Banks and other financial institutions offer various credit cards to their clients. The most widespread cards in Canada and the US are VISA, Master Card and American Express. Quite often you receive an invitation to apply for some type of a credit card in your mail. When do you really need to apply? You need to apply only when you actually need this specific card. In order to determine whether you need this credit card, you need to know what the differences between the cards are.
- Annual fee – it is the sum that you have to pay annually for using the card. These days, quite often, cards are offered without annual fees (because the clients demonstrate better due diligence when choosing a card).
- Grace period – it is the term during which you have to repay the credit in order to avoid the interest charges. American Express usually has the shortest grace period.
- Interest charged for not repaying the credit timely. The sum varies between 5% and 19%. You shouldn’t worry about it if you are able to pay back on time.
- The advantages of a card. Some cards offer air miles as a bonus, while others offer credit for buying a car or a house, and some cards offer participation in sweepstakes. There are also other types of cards. Some people use Z-Club cards to use discounts in Zellers, for example. Gold and platinum cards help you save on car insurance or car lease. I advise my clients to use Dividend VISA CIBC bank card (0.25% return from the first thousand spent and paid back and 1% of return after the first thousand is spent and paid back). Platinum Dividend VISA CIBC ( 0.25% – 2% of return, but annual fee applies), President Choice Master Card (1% of return through purchases at Superstore).
- I would like to draw you attention to the importance of reading everything that is specified in a brochure, especially the information in small print. For example, the card could be without annual fees, but there might be a condition that this rule only applies when you spend no less than $300 monthly.
The disadvantage of the cards with air miles, points or other incentives is that the bank can change the method of determining the amount of qualifying points at any time, and you will need to collect more points in order to use them while purchasing products or services.
And the most important thing is: do not apply for more than 4 cards. It will come across as a disadvantage while trying to obtain a bank credit or a card that you really need. Usually the card that you really need is not offered through mail. Quite often you have to be proactive to find the card that you need.
Even if you receive an invitation to apply for a credit card and you wish to obtain the particular card offered, do not rush to fill out the application form. If you haven’t obtained any card yet and your application is declined, it will be harder to receive a credit card next time you apply. I would recommend reading the article “How to Get Your First Credit Card” for those who haven’t gotten their credit card yet.