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How to Choose the Best Canadian Credit Card in 4 Simple Steps

Choosing the right credit card provider is a very important decision and it needs to be treated as such. You need to consider your needs and research the pros and cons of different credit cards. Once you’ve chosen a card, you will open an online account and set up auto-pay options, so the last thing you want is to end up with exorbitant fees and to be forced to go through the hassle of switching to a different credit card.

Since the Canadian market has tons of options, we also took the liberty to narrow down the most desirable options.

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1. Consider your financial needs and long-term goals

The benefits offered by your credit card provider should go hand in hand with your long-term financial plans. Let’s look at the main categories of credit cards and see how they suit different types of people:

Low-interest cards – suitable for people who have a debt that they are trying to reduce or who carry a monthly balance

Balance transfer card – suitable for people who carry a balance. This type of card allows you to enjoy a few months without interest after you transfer from your current bank.

Cash back card – suitable for people who can pay off the full balance in time.

Travel cards – like the name suggest this type of card is best suited for avid travels as it offers benefits for future trips.

Extra: Specialized credit cards

Student cards – lower credit limits and special discounts for students

U.S. dollar cards – great if you have a lot of expenses in U.S. dollars as you will avoid conversion fees.

Retail cards – offer discounts at specific retailers.

2. Compare interest rates and commissions

When it comes to credit card adds, we tend to be very suspicious, as we have this belief that banks are out to get us, and for good reasons. Many times, the benefits that look too good to be true often hide a lot of traps like high interests and commissions. So, the first thing that you need to consider are the interests and the transaction and processing fees. Based on these factors, you can narrow down your choices, after which you can start looking at the benefits offered by each card. Welcome bonuses, cash-back values, insurance packages, and discounts are just a few of the many benefits that can help you manage your finances more wisely and save some money in the long run.

The only times when interest rates don’t matter is when you pay off your balance regularly or if you don’t make transactions or take out cash advantages. Be careful, as some credit cards can offer low-interest rates for a limited time only.

Other fees that you need to consider are annual fees, foreign currency charges, over-the-limit fees, dishonored payment fees, inactive account fees or insurance fees.

3. Cash backs of credit card points?

Each type of card has both pros and cons and choosing between the two of them comes down to your spending habits.

Credit card points – Reward point systems are usually used for travel purposes. Although credit card providers generally offer an array of options for redeeming your points, travel options have the most benefits. But each card will give a different number of points for various spending categories. As such, to make the most of your points, you will have to analyze your travels expenses and see where your budget usually goes. For example, if you spend most of your vacations abroad, you might benefit from an airline-branded credit card. On the other hand, if you spend more money on accommodations than on transportation, you might want to consider a hotel credit card.

Cash backs – Just like with the travel card, for cash back cards you also need to analyze your spending habits and choose a card that offers you the most points for your major expenses. For example, if a large amount of your income goes on gas money, choose the card that offers you the most cash back points at gas stations. Some cards offer rewards for grocery expenses or for insurance rates.

The trick with cash backs is that some credit cards can require a high income to be approved, or they may have a minimum spending amount for cashbacks. Moreover, if you opt for a card with an annual fee, make sure that the fee won’t exceed your estimate annual cash-back.

4. Best credit cards in Canada

Although everyone will have different financial needs, we have narrowed down the cards that have the biggest number of advantages for the average person:

– Best overall card – American Express Cobalt – Although it has a $120 annual fee, it offers numerous benefits such as 30,000 welcome bonus points. This is also the best choice for travelers.

– Best low-interest card – American Express Essential – no annual fee, low interests, 0% return

– Best cash back card – Scotia Momentum Visa Infinite – No annual fee for the first year and a 2.03% return rate.

– Best gas card – American Express Gold rewards card – $150 annual fee, 25,000 reward points.

But to be sure you’ll make the right choice, we encourage you to read further before choosing the best credit card in Canada for your personal needs.

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