinguish the debt may be to file for bankruptcy.

2. High Interest Rates

Card issuers routinely charge a high-interest rate on any balance you fail to pay off by the due date.

The average rate is around 20%, but it can also be as high as 30%. 

Risk of Damage to Credit Score

If you fail to make timely payments against your balance, your credit score will decline.

The same outcome applies if you continuously maintain a high credit utilization ratio, meaning you use a large portion of your available credit. 

Alternatives to Credit Cards

Having trouble getting approved for a credit card? Here are some alternative options to explore:

1. Consider starting with a secured card

A secured credit card functions like its unsecured counterpart but with one key difference: you need to provide a cash deposit before using it, as security for the lender.

The deposit determines your credit limit and gives your card provider the right to seize the funds should you default on your payment obligations.

2. Become an authorized user on another account

Most credit cards allow the cardholder to add additional users to their account. 

If a trusted family member or friend adds you as an authorized user, you’ll receive access to a card that’s linked to their account.

As a result, you can actively use it to make purchases without meeting the lender’s eligibility criteria. 

3. Apply for a retail card

Some retailers partner with banks and card networks to issue credit cards of their own.

Retail credit cards can net you discounts on purchases and earn you points through loyalty rewards programs that you can redeem for merchandise or cash back. 

Retailers generally have relaxed eligibility requirements when it comes to credit scores, so you’ll face fewer hurdles when applying for one compared with regular cards.

4. Get a student card

Student credit cards cater to individuals pursuing their post-secondary education.

Like retail credit cards, they have less stringent eligibility requirements, so there’s a good chance you’ll get approved for one.

Don’t Forget!

Making timely payments on a credit card account where you’re an authorized user will neither improve nor harm your credit score.

Frequently Asked Questions

  • What credit score is needed for a credit card?

Mark is a freelance writer who specializes in covering personal finance topics related to investing, mortgages, credit cards, and more.

He is passionate about educating people on how the financial markets work and providing tips to help them better manage their money. Mark holds a bachelor’s degree in finance from the Northern Alberta Institute of Technology and has more than a decade of experience as an accountant.

Outside of writing and finance, he enjoys playing poker, going to the gym, composing music, and learning about digital marketing.