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How to choose a credit card in Canada: card types and a step-by-step method

Updated

This page works through four questions in order: whether you’ll carry a balance, what you spend on, whether a card’s fee is worth it on that spending, and whether you’re likely to be approved. The Financial Consumer Agency of Canada (FCAC) says the key differences between cards are the interest rates, the fees, and the rewards and benefits. Each question links the page that goes further, the types of card are set out in one table, and the rankings are listed by need at the end. To compare credit cards side by side, see the comparison table.

Will you carry a balance?

FCAC says: A credit card’s interest rate may be an important factor if you regularly carry a balance.

FCAC also says the rate may not be an important factor in choosing a card if you:

  • pay your balance in full every month
  • don’t take out cash advances
  • don’t make cash-like transactions

On low-rate cards, FCAC notes: Some low-rate cards charge an annual fee. Even if there is a fee, a low-rate card may be a better option.

Worked example (rates and fee chosen for the arithmetic, not taken from any card). Say a balance of $3,000 stays level for a year. On a card charging 21% with no annual fee, simple interest comes to about $630. On a card charging 12% with a $39 fee, interest is about $360, or $399 with the fee. This is simple interest on a level balance, before compounding.

Card issuers give an interest-free grace period to pay for the previous month's purchases, beginning on the last day of the billing period, and federally regulated financial institutions must provide at least 21 days. It doesn't apply to cash advances, cash-like transactions and balance transfers, and interest applies if the balance isn't paid in full by the due date. How interest is charged, and when it isn’t, is on how credit card interest works.

Related rankings: low-interest cards and balance transfer cards.

What do you spend on?

Rewards depend on where the spending goes. One issuer describes cash back cards this way: some pay more on certain purchases, while others pay one flat rate on every kind of purchase. A higher category rate can also stop at a spending limit: one issuer’s terms for one of its cards pay 3% cash back on groceries, on the first $15,000 in annual purchases in that category, then 1%.

What counts in a category is set by the card’s own terms, and the definitions differ. That issuer’s terms for the same card count grocery purchases as: Purchases at merchants the Visa network classifies as Grocery Stores and Supermarkets (MCC 5411). Another issuer’s terms for one of its cards count: Stand-alone grocery stores in Canada. Superstores, wholesale clubs, alcohol retailers and general merchandise retailers do not qualify because grocery is not their primary business.

A few months of statements show where the spending goes. Whether a card’s rewards come as cash back or points, and how each is paid out, is on cash back or points.

Rankings by kind of spending: groceries, gas, restaurants, one store or Amazon.ca and travel.

Is a fee worth it on your spending?

FCAC’s method for a rewards card: You may estimate the potential value of the rewards you may earn in a year and then subtract the annual fee. On fees, it says: Cards with an annual fee usually offer extra rewards and benefits or a lower interest rate. Some no-fee credit cards offer similar rewards and benefits to cards that do have an annual fee.

Worked example (rates and fee chosen for the arithmetic, not taken from any card). Say you spend $800 a month on groceries and $1,200 on everything else, over 12 months.

  • Card A has no fee and pays 1% on everything: $240 a year.
  • Card B has a $120 fee and pays 4% on groceries and 1% on the rest: $384 on groceries plus $144 on the rest, minus the fee: $408 a year.

With groceries at $200 a month instead, card A returns $168 and card B $120, so at that spending the no-fee card comes out ahead.

The cash back calculator runs this sum on your own amounts.

FCAC lists questions to weigh about a card’s rewards and benefits:

  • how likely you are to use each benefit
  • how long it will take you to earn rewards
  • if you already have access to the benefit some other way
  • if there are any restrictions or limitations

What a point is worth is covered on the rewards programs page. The sum above doesn’t count welcome offers; how they work is on welcome offers, and a card’s current offer is for its provider to confirm.

Beyond the annual fee, FCAC lists other fees a card may charge:

  • foreign currency charges
  • over-the-limit fees
  • reprinting charges for statements or receipts from previous transactions
  • dishonoured payment fees
  • inactive account fees
  • insurance fees, also known as premiums for credit card balance insurance
  • merchant surcharges (except in Quebec)

Fees on a card are covered on credit card fees. Financial institutions may offer credit card balance insurance when you apply, and FCAC says of it: It is optional insurance that’s a separate product from your credit card. You don’t need to buy credit card balance insurance to be approved for a credit card. FCAC also notes: If you apply for a credit card from a federally regulated financial institution such as a bank, the application must include an information box. The box must present the card’s key features.

Will you be approved?

FCAC says: To apply for a credit card, you must be of legal age in your province. On credit history, FCAC says: Lenders use your credit history when deciding whether to lend to you, how much interest to charge and what credit limit to offer; a poor or limited credit history may make it harder to get a credit card.

The comparison table lists each card’s income requirement where its provider states one.

FCAC says: When a lender checks your credit, it creates an inquiry on your credit report. How hard and soft checks differ is on hard and soft credit checks. Checking your own credit report or score doesn’t affect your score, and FCAC notes: Errors in your credit report may be the reason you couldn’t get an unsecured credit card. Getting your report for free is covered on free credit reports.

With little or no credit history, or a damaged one, these pages list cards by situation: choosing a first card, student cards, newcomer cards, secured cards and cards for bad credit.

Types of credit cards

The main kinds of card, what each is, what to compare, and the page that lists cards of that kind:

TypeWhat it isWhat to compareCards of this type
Cash backOne issuer says: A cash back credit card gives you back a percentage of eligible purchases as cash back. Some cash back credit cards offer more cash back on certain purchases, while others offer a flat rate across every purchase type.the rate in each category, any limit on a category’s rate, how and when the cash back is paidcash back cards
PointsOne issuer says: With a rewards credit card, you can earn points on everyday purchases like groceries, gas and household essentials. You can redeem your credit card rewards points for gift cards and merchandise, or even to pay down your card balance or save for the future.points per dollar, and what a point is worth for the redemption you’d usepoints cards
Travel and airlineOne issuer says: A travel credit card lets you earn points on everyday purchases. You can typically redeem these points for flights, hotels, car rentals or other travel expenses. Some cards also include perks like travel insurance, airport lounge access or no foreign transaction fees.the points program, the insurance terms, the foreign transaction feetravel cards
Store (retail)FCAC: A retail credit card is a credit card that lets you earn rewards, such as discounts, at a specific retailer. Since the interest rate for retail cards is usually high, even the items you bought at a discount may end up costing you more than the regular price.the reward at the store and elsewhere, the interest ratestore cards
Low-rateFCAC’s note on low-rate cards and fees is in the first questionthe purchase rate, the annual feelow-interest cards
No annual feeFCAC: Some no-fee credit cards offer similar rewards and benefits to cards that do have an annual fee.the rewards and benefits, against cards with a feeno-fee cards
StudentFCAC says some cards are made for students: These cards often have lower credit limits than standard credit cards. Contact your credit card issuer to find out if you’re eligible for a student credit card.the fee, the rewards, the credit limitstudent cards
SecuredFCAC: A secured credit card may be an option if you don’t have a credit history or if you have bad credit. You must provide a security deposit to get a secured credit card. The security deposit may range from a few hundred to a few thousand dollars.the deposit, the feesecured cards
PrepaidFCAC: A prepaid card is a payment card that you can use to make purchases. Prepaid cards can be physical or electronic. When you use a prepaid card, the merchant deducts the purchase amount from the balance on the card.the fees to buy, load and use the cardprepaid cards
ChargeOne issuer that offers both says: Charge cards give you the financial flexibility of a no pre-set spending limit but require the balance to be paid off in full each month. Of its credit cards: A credit card gives you the choice to pay for your purchases in full or carry a balance and make minimum monthly payments.paying the balance in full each monthone issuer’s lineup
BusinessOne issuer says: A business credit card is similar to a personal credit card but is designed for use by businesses.who is liable for the balance, cards for employeesbusiness cards
U.S. dollarFCAC: A U.S. dollar credit card may work for you if you often purchase goods or services in U.S. dollars.the annual fee, how the U.S.-dollar balance is paidthe comparison table

Rankings by need

The pages below list cards by need.

Sources

The figures and rules on this page come from these sources, last checked against them between October 3, 2026 and October 26, 2026. How we check facts.