Compare Canada’s Best Credit Cards and Choose Your Perfect Match

When determining a rating for individual credit cards, the Forbes Advisor Canada editorial team factors in an exhaustive list of data points. With the best credit cards in Canada, the scoring model used takes into account factors such as, but not limited to, annual reward earnings, fees, welcome bonuses and other benefits and features. Keep in mind, what may be best for some people might not be right for you. Conduct informed research before deciding which cards will best help you achieve your financial goals. The methodology for scoring the best credit cards in Canada breaks down as follows:

• Overall annual earnings – 50%
• Average Earn Rate – 25%
• Reward Redemption Flexibility – 15%
• Annual Fee — 5%
• Welcome Bonus – 5%

KOHO Essential Prepaid Mastercard

Rewards: Earn 1% cash back on groceries, eating & drinking and transportation. Plus, up to 50% cash back from select retail partners.

Welcome Offer: Earn a $40 cash bonus when you sign up for a KOHO account with code KOHOBONUS and make your first $20 purchase within 30 days of registration.

Annual Fee: $4* per month or $48 per year for an Essential Plan

Other Benefits and Drawbacks: KOHO is on the Mastercard network. So even though it’s a prepaid credit card, it’s still widely accepted. That said, unless you use the credit building features, this card won’t help repair your credit score the way a traditional credit card or secured credit card would. You also have to pay to play in some cases, as credit-building features cost $10 per month.

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American Express Cobalt® Card

Rewards: Earn 5 Membership Rewards per dollar spent on groceries (up to $30,000 annually), 3 Membership Rewards points per dollar spent on eligible streaming subscriptions in Canada, 2 Membership Rewards points per dollar spent on rideshares, transit and gas in Canada, 1 Membership Rewards points per dollar spent on all eligible purchases and 1 additional Membership Rewards point for every dollar spent on eligible hotel or car rental bookings made with American Express Travel.

Welcome Offer: In your first year as a new Cobalt Cardmember, you can earn 1,250 Membership Rewards points for each monthly billing period in which you spend $750 in net purchases on your Card. This could add up to 15,000 points in a year. That’s up to $150 towards a weekend getaway or concert tickets.

Annual Fee: $155.88 ($12.99 per month)

Other Benefits and Drawbacks: Though American Express is still not accepted everywhere in Canada – taken at fewer retailers than Visa and Mastercard – the benefits of the Amex Cobalt are so plentiful, it’s very much still worth using. You’ll get flexible redemption options for Membership Rewards points, such as statement credits, and the ability to transfer points to leading frequent flyer programs at a one-to-one ratio, an extensive suite of travel insurance coverages, including $5 million in out-of-country and out-of-province emergency medical travel coverage. Plus, you’ll get an annual $100 USD hotel credit that can be used on dining, spa or other leisure amenities at select hotels.

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CIBC Aventura® Visa Infinite* Card

Rewards: Collect 2 points per dollar on travel purchases with the CIBC Rewards Centre, 1.5 points per dollar spent at gas and EV charging stations, grocery stores and drug stores and 1 point per dollar on everything else.†

Welcome Offer: Get up to $1,450 in value including a first year annual fee rebate!†. Earn up to 45,000 Aventura Points (up to $900 in travel value†): 15,000 Aventura Points after making your first purchase and 30,000 Aventura Points after spending $3,000 or more in net purchases in the first 4 monthly statement periods. †Terms and conditions apply. This offer is not available to residents of Quebec.

Annual Fee: $139 (Rebated in the first year)† (Purchase Interest Rate†:20.99%; Cash Interest Rate†:22.99%)

Other Benefits and Drawbacks: For the $139 annual fee (rebated in the first year) you will get many additional benefits. These include four complimentary airport lounge visits per year at over 1,200 airport lounges worldwide through the Visa Airport Companion Program and a rebate on a NEXUS application fee every four years. You’ll also get emergency medical out-of-province and out-of-country travel medical insurance in the amount of $5 million for 15 days for those under age 65. Flight delay and baggage insurance is also included along with mobile device insurance, auto rental collision damage/loss insurance, hotel burglary insurance and $500,000 common carrier travel accident insurance. This is in addition to purchase protection and extended warranty insurance.†

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CIBC Dividend® Visa Infinite* Card

Rewards: Earn 4% cash back on gas, EV charging, and groceries, 2% on dining, transportation and recurring bills and 1% on all other purchases.

Welcome Offer: Earn a 10% cash back welcome bonus of up to $300 for the first 4 statements.†
This offer does not apply to residents of Quebec. †Terms and conditions apply.

Annual Fee: $120 (rebated in the first year)†. (Purchase Interest Rate†:20.99%; Cash Interest Rate†:22.99%)

Other Benefits and Drawbacks: This card earns you a healthy $537.50 per year in cash back (even when you factor in the $120 annual fee – a cost which is a bit of a drawback on its own). Truly, the only other negative thing about this card is that you need to have at least $60,000 in personal annual income or $100,000 in annual household income to qualify for it.

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CIBC Aeroplan Visa Business Plus

Rewards: Get 2 points per dollar for every purchase made with Air Canada directly and at the Air Canada eStore. Get 1.5 points per dollar on travel purchases like non-Air Canada flights, cruise lines, rental car companies and tour companies. You’ll also earn the same on transportation purchases like limos, cabs and buses, as well as any dining, shipping, internet and phone purchases. Plus, you’ll get 1 point per dollar on all other purchases.

Welcome Offer: Get up to 60,000 Aeroplan Points in the first year (10,000 when you make the first purchase, 20,000 points when you spend at least 3,000 during your first four monthly statements and 30,000 when you spend at least $35,000 in the first year.

Annual Fee: $120 (rebated in the first year)

Other Benefits and Drawbacks: For a $120 annual fee ( $50 annually for each additional cardholder), you’ll also get four complimentary guest passes to Air Canada’s Maple Leaf Lounge and a free first checked bag for you, your employees and up to eight traveling companions. You also get a one-time Air Canada Buddy Pass in the first year, which gives your travelling companion a base flight fare of $0 anywhere Air Canada flies in North America. This is over and above the travel and consumer insurance you get, including flight delay, baggage insurance, travel accident insurance, rental car auto collision damage or loss insurance, trip cancellation and trip interruption insurance and purchase protection and extended warranty insurance.

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BMO CashBack Mastercard for Students

Rewards: Earn 5% cash back on up to $2,500 worth of purchases made in your first three months (up to a maximum of $125 in cash back). You can also get 3% cash back on groceries (up to $500 per month). Plus, you’ll receive 1% cash back on recurring bill payments (up to $500 per month). If that weren’t enough, 0.5% cash back will come to you on all other spending with no purchase limit.

Welcome Offer: Earn 5% cash back on your first $2,500 in purchases for the first three months (up to $125 maximum in cash back). Must apply by June 1, 2025.

Annual Fee: $0

Other Benefits and Drawbacks: In addition to the cash-back rewards you can earn and the generous welcome offer, you can apply your cash back to a BMO chequing, savings or InvestorLine account with no limit to how much you can deposit at any amount. You will also be able to track your spending with BMO Financial Insights so you can stay on budget.

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American Express Green Card

Rewards: Earn 1 Membership Rewards point per dollar on all eligible purchases and 1 additional Membership Rewards point when you book hotel stays and car rentals through the Amex Travel online portal.

Welcome Offer: Earn 10,000 bonus American Express Membership Rewards when you make $1,000 in net purchases in your first 3 months of card membership.

Annual Fee: $0

Other Benefits and Drawbacks: Though one point on all purchases doesn’t sound like much, it all quickly adds up. Add to that, some pretty decent additional benefits for no annual fee, like Amex’s patented Front Of The Line access to exclusive events and concerts or 90 days of purchase protection. The real benefit of the American Express Green Card though is the ability to transfer the Amex Membership Rewards Points you earn to pretty much any of the most popular travel loyalty programs at a ratio of 1:1.

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MBNA True Line® Mastercard®

Rewards: None

Welcome Offer: None

Annual Fee: $0

Other Benefits and Drawbacks: Though devoid of rewards and insurance benefits, the MBNA True Line® Mastercard® has one of the lowest promotional interest rate and the longest promotional benefit period on balance transfers in the country. It offers a 0% promotional annual interest rate (“AIR”)† for 12 months on balance transfers✪ completed within 90 days of account opening, with a 3% transfer fee. It also carries a lower than average 17.99% standard interest rate on purchases and balance transfers when the 0% balance transfer promotional rate ends. Remember though, to qualify for the promotional rate on balance transfers, the actual transfer must take place within the first 90 days you have the credit card.

†, ✪, Terms and Conditions apply. This offer is not available to residents of Quebec.

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MBNA Rewards Platinum Plus® Mastercard®

Rewards: Earn 4 points†† per dollar on restaurant, grocery, digital media, membership and utility purchases for the first 90 days (2 points‡ per dollar in those categories thereafter). Plus, 1 point‡ per dollar on all other purchases.

Welcome Offer: 10,000 MBNA Rewards (5,000†† once $500 is spent on purchases and another 5,000†† when you switch to e-statements).

Annual Fee: $0

Other Benefits and Drawbacks: Along with being able to redeem‡ for cash back, travel, charitable donations, gift cards and merchandise, you’ll also receive a birthday bonus‡ of 10% of the number of points you earned over the last 12 months before your birthday. You’ll also get mobile device insurance, which is rare when it comes to insurance benefits on credit cards. As for customer protection insurance, you’ll get 90-day purchase protection and an extended warranty that’s one additional year past what the manufacturer offers.

‡, ††, Terms and Conditions apply. This offer is not available to residents of Quebec.

Credit card data researched and collected by Debra Toews, Tia Duncombe and Jack Choros.

The information for the CIBC Aeroplan Business Visa Card Plus has been collected independently by Forbes Advisor. The card details on this page have not been reviewed or provided by the card issuer.

Essentially, a credit card is a payment method that allows you to use credit provided by the issuing financial institution. Every time you swipe or tap your credit card to pay for something at a retailer that accepts it — whether it be a Mastercard, Visa or American Express — you are effectively borrowing money from the amount of credit  you have qualified for with that financial institution.

When you make a purchase with your credit card, your credit limit decreases by the amount of that purchase.  You have until the release of your next credit card statement, an accounting of everything purchased with the card, to pay back your purchase amounts, known as paying your credit card bill. If you are unable to pay off your credit card before the payment deadline and within the included grace period, typically 21 days, you will be charged interest on your purchases. Any unpaid balance carries over into the next month.

Purchases and interest payments aren’t the only thing you’re on the hook to pay when using a credit card: If your payment is late, you will pay a late fee and if  you go over your credit limit with your purchases, you will pay an overlimit fee.  And, if you don’t pay your credit card balance off, your ability to get more credit will shrink as your credit score goes down.  Ultimately, a collection agency will be tasked with collecting your overdue debt. If you still do not pay your debt, the collection agency can take legal action against you and you may find yourself in court.

For most people, it never comes to that. Instead, cardholders will pay off their bill by the deadline (the best case scenario) or pay off their balance over time, as interest accumulates. In this case, it takes even longer to get their balance down to zero, especially if they add more purchases and continue to accumulate interest. However, carrying a balance into the next month, while only making incremental payments, is common.

Still, those cardholders that get the most benefits and rewards from their credit cards are the ones that are able to pay off their bill within the grace period before any interest is accumulated.  These cardholders receive the full value of the rewards or cash back offered by their card, since their debt never outpaces their payments. Plus, their credit remains in the best shape possible, helping them build or maintain a good credit score, which in turn makes it easier to  get bank  loans, car loans or qualify for a mortgage.

When you carry a balance on your credit card beyond the interest-free period and past your payment due date, your credit card issuer will charge interest on the remaining balance. Interest is charged when the issuer multiplies your balance by the Daily Periodic Rate (DPR) and adds it to what you owe on a daily basis. Your DPR is your Annual Purchase Rate (APR) divided by 365.

Related: Credit Card Interest Calculator

This means if your APR is 19.99%, then your DPR would be 0.054%. If you had an outstanding balance of $1,000, by the end of the day your balance would be $1,000.54. Then, your balance the next day would be $1,001.08, followed by $1001.62 and so on. By the end of the month, if you made no payments, your balance would be $1016.66, excluding a late payment fee for not making a payment until after the due date.

When you look at the interest rates on a credit card, you will typically see three different types.

Purchase Interest

Purchase interest is the amount you pay on overdue purchases. It is expressed as the annual percentage rate and it is usually 20% in Canada.

Cash Advance Interest

Cash advance interest is the amount of interest you pay until you pay back a cash advance you requested after sticking your credit card in an ATM and getting the funds in cash. Most credit card cards in Canada put a cash advance APR at just over 22%.

Balance Transfer Interest

Balance transfer interest is the interest charged on a balance you transferred from one credit card to another. It applies to a transferred balance until you pay it off. New purchases on the credit card where the balance was transferred continue to have the purchase interest applied that comes with the card that the balance was transferred to. In the majority of cases in Canada, the balance transfer APR is an identical percentage to the cash advance APR.

Everyone loves getting rewarded for their spending either with points, cash back or even store credit. But, with so many reward options to choose from, how does earning and redeeming rewards actually work? Well, it all depends on the types of rewards your credit card comes with.

Points and Miles

Points have a value that usually equates to 1 cent each or, in some cases, fractions of a cent. Basically, you collect them by making purchases with your credit card — either you earn them on all purchases or you earn them by making purchases in specific product categories like transportation, dining, streaming services or groceries. In most cases, you earn a certain number of points on every purchase and then even more in specific purchase categories. Once you have enough (or sometimes immediately) you can start redeeming points or miles for rewards like statement credit, flights, free nights at hotels, merchandise, charitable donations or investment capital.

Cash Back

Cash back works by giving you a percentage of your money back on every purchase and even more of a percentage in specific purchase categories like restaurants, business expenses, recurring bills and more. Sometimes you’ll get a flat-rate of cash back across all purchases and, in rare cases you’ll be able to choose the purchase categories that will give you the most cash back. In most cases, cash back is awarded as statement credit, but sometimes it’s deposited as cash money in a bank account you might hold with your credit card’s issuing bank.

Typically, a credit card is applied for online via the website of the associated financial institution. You can also apply with the institution over the phone or in person at their local branch. Once you click “apply now” or express interest in acquiring a new credit card, you will be asked if you meet the most basic requirements for eligibility, which are the following:

• You are a Canadian resident.
• You are the age of majority in the province or territory where you live.
• You meet the particular card’s annual household or personal income requirements (some cards do not have income requirements).

If you meet those requirements, you will be shown important card details like the card’s various annual interest rates and its associated fees. You will then be asked to fill out an application where you will have to provide your personal details including name, address, phone number, place of employment, annual income and more.

After that, the credit card issuer will perform a credit check to gain insight  into your credit history and check your credit score. This credit check will be the main determining factor as to whether your application for a credit card gets approved.

Credit cards have  a particular range they’d like their cardholders’ credit scores to fall within. Any delinquent accounts on your credit file, chronically late or missed payments and too many maxed out (or nearly maxed out) credit vehicles open at one time will likely get your credit card application rejected by the issuer. Conversely, if you always pay your credit card bill on time, have no other credit accounts in arrears or with collections and carry a credit score in the good to excellent range of 670 and above, you should have no problem qualifying for most credit cards in the Canadian market.

A credit score is a three-digit number between 300 and 900. This number is used by lenders to determine your creditworthiness or, in other words, your ability to pay your loan back on time. The higher your number, the better your creditworthiness. That means lenders consider you to be a lower risk and are more likely to approve you for a credit card.

The credit score you need depends on the credit card you are applying for. If you are applying for a premium rewards credit card, you will likely need a score considered very good to excellent. In other words, anywhere between 725 to 900. However, that doesn’t shut you out of getting a credit card entirely. In general, the minimum credit score necessary for an unsecured credit card is between 650 and 660, but each credit card application is assessed on an individual basis and approval is not automatic no matter what credit score you have.

That being said, even if your credit score is lower than 650, you can still apply for a secured credit card, you just need enough money for a deposit (usually $500) that will act as your credit line and will be used if you default on paying it off. Even after that, there are plenty of neo credit cards and prepaid cards that function like a credit card, and can be used anywhere they are accepted, but work like a debit card or are preloaded with your existing funds. These types of cards, usually don’t require a credit history and some allow you to build credit for a fee.

The best credit score you can possibly achieve in Canada is 900. Though achieving this score can be elusive at best, it is possible. No one quite knows what goes into having a 900 over just an excellent credit score of 760 or above, but it’s mainly about having a long credit history with a lot of different types of open loans that are both revolving and installment in nature, such as a mortgage, a student loan, a few credit cards, a personal loan, a vehicle and more. Not only do you need a number of diverse loans that you are paying more than the minimum on every month by the deadline, but the amount of credit you are currently using of what you have available must be at 30% or lower. That doesn’t mean you are using just 30% of your available credit on one credit card, it means that all the credit you are using across all the different types of credit or loans you have available to you adds up to 30% or lower.

However, even with all that being said, you might be doing all those things right now and have a very good or excellent credit score and never see a 900 credit score in your lifetime. The specific alchemy of how credit scores are calculated is so opaque that there’s no way to guarantee a specific number. Not only that, but you may have one credit score with Equifax and another credit score in the same range with Transunion because both credit bureaus use a slightly different model from each other for their calculations. At the end of the day though, don’t put too much stock in your credit score and what the number actually is because past 760 it doesn’t really matter what the number is. Your likely to get approved for any credit vehicle you could possibly want as long as your credit remains very good to excellent.

There are various types of credit cards available in Canada. The different credit card types are designed to fit the spending habits of different kinds of cardholders. The types of credit cards you will typically see on the market are as follows:

Rewards Credit Cards

These are credit cards that reward you for your spending, usually in the form of reward points or cash back. The number of points you receive or the percentage rate of cash back you get on a purchase typically depends on how much you spend, what retail partner you’re patronizing  and what category of purchase you are making. Some common purchase categories for an increased rate of reward points and cash back are groceries, gas, transit, travel, dining and online streaming services. These cards also usually offer a base rate of rewards or cash back across all spending, regardless of category.

Reward points can typically be redeemed toward travel purchases, merchandise, gift cards, event discounts, charitable donations and statement credit. Cash back can typically be redeemed as a statement credit on your credit card bill and sometimes transferred into a savings account with the associated financial institution.

No-fee Credit Cards: Rewards With Little Cost

Very few credit cards are truly no-fee, as most carry fees for late payments, NSF charges and more. Plus, everyone pays interest if they don’t pay off their balance in full every month. No, usually what people are talking about when they refer to credit cards as no-fee is a credit card that has no annual fee. Of course, cards with no annual fee are still valuable because they still save you money and some come with rewards, which means you can earn points or get cash back without having to pay a high annual fee for the privilege, which always put you, as the cardholder, ahead.

Black Credit Cards: Good Luck Trying to Get One

There aren’t many black credit cards available in Canada. The one that comes to mind is the American Express Centurion Card, which is colloquially known as, “The Black Card.” This card and other credit cards at its level are marked by one thing: exclusivity. These credit cards are invite-only and are reserved for those with perfect credit, big incomes and a large net worth. If you are lucky enough to be among them though, you will get a myriad of exclusive and expensive perks, including a concierge service that can pretty much get you whatever you want at any point. However, even if you do qualify for a black card, are invited and get to enjoy its luxurious perks, you must also be prepared to pay a $10,000 initiation fee and a $5,000 annual fee.

Aeroplan Credit Cards: For Frequent Air Canada Flyers

If you fly Air Canada a lot, or at least fly those sister airlines that are part of the Star Alliance network, you may want to join their Aeroplan rewards program. You can apply for a free membership through the Air Canada website and by making purchases at Aeroplan’s retail partners across Canada and presenting your Aeroplan membership card when you do so, you can earn points towards free Air Canada flights or perks like a free companion fare or checked bag on an Air Canada flight. An Aeroplan credit card can help you earn Aeroplan points faster, accelerating the cardholder’s ability to earn a free flight. Sometimes, the welcome bonus alone is enough for a one-way ticket to your destination.

Air Miles Credit Cards: Best for Airline Flexibility

If you don’t want to be restricted to free flights on just one or a few airlines, then Air Miles is the way to go. Air Miles allows you to collect miles towards free flights on virtually any airline. An Air Miles credit card can once again help you collect Air Miles faster, but the big drawback here is that the Air Miles program currently only has Canadian Tire and The Bank of Montreal as its partners, so there aren’t a lot of places you can collect points other than with everyday purchases on your Air Miles credit card. The Air Miles path to redemption is also less straightforward than Aeroplan with a single mile being worth different fractions of a cent depending on your destination, the airline you’re flying, how far you are going and what time of year you’re booking.

Balance Transfer Credit Cards

Balance transfer credit cards are aimed at cardholders that usually carry a balance. These types of cards usually carry a lower interest rate (or no interest rate) on balance transfers either for a limited number of months—known as a “promotional period”—or for as long as you hold the card.

This means that if you carry a balance on another credit card, you can transfer the balance to the balance transfer credit card and pay less or no interest on the balance for a period of time. This gives you a better chance of paying off a significant portion of your balance or paying it off altogether.

However, there are several things to be aware of when transferring a balance to a balance transfer credit card. The first is that there is a balance transfer fee involved, usually 3% of the total balance you are transferring. It should also be noted that while the balance you are transferring qualifies for no or a lower interest rate, any new purchases made on the card will be charged according to a different—and likely higher—purchase interest rate.

Low Interest Credit Cards

Low interest credit cards feature any combination of low annual interest rates on purchases, cash advances and balance transfers, either for as long as you hold the credit card or for a stated promotional period of time. If the low interest rate is only in effect for a period of time, once that time expires, the low interest rate in question will usually revert back to a more typical rate like 19.99% on purchases or 24.99% on cash advances and balance transfers.

0% APR Credit Cards

A close sibling of low interest credit cards are no interest credit cards. Cards with 0% APR in particular give cardholders 0% annual interest on purchases for a limited time, or as long as you have the card. Currently no credit card in Canada gives away 0% APR indefinitely. Typically, it’s a promotional rate offered for the first three, six or 12 months cardholders have the account. Then, after the promotional period, the annual interest rate on purchases typically reverts to a more typical rate, like 19.99% or 20.99%.

Student Credit Cards

Student credit cards are available to students studying at a post-secondary institution. They usually do not require a credit history or a credit score in order to qualify and are often a way for Canadian students to get a credit card for the first time. They are typically copies of regular credit cards offered by the issuer with the same rewards and benefits, but a lower barrier to  entry.

However, just because a student credit card doesn’t usually require a credit history, doesn’t mean there is no qualifying criteria whatsoever. Typically, the prospective cardholder must at least have a source of regular income with which to pay their upcoming credit card bill. Student credit cards also usually have higher interest rates than their non-student versions because the student is typically a first-time credit borrower and thus may be seen as more of a credit risk than a non-student applicant.

Credit Cards to Build Credit

All conventional credit cards build (or diminish) credit, since they report the spending and payment habits of their cardholders to the credit bureaus. However, if you’ve been seen as a credit risk in the past, to the point where your credit score is so low that it’s difficult for you to obtain any kind of credit in the conventional way, there are several credit cards on the market designed to help you rebuild your credit. Here are the types of cards that can help build credit:

Secured Credit Cards
Secured credit cards require a deposit that doubles as the user’s credit line. This deposit is used as a method of payment if the secured card user is unable to pay back the purchases on the card with their own money. During typical use, a secured card user would pay off their purchases on the credit card as they normally would with a regular credit card, but every time they make a payment, those payments are all guaranteed to be reported to the credit bureaus, which will raise the user’s credit score more rapidly than a typical credit card.  After several months of responsibly using a secured card, you may be offered a non-secured credit card once again.

Prepaid Credit Cards
Some prepaid credit cards  can also help you build credit. These are cards that you load with funds and use until the loaded money runs out. For an extra $10 a month, card’s like KOHO’s Prepaid Mastercard will then report your payments to the credit bureaus and help you build your credit.

Unsecured Credit Cards
Finally, there are regular, unsecured credit cards that don’t require a very high credit score for applicants to qualify.  These will also report payments to credit bureaus and help those with bad credit raise their credit scores.

Related: Best Credit Cards For Bad Credit In Canada

Business Credit Cards

Business credit cards are meant to support business owners and are tailored to the expenses associated with running their business. They usually include a more extensive application process that is concerned with both the applicant’s individual income, but the income of the business as well.

Quite often, business credit cards come with rewards and perks geared towards business expenses. These include a higher earn rate in cash back or rewards points on purchase categories that would be considered typical business expenses, like travel purchases, office supplies and internet or phone bills.

Business owners will also benefit from having multiple employees on the credit card account at no additional cost and insurance coverages that would benefit their business activities such as emergency travel medical insurance, rental car loss/damage insurance, extended warranty and purchase protection. Plus, business credit cards often have built in expense tracking components and a robust zero liability plan in case an employee makes an unauthorized purchase.

Like anything in life, there are advantages and disadvantages to credit cards. Let’s break it down:

Pros

• You can buy now and pay later
• You can spread out payment for big purchases over a couple months
• You can get reward points for flights, merchandise and gift cards and cash back for your spending
• You can build your credit if the card is well managed, making it easier to qualify for a loan or a mortgage

Cons

• You may still be paying off purchases you already made months ago
• An unpaid credit card balance will put you in debt that you may not come back from
• Harms your credit if used irresponsibly
• A more expensive form of debt than a line of credit or a personal loan

Equifax recommends having at least two to three credit cards along with several other forms of credit like a loan, a mortgage or line of credit in your credit mix. However, they also make the point that the number of credit cards you have is ultimately less important than how you use them. You can have as many credit cards as you want as long as you use them responsibly. Still, there are various advantages and disadvantages that come with having many and not so many credit cards.

Advantages to Having Multiple Credit Cards

As long as you use them responsibly, there are many distinct advantages to having multiple credit cards. The first is that lenders like to see a wide variety of credit sources on a credit file because it shows that you know how to manage multiple credit sources responsibly. So, having multiple credit cards with minimal balances that are being paid off regularly can play a role in raising your credit score and subsequently qualify you for other types of credit.

Another way having multiple credit cards can raise your credit score is it will lower your credit utilization rate or debt to credit ratio. Lenders and credit bureaus like to see an ideal credit utilization percentage of 30% across all the credit sources you have available. When you have more credit available to use,  you have more available across multiple credit cards than you would have with just one or two cards. Plus, with many different credit cards, you potentially have the opportunity to collect more rewards and redeem them in more ways.

That said, having multiple credit cards can be risky for some as well, especially if you have a history of irresponsible spending or poor financial management.

Disadvantages of Having Multiple Credit Cards

The biggest risk to having more credit cards is they can give you the opportunity to access more credit than you can reasonably pay back and having to keep track of multiple credit cards, including fees, deadlines, interest rates, and reward structures can be complex and challenging.

Plus, if you can’t manage multiple credit cards effectively and start falling behind on payments, you’re likely to turn what would be a small problem with one credit card into a much bigger one with multiple credit cards. You have to be very organized and ready to take on the additional financial responsibility when having multiple credit cards. Otherwise, your debt could spin out of control at an accelerated rate and create multiple strikes against your credit report, which will lower your credit score and make you unattractive in the eyes of lenders.

The first step to choosing a credit card is deciding how you are going to use that card and contemplating whether the value gained from any cash back, rewards points or other perks, like travel insurance, are worth the annual fee. If you can or if you can get the same or similar benefits from a card with no annual fee.

Annual Fee

Depending on the credit card, an annual fee either appears on your credit card statement as an annual charge or it is spread over 12 months as a lower monthly charge. There are cards in the Canadian credit card market that carry no annual fee, but they don’t tend to have as many benefits or perks, such as the ability to get cash back or redeem rewards points towards trips and merchandise, as those cards that do have an annual fee.

When choosing a credit card, it’s important to assess whether the perks and benefits, along with any annual earnings gained from a rewards program that it may come with, outweigh the annual fee you may be paying. Ask yourself, “Do the benefits of this card more than make up for the annual fee in terms of dollar value?” If the answer is yes, then maybe you might consider taking on an annual fee for the right card that fits your spending habits.

You may also want to ask yourself whether you can get similar benefits and value from a card that carries no annual fee. If the answer is yes, we recommend saving the money.

Other Fees

Of course, the annual fee isn’t the only fee a credit card holder must contend with. All kinds of additional fees are triggered by certain actions with the card. For example, if you make a transaction that originates in another country, either in-store or online, typically you will be charged a foreign transaction fee of 2.5%. With the Scotiabank Passport Visa and a few other cards in Canada, you won’t pay foreign transaction fees, but that’s not the case most of the time.

Other fees you might encounter are an over-limit fee, if a credit card transaction goes over your credit limit, a late fee, if a payment is late, a dishonored payment fee, if you attempt to make a payment, but don’t have the funds to cover the cost, a fee for an additional card, for an additional cardholder on the account, and a fee for any duplicate statements or credit card cheques.

There will always be fees charged to your credit card but some are zero and others are lower than what’s offered by other credit cards.

Related: Who Pays Credit Card Fees In Canada?

Interest Rates

Interest rates are the rate of interest you are charged should you carry a balance beyond the interest-free period and your credit card statement’s payment due date. Interest is advertised as an annual percentage and there are different percentages charged for the different credit card uses: Purchases, cash advances and balance transfers. Interest is actually accrued daily and compounds at the Daily Periodic Rate (DPR).

You can find out what your DPR is by taking your Annual Percentage Rate and dividing it by 365. It is because of the compounding DPR that interest can balloon so quickly from month to month. The accumulated interest is added to any new purchases made in the intervening weeks and added to your next monthly statement. If you are prone to carry a balance, you should look for a card with a low interest rate either permanently or for a certain promotional period.

Rewards

Rewards help incentivize your spending by giving you something back in return. They usually come in the form of cashback or points that can be redeemed for various items. When choosing a credit card, think about the types of rewards you prefer. If you’re into traveling, merchandise, gift cards, discounts on events, or even charitable donations, points are probably the way to go because those are some common things that you can redeem them for. However, if you’re more interested in paying off your credit card balance, cashback may be the better option because cashback is most commonly redeemed as a statement credit, which can help reduce your bill.

Perks

Perks are the most wide-ranging thing you’ll find on a credit card and the biggest aspect of choosing a credit card that comes down to personal preference. No two credit cards are alike when it comes to perks, but there are some common ones you’ll see most often. One is insurance. Many credit cards come with purchase protection, which will replace damaged or stolen purchases up to 90 days after you originally bought them. Another common one is the extended warranty, which takes any warranty for any product you charge to your credit card and doubles it. Lots of credit cards also come with insurance options associated with travel, such as emergency travel medical insurance, travel accident insurance, lost or delayed baggage insurance for when you’re flying, and rental car insurance that covers damage or loss when you’re renting a car.

Beyond insurance, some credit card networks, like American Express, offer front-of-the-line privileges when buying tickets for events, there’s also concierge services that can set you up with things like dinner reservations, hard-to-find gifts, event tickets, and coordinating business arrangements. Some credit cards will also give you free hotel nights, a prime parking spot at the airport, companion vouchers for the flights you book, and roadside assistance, among countless other benefits.

Credit Building Help

If you’re a person who has trouble managing the responsibility of a credit card and your credit score is so low that qualifying for traditional, unsecured credit cards is not an option for you, then that’s when it’s time to start looking into credit cards that are specifically designed to help you build your credit.

Most often, that means getting a secured credit card. Secured credit cards are cards where you put down a cash deposit that doubles as your credit limit. The cash deposit acts as insurance so that if you default on payments, the issuer has a way to quickly pay back the balance. Otherwise, you use a secured credit card just like an unsecured one, paying off the balance as you rack up purchases against your secured credit limit. The benefit of a secured credit card is that every time you make a payment in full and on time, your payment is guaranteed to get reported to the credit bureaus, which will help raise your credit score over time. Do that enough times consistently and eventually your secured card issuer will offer you a traditional, unsecured credit card.

There are some other credit cards on the market that are unsecured and specifically designed to help you build credit by guaranteeing that they will report every payment to the credit bureaus consistently, but sometimes that comes at an extra monthly cost, like with the KOHO Prepaid Mastercard.

However, it should also be noted that whatever your credit situation, every credit card reports payments and credit card management habits to the credit bureaus, so qualifying for a credit card, even a student card, where you don’t need a credit history to get one, can put you on the road to building your credit and raising your credit score to qualify for bigger things, such as a mortgage, a car loan or a line of credit.

Paying off a credit card is simple whether you’re paying off the balance all in one lump sum or paying it off a little at a time.

The key is to pay off the balance before your payment due date so you don’t accrue interest on what you already owe. If that’s not possible because the balance is too big to pay off before the payment due date, just be sure you don’t rack up any more charges and you should be able to pay off your balance a little bit at a time with consistent, regular monthly payments.

The best way to make sure that you can always pay off your balance by the statement due date is by keeping the charges manageable and within your budget. But, if you do carry a balance for a little while, it’s not the end of the world. Simply, stop making purchases or use the credit card’s card locking feature so even if you’re tempted, it’s not possible to rack up charges. Then, once you’ve paid off your existing balance, you can unlock your card and start using it again.

Minimum payments on credit cards are usually calculated one of two ways. If you owe a lot, it’s likely calculated based on a flat percentage against your balance. Sometimes if you owe very little, your minimum payment is your balance, but most of the time, your minimum payment is likely a fixed dollar amount as long as what you owe is less than your credit card issuer’s floor rate for credit card payments.

Some credit cards charge a percentage of your balance minus interest and fees and then they tack on all the interest and fees built up that cycle at the end. So the equation would be:

Balance X flat percentage + interest and fees.

There are other things that can change your minimum payment equation, such as whether you missed a payment or some of the amount is over the limit. The amount you’re over the limit by or the past due amount could also be added to the minimum payment calculation.

No matter how your minimum payment is calculated, don’t make a habit of paying only the minimum amount. It’s fine to help you maintain good standing with your issuer when you are between jobs or your finances are in flux for some other reason, but to only pay the minimum means you’re barely over the interest on your balance and therefore, you will never have any hope of paying your credit card off. Also, paying over the minimum is always a positive attribute towards raising your credit score.

• Cash back – With cash-back rewards, you usually earn a percentage of the cost of certain purchase categories back, such as 4% on groceries, 2% on restaurants and 1% on all other purchases. Either monthly, once a year or anytime, cash back credit cards will let you redeem your cash back for statement credit, a deposit into a savings account provided by your credit card’s issuing bank or as a cheque you can deposit yourself. With some cards, like the Tangerine Money-Back Card, you’ll be able to pick the purchase categories that give you the largest percentage in cash back and sometimes the purchase categories that give you the most cash back change or rotate throughout the year.
• Travel Benefits – Usually by collecting points through an air travel loyalty program that’s attached to your credit card, such as Air Miles, Aeroplan and Avion. How many points you earn per purchase depends on the credit card, which usually awards a certain number of points per dollar spent. You’ll also tend to get even more points if you’re shopping at a retail partner or, in the case of Air Miles, if you have an Air Miles membership along with an Air Miles credit card. As for redemption, your points can earn you hotel nights, vacation packages, rental car purchases and flights. How much your points are worth depends on the rewards program and the credit card it’s attached to. As for flights, where you can go largely depends on when you book, how far you’re going and the region of the world your destination is located in. Some travel benefit programs cover fees and taxes on flights while others do not.
• General Rewards – In addition to travel, most points programs also allow you to redeem points for merchandise, gift cards, charitable donations, event tickets and experiences and even financial investments. How many points you need for each reward category depends on the program and usually varies widely depending on the type of reward.
• Store Perks – Some credit cards offer you points towards free merchandise at particular retailers. One of the largest reward programs offering free merchandise at particular stores is the PC Optimum rewards program, which offers free groceries at Loblaws banner stores at a rate of $10 worth of groceries for every 10,000 points.

The Rewards Process

Even though there’s plenty to be redeemed for through credit card rewards programs, they do have their limits. For example, you may be able to get a high earn rate on a purchase category for a while, but once you spend enough money (a spending cap) the earn rate will often revert to a much lower base rate, usually 1%. Other limits include only being able to redeem your rewards at a certain time or specific types of purchases (tobacco and lottery tickets, etc.) and specific retailers.

Sometimes reward points can also be transferred to other reward programs at different ratios, the best ratio being 1:1. This gives you the opportunity to collect points for one rewards program like American Express Membership Rewards and redeem them for another like Aeroplan. Generally though, the process for earning rewards is the same across the board: Just buy goods in purchase categories that earn points, store credit or cash back, the redemption process varies, including how much you need for potential redemption items, when you can redeem and how you redeem.

For example, Air Miles separates its miles into Air Miles Cash and Air Miles Dream. Air Miles Dream has the traditional value of Air Miles and is exclusively used for travel, while Air Miles Cash can be redeemed for merchandise, gift cards, vacation packages and everything else, but is worth less than Air Miles Dream. This just goes to show that points are actually worth different amounts and go further depending on what you’re redeeming for and even though most rewards programs don’t separate their points into two different types, the value of your points can fluctuate, depending what you’re redeeming for, on every rewards program.

Earn Rates

While the process for earning rewards is generally consistent across most cash back and points credit cards, earn rates still vary widely depending on the card. Usually there’s a base earn rate on every other purchase outside of the showcased purchase categories whether you’re talking about cash back or points that amounts to 1% or one point per $1.

However, the amount of points you can earn is usually different outside of the base rates, depending on the credit card and the terms of the rewards program. Plus, even if your purchases qualify for the highest earn rate, sometimes if you hit a spending cap in that category, those high earn rates will usually revert to the lower base rate.

Sometimes the credit card issuer will change the earn rates themselves, particularly if an earn rate was part of a welcome bonus available during the first year of card ownership. Also, when it comes to existing reward programs, earn rates can change if particular retail partners drop out or new ones are added because usually you can earn more points or more cash back than is typical when you shop at these stores with your card.

• Learn the rules of your credit card rewards program. Know which purchase categories offer the most cash back or rewards points per dollar and what the spending caps are – what spending thresholds that cause a high earn rate revert to the base earn rate.
• Pay attention to limited time offers. Some rewards programs run periods where certain purchase categories or purchases at certain retailers are worth double, triple or quadruple the points or cash back compared to what they offer normally. Take advantage of those limited periods and purchase those eligible goods to take advantage of the available rewards.
• Redeem those rewards that provide the most value. Don’t waste rewards on gift cards or charitable donations that usually cost the most points. Instead, go for the rewards that provide the most value, like flights and hotel stays. “Also, be aware of any possible stipulations, like limitations on flights you can book, seats you can choose or blackout dates,” says Sandy Yong, Forbes Advisor Advisory Board Credit Card Expert.
• Be aware of when points expire. On most reward programs, points don’t expire, but some reward programs do allow points to expire either through account inactivity or just as part of how the rewards program works (such as a time limit). If this is the case for you as a cardholder, be aware of when your points expire and use them before you lose them.

In Canada, Visa and Mastercard are accepted at most businesses in equal measure. Two notable exceptions are No Frills and Costco. These two grocery brands don’t accept Visa, so make sure you have a Mastercard in your hand when you join the checkout line. In third place is American Express. As of 2023, 111,100 businesses accept Amex across the country–and that number continues to grow. Amex even has a map that you can refer to when looking for businesses that take its credit cards.

The overall answer to this question is that neither is better than the other, but that’s mostly because Visa and Mastercard do not issue credit cards. They are credit card networks. Sure, they do provide a few benefits thanks to their Signature or Infinite and World or World Elite programs on some cards and when comparing those programs, Visa generally offers more, but generally, there are largely negligible differences between the two.

Both are widely accepted around the world everywhere we could possibly shop in-store and online and though they do provide some benefits, the benefits your credit card issuer provides are much more important and probably much more extensive than what a credit card network can offer. In addition, just because some Visa or Mastercards offer benefits provided by the network, doesn’t mean all the credit cards on the network will. Also, any insurance benefits your issuer provides are also much more important and beneficial than anything Visa or Mastercard can give you as a network.

In reality, credit card networks like Visa or Mastercard don’t give you as much value per dollar as the benefits provided by your issuer, so whether Visa or Mastercard is better doesn’t matter and shouldn’t be where your focus is when comparing credit cards. Plus, in all honesty, picking a winner between Visa and Mastercard comes down to personal preference and let’s not forget, what credit card you qualify for — therefore, what benefits you get — come down to your own credit score. So, even if you feel some Visa cards are generally better than some Mastercards or vice versa, you may not qualify for them all, which will limit your choices anyway.

There are three main ways credit card companies make money:

• High interest rates – They make money from unpaid balances and the interest charged on those that usually hover around 20%.
• Miscellaneous fees – Fees like overlimit fees, balance transfer fees, cash advance fees and annual fees, all line the pockets of the credit card issuers.
• Interchange fees – These are the fees issuers charge merchants for the right to accept certain credit cards. Sometimes this cost is passed to consumers through a markup on the price of the goods the merchant is selling.

Yes. The majority of the Big Six banks offer credit cards for non-residents or newcomers who either don’t live, or are new residents, in Canada and likely don’t have an established credit history in this country, so they can’t apply for a standard unsecured credit card. Newcomer and non-resident credit cards do not require a hard credit check and may only require a soft credit check at most, if at all. Alternatively, Americans can get a prepaid card that they can use where the credit card network on the card is accepted, but is preloaded with their own funds or they can get a secured credit card, which only requires a cash deposit to stand in for your credit line.