Credit, Debit, Gift and Prepaid Cards

Credit Cards

A credit card is issued by a bank or financial company. The user can pay for a good or service with the card, but then must pay back the original purchase amount to the credit card company. If the full amount is not paid back within a set period of time, often one month after the purchase is made, the user may have to pay a high rate of interest on any remaining balance.

A credit card is different from a charge card: a charge card requires the balance to be paid in full each month. In contrast, credit cards allow consumers to carry a balance of debt, subject to interest being charged.

Smart Tips for Choosing and Using a Credit Card

  • Choose your credit card wisely – compare rates, annual fees and reward features. Check out the Financial Consumer Agency of Canada’s Credit Card Selector tool. This tool can help you make an informed decision about which card best suits your needs.
  • Understand how the power of time and compounding interest can work against you when you owe money. Check out the Financial Consumer Agency of Canada’s Credit Card Payment Calculator. The calculator demonstrates payment options when carrying a credit card balance from month-to-month and the total cost of making payments.
  • In order to establish a good credit rating, you need to make payments according to the terms of the credit card. Paying the balance in full each month is ideal.
  • Read the fine print on your credit card agreement. It will have the terms and conditions of using the card, the fees that are imposed if you miss a minimum payment and the “grace periods” (the number of days you have to make your payment before interest is charged) if allowed.
  • Be cautious about introductory credit card offers. Often they carry a lower interest rate for the initial period followed by a much higher rate at the end of the period.
  • Having too many credit cards may hurt your credit rating. Financial institutions take the credit available to you into account when assessing your credit worthiness, even if you don’t use them.
  • Monitor your accounts for any unusual activity: new charges, forgotten charges or fraudulent charges.

For more on gift cards, see the frequently asked questions (FAQ) page.