So you’re searching for a credit card, are you?
It can be a daunting task, what with the different companies, different rates, different bonus plans, and different spending limits.
RateSupermarket.ca is making life easier for credit card shoppers with our newly-launched card comparing service, so we want to provide you with tips for getting exactly what you need from your credit card.
The company matters
In Canada, the most widely-accepted credit cards are Visa and MasterCard, while American Express can be used at some establishments. Don’t feel like your options are limited because we essentially live in a two-card system, both Visa and MasterCard offer a wide-range of credit cards, rates, bonus plans, etc. Both companies have special cards for business owners, as well.
Although we’d never tell you not to explore all your options and research what every company out there has to offer, it just takes having a lesser-known card rejected once at a restaurant or grocery store for a shopper to realize their best bet is with either Visa or MasterCard.
Watch the rate
Like all financial industries, the credit card companies like to make a buck. Some charge high interest rates that can climb upwards of 20%. That’s a fair chunk of change if you’ve been on a shopping spree and haven’t been able to chip away at the balance. When shopping for a credit card, you must know what your interest rate is.
Some cards offer lower interest rates – in the 10% to 12% range – but you are most likely stuck with at a small spending limit, as part of the give and take between the consumer and the credit card company.
Before starting your search, know what you plan to use your card for – day-to-day shopping, emergencies only – and that should help you decide on the spending limit you require, which could translate into a lower rate.
Spending limits
Not only should you have a game plan about what purpose you’d like your credit card to serve, but you should also know that shooting for the highest spending limit possible is not always a good idea.
Although having the flexibility to put a large purchase on your credit card and paying it down at your own pace is definitely a bonus, an unnecessarily high spending limit can become a hindrance when applying for other bank loans like mortgages and cars. Although the balance on your credit card could be zero, if you’re available credit is $10,000, the bank will automatically assume you have a consumer debt of $10,000, simply because you have the option of charging that much to your credit card.
So use your judgment when choosing a spending limit, and find the balance between flexibility and excessiveness.
Bonus plans
The major credit card companies offer numerous types of bonuses on their credit cards, like Air Miles or other awards plans. They are also aligned with other major corporations, such as Home Depot, to offer shoppers incentives for using both products. There’s really no downside to any of the bonus plans, although some require annual fees, so choose the awards plan that works best for you.
Dwight@RateSupermarket.ca
Staff writer
Have any credit card tips? Good or bad experiences? Post a comment or e-mail the author at Dwight@RateSupermarket.ca.
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