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As we move further and further away from cash and become an ever more card-based society, understanding how to get the most out of your credit cards has never been more important.

Gone are the days of having a stack of cash in your wallet or under the bed. These days, everyone is tapping to pay, using their smartphones, and checking their account balances online. If you don’t have a credit card, you are practically cut off from a range of online services and retailers, and you are also missing out on some great rewards.

But in the world of never-ending choices and credit providers vying for your business, how are you supposed to know which credit card is right for you?

Well never fear! We’ve put together a complete guide to all the different credit card options available to you in 2019. Read on to find out everything you need to know about becoming a credit card guru!

Close up of wallet with several credit cards

Secured vs Unsecured

One of the first decisions you’ll want to make is whether you are after a secured or unsecured credit card.

A secured credit card is most often used as the first credit card you ever get as a new young adult, or if you have recently immigrated to Canada. It involves paying the credit provider upfront the amount of money you would like your credit card to have as a limit, for example, if you wanted a credit card with a $1,000 limit, you would hand over $1,000. Thus, the credit card is said to be “secured” as you have already paid the bank the money you plan on spending.

The good thing about secured credit cards is that they do not require an established or good credit history, so can be taken out when you are just beginning to build your credit file or if you have a less than ideal credit score. They function exactly the same as an unsecured credit card in terms of their impact on your credit score, which makes them a great way for newcomers and young adults alike to begin their credit journey.

Unsecured credit cards are the more standard form of credit card across most of Canada. These are cards that you apply for, and the credit provider will generally give you access to a certain amount of credit without you needing to hand the money over first. Whilst this is good as you do not need to part ways with any of your cash straight away, unsecured credit cards are a lot harder to obtain if you have no credit or bad credit.

Interest Rates

Once you have figured out which credit card type you want to get, you’ll want to have a look at the kinds of interest rates you will be charged.

Interest is charged on any outstanding balance at the end of a billing cycle that is not paid off. For example, say you spent $500 on your credit card and then paid off $350 at the end of the billing cycle. You would then have to pay interest on the remaining $150. This is one of the ways in which the credit provider makes money off of credit cards, and is an unavoidable reality of the system.

Something that you can avoid, however, is credit cards with outrageously high interest rates. Many flashy looking credit cards with nice perks will be carrying extremely rates for any balance not paid off at the end of a billing cycle, some as high as 30%! If you are not careful, this can quickly spiral into a vicious cycle of credit card debt, as the interest payments become more than you can pay off per month. A general rule of thumb is to aim for a card with 12% or lower interest, which will prevent repayments from getting too out of control.

If you want to completely avoid paying any interest at all, you could always pay off the entire statement balance at the end of each billing cycle. This ensures you won’t owe the lender anything extra and means you can make the most of any rewards your card might bring!

Woman paying with her credit card

Cashback, Rewards, And Bonuses

Speaking of rewards, it’s time to look at all the extra perks that modern credit cards can come with.

Gone are the days when it was simply good enough to give someone a magical piece of plastic that they could buy things with. These days, credit card providers are constantly fighting to have their credit cards noticed and to entice new users to their platform. They most commonly do this by offering a range of different benefits beyond simply the convenience of having a credit card. These include:

Cashback

One of the most popular benefit schemes many modern credit cards use is a cashback system. This is a relatively straightforward reward plan that involves getting a certain percentage of purchases credited back to your account every quarter. Most cards will offer cashback ranging from 1% to 5% on most purchases, with some offering higher cashback on certain items like dining or travel.
Rewards Points

Many credit providers also offer credit cards that come with points earned per purchase. These points can either be for their own rewards scheme or they can be tied to a third party rewards scheme like a frequent flier program or hotel chain. They typically work on a set number of points being earned per dollar spent, with some purchases allowing for higher earn rates.

Complimentary Insurance

There are plenty of cards that offer a range of complimentary insurances that automatically apply to purchases made with the credit card. The most common ones are buyers protection, travel insurance, and car insurance for rental cars. Be sure to look into what is offered on a potential credit card if there is insurance you know you’ll be wanting to use in the future!

Welcome Bonuses

A lot of new credit cards will also offer some kind of welcome bonus in order to entice you to sign up for the card. These are usually in the form of a large sum of rewards points or cash incentives that are given once a certain amount has been spent on the card within a set amount of time. These can give you a huge boost towards that vacation you have been looking forward to, so shop around for the best deals!

Yearly Fees

Something else you will want to consider when looking to get a new credit card is whether the provider charges any annual fee.

In general, there are two classes of credit cards available. The first kind is low-fee, low-interest everyday cards that are geared towards new credit users, students, or just as a standard entry level card. These often have no yearly fee and are a great option for everyone to have at least one of. You can open these cards and then keep them open indefinitely to help build your credit history and improve your credit score over time!

The second kind of card is the more premium rewards cards that offer travel bonuses, reward programs, or high limits. More often than not, these cards will come with some kind of annual fee that the providers use to offset some of the cost of providing the benefits. Some of these annual fees can be relatively reasonable, around $50 or so, but some can be upwards of $500! Be sure to look into how much your annual fee is and when it gets charged. There are actually many credit card promotions where they waive the first year’s annual fee, so you could sign up for the card, reap the benefits, and then cancel it before you have to pay the second year’s fee!

When To Apply

Once you have found the card you want, it’s time to decide when would be the best time to apply for it.

If you are applying for a secured credit card, you don’t really need to worry about timing your application, so long as you have the money saved up to give the lender. Pull the trigger whenever you are ready and you’ll be approved in no time! However, if you are going after an unsecured credit card, there are a couple of things to consider, timing wise.

A credit card application will involve a credit check on your credit file. If your credit score is currently sitting a little lower than you might like, it could be worth holding off on applying for your card until you improve it a little through paying down other debts and making regular on-time repayments. Once your score is in a good position, you’ll be well poised to secure your new credit card.

Another thing to consider is whether you have made several other credit card applications in the recent past. Both credit bureaus and credit providers get nervous when they see a credit file with many credit card applications in a short space of time. If you have made a bunch of applications recently, it would be wise to wait around three months before applying for another. This will give your bad credit score time to reset and will look less risky to potential credit providers.

Close up of wallet with several credit cards

Impact On Credit Score

One last thing to consider if the impact a credit card application can have on your credit score.

A credit card application will involve what is known as a “hard check”. A hard check is any credit file check that is seen as a request for more credit, and usually comes with a slight decrease in your credit score. Hard checks are also performed when applying for a mortgage, personal loan, car loan, and utility account. A soft check is a credit check that is not seen as a request for more credit, and usually occurs when you check your own credit score, or when you are being preapproved for a credit account.

Thus, if you currently have bad credit, it might be best to hold off on applying for the new credit card for a little while. It is better to be as sure as possible that you will be approved for a credit card so that you don’t take the credit score hit for no reason.

And that’s everything you need to know about credit cards in 2019! From rewards points to interest rates, we’ve covered it all. The best thing you can do is to consider exactly what it is you need from a new card and what you can afford. Then don’t be afraid to shop around and negotiate to get the best deal – you’re worth it!