Canadians can choose from hundreds of credit cards issued by an assortment of financial institutions including banks, credit unions, retailers, caisses populaires and trust and finance companies. Each credit card offers an array of features, but one benefit grabs most of the attention: the rewards earned for using the card. It could be "cash back," an account credit based on a percentage of card spending. Or, it might be points or "miles" for every dollar spent, which can be saved up and redeemed for items such as travel, groceries, movie admissions, gas, merchandise, cash back or even charitable donations.
Rewards may be the marketing sizzle, but the best credit card is the one that delivers the combination of attributes that are the most valuable for your personal situation. These include not only the rewards, but also the annual fees charged (if any) and such features as the interest rate on outstanding balances and cash advances, where the card is accepted, and cardholder liability in event of fraud. Insurance covering goods or services purchased on the card may also be available. This might be trip-cancellation and trip-interruption insurance, purchase protection in case of accidental damage or theft, or extension of a product manufacturer's original warranty.
Picking a rewards credit card begins with a review of your spending habits. Where you shop, the types of goods and services you normally buy, and how much you typically spend monthly on the card will factor into the card-selection process. For many consumers, a review of past statements of the credit card(s) they currently use is the easiest way to get this information.
The second step is to become familiar with the types of features and benefits of the rewards cards in the Canadian marketplace. The Financial Consumer Agency of Canada's Credit Card Selector Tool lists most of these attributes under the tabs across the top of the tool (General Information, Rewards, Service fees, Insurance and Benefits, Balance Insurance). For a fuller explanation of particular attributes, click on some of the listed cards.
Next, you need to determine the credit-card features that fit you and your spending habits. For example, if you travel frequently, you may want travel rewards and travel-emergency medical insurance, or a card that doesn't charge foreign-currency transaction fees. If you hate hassles, cash-back rewards that are automatically credited to your card may top your list. If you carry an outstanding balance on your card, a "low" interest rate could be an important feature.
Step four is to work out the credit-card payment-processing network(s) that will serve you best by reviewing the networks accessible where you usually shop. The main networks in Canada used by credit-card issuers are the big three global payment processors: Visa, MasterCard and American Express. However, not all merchants accept cards from all three networks.
The Visa network is the largest, accounting for 55.5% of all purchase transactions worldwide in 2015, according to the Nilson Report. Yet, Costco Wholesale Canada and the discount grocery store in my Toronto neighbourhood accept only MasterCard. My local Canada Post outlet does not accept American Express. In fact, AMEX cards are not as widely accepted as Visa and MasterCard, probably due to the higher fees charged to merchants to access its network.
Once you gain a good understanding of your spending patterns and the credit-card attributes you want, it is time to identify credit cards that should meet your needs. Online credit-card screeners can help with this task. As selection criteria and the card database vary by screener, it is worthwhile to check out several. The following are some of the better screeners available online.
- FCAC Credit Card Selector Tool - The comprehensive list of selection criteria allows you to fine tune your search.
- Red Flag Deals Credit Card Comparison Tool --This tool has an easy-to-use four-step process to select candidate cards.
- MoneySense Credit Card Selector Tool -- You choose your criteria, input estimates of your spending by category (gas, groceries, hotels etc.) and the tool suggests the best cards based on your spending habits.
- Greedyrate$.ca screener -- The search results show the best cards and the net annual rewards based on your estimated spending. Sign-up bonuses in effect are also listed.
- Ratesupermarket.ca -- Besides a basic credit-card screening tool, there is a calculator that uses your estimated spending to compare the annual rewards provided by a specific credit card to those offered by the leading cards in the rewards category you choose.
Another method of identifying suitable rewards credit cards is to review some of the numerous lists of best credit cards that are published online. Most of the aforementioned screening sites also provide lists of their top picks.
If you have a travel rewards card in mind, the credit-card section of the Rewards Canada website. There is a Top Travel Rewards Credit Cards page, numerous articles on all aspects of travel-rewards cards and an inventory of the latest credit-card sign-up bonus offers.
Before finalizing your choice of rewards credit card, a visit to the websites of the top candidate cards is essential to verify the features and benefits of each card. If insurance is part of the package, read the policy to confirm the coverage and exclusions. Find out what security features are in place and the card issuer's policy on fraud protection. Check that you meet the income or credit-rating requirements to qualify for the card. Assess the customer service. Is it easy to report a lost or stolen card? What are the call-centre hours? Are you able to reach a live person when you phone?
As with other consumer products, buying a rewards credit card is a matter of doing your research so you understand the product, and shopping the market for the best deal.
