Credit Card

A credit card is a powerful tool for customers who are seeking an alternative to checks, cash or debit cards when making payments.

How they work

Credit cards provide customers with the opportunity to access funds that they currently do not have in their chequing or savings account, under the condition that they will repay the sum they borrowed at a designated rate of interest. The primary factor, which determines whether or not an individual can gain access to a credit card, is his/her credit score. When customers apply for a credit card, banks evaluate their credit score to determine their capacity in repaying the loan.

A credit card has the following essential features:

  • A “credit limit” which represents the maximum loan dollar amount.
  • An annual percentage rate (interest rate), which may accrue on a monthly basis for any credit not paid back in full at the end of the grace period.
  • An annual maintenance fee if applicable.
  • An expiration date for credit card

Often, individuals with a lower credit score will be forced to use their credit at a higher rate of interest than those with superior credit scores.

Features & Benefits

The most significant benefit of a credit card is that it allows individuals some flexibility in their financial strategy. Particularly for those who need to either make expensive purchases or confront unexpected bills/expenses, credit cards are highly valuable. Another benefit is that some credit cards also offer various “gifts,” such as airline miles or cash back programs to reward customers for their loyalty. However, as mentioned previously, one should carefully research all available credit cards to ensure he/her is entirely aware of the card issuer’s repayment terms.

Different Types

Canada’s leading banks each offer a wide variety of credit cards, all of which include their different interest rates, minimum / maximum credit limits, and borrowing incentives. Regardless of which bank an individual may use, it is crucial to research the interest rates for both purchasing and cash advances. In many situations, the interest rate for cash advances will be noticeably higher than the rate offered for purchasing. Customers who may be hoping to use their credit card as a cash advances service should pay careful attention to these rates, as it can become incredibly difficult to pay off large credit card balances at 20% + interest rates.


Many Canadian banks are willing to provide significant credit limits to customers – in these situations. However, the banks will often require proof of a certain income level which they consider appropriate for the card in question. To convince customers of all income levels to sign up for new credit cards, banks will often offer 0% introductory interest rates on all purchases made for a specific amount of time. Customers must be very careful, however. In many situations, interest rates will return to their normal levels after the introductory period ends, and any balance outstanding on the card will be subject to interest for all the months it has existed, not just for the time since the 0% interest offer expired.


One of the most important aspects of credit cards that consumers must be aware of is when interest/financial charges begin to accrue. For some cards, interest-only starts to accumulate after the grace period, typically around 21 days. However, it is not uncommon for some Canadian credit card issuers to begin collecting financing charges immediately after a transaction has been completed. For those who have made significant purchases on their cards, this could lead to large monthly payments.


Yes, this is yet another important question that a customer should ask his/her bank’s representatives. In some situations, interest rates may go up dramatically if the client misses their monthly payment.

Your credit card minimum payment is the lowest dollar amount that you are required to pay each month after using your credit card, to maintain your credit card account in good standing. You can find your minimum payment on your credit card statement.

It is entirely dependent on the card issuer. The specific number of days between payments can vary widely between banks. Usually, the payment due date is indicated on your credit card monthly statement.

Interest on Cash Advances and their associated fees cannot be avoided. These interest charges start on the transaction date.

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