Credit cards
Last updated on April 29, 2022
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About
Credit cards can be used to make purchases or to get a cash advance up to a set maximum amount (your credit limit). Like a line of credit, a credit card is a type of revolving or 'open credit', meaning you can borrow, when and as you need to, if you make payments and stay under your credit limit.
Several types of credit cards are available from banks, credit unions and other institutions. You do not need to have a bank account to apply for a credit card, but you usually need a certain level of income and credit score to qualify. Some credit cards may be 'secured', meaning you will need to provide a cash deposit up-front to use the credit card.
Costs
The cost of using a credit card depends on what you use the card for and when you repay any amounts that you borrow. The most common charges for using a credit card are:
Purchase interest
A purchase interest rate is applied, after an initial grace period (for example, three weeks), to any purchases you make. If you pay off the amount of the purchase on your credit card, you are not charged any interest. Interest will be charged on any balance remaining on the credit card, even if you make the required minimum payment.
Cash advances
A cash advance fee or interest rate is usually applied to any cash advances you take out. Cash advances usually have no interest-free grace period and are charged a higher rate of interest than for purchases.
Annual fees
Some credit cards, like rewards or cash-back credit cards, have an annual fee. This fee is charged up front each year, even if you do not use the credit card. There is also usually an annual fee to allow another person to use the credit card.
Other fees
You can be charged other fees. For example, if you go over your credit card limit or make a late payment, you may be charged a one-time fee or have to pay a higher rate of interest for a period of time.
Choose the right credit card
When shopping for a credit card, it is important to find one that is right for you. Do your research and ask questions to understand how the costs can affect you. For example:
- Consider a card with a lower interest rate, especially if you may be unlikely to pay off the balance of every bill
- If there are rewards for purchases, consider whether the benefits outweigh the annual fee. Many credit cards have no annual fee, including some rewards cards
- Consider the costs for things like going over the credit limit or for missing a payment
- Some companies offer promotions, like fee waivers or free points. Note that these offers are usually time-limited, meaning fees can be charged later
There are online tools to help you find a credit card that is right for you. The Financial Consumer Agency of Canada provides a free credit card comparison tool to compare interest rates, annual fees, rewards and other features.
Once you have chosen a credit card that is right for you, carefully review the terms and conditions you will be asked to accept. When you agree to these terms, you are entering into what is known as a credit agreement. There are certain things to look for in the credit agreement.
Rights and responsibilities
Banks and credit card companies are federally regulated, meaning they must follow rules set by the federal government. Information on your rights under federal laws is available from the Financial Consumer Agency of Canada.
B.C. sets rules for what information must be disclosed to a person in the credit agreement for a credit card but does not regulate the activities of credit card companies.
Resolve an issue
If you have concerns or a complaint about a credit card company, you can contact the Financial Consumer Agency of Canada to get information or learn how to make a complaint.
Have you lost or had your credit card stolen? It’s important to tell your credit card company right away. Visit Consumer Protection BC for information on what to do if you credit card is lost or stolen.