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Different Types of Credit Cards

by John_S on August 20, 2010

In an age of speedy communications, it is hardly a wonder that the number of electronic transactions in Canada has soared since the turn of the 21 st century. This fact is mostly due to the increasing number of credit card holders in the country.  There are various offers on the Canadian credit card market, both, at the local branches of banking institutions and around the web. It is important to choose the right type of credit card that will best meet your individual financial needs. Otherwise, you may find yourself stuck with one that is ripping off your pocket every single month.

For better or worse, there is a much wider variety of credit cards with bonus programs, different fees, and interest rates than in the past, when all offers were run-of-the-mill. The simplest type of credit card is the standard, widely available from most financial institutions and organizations. It does not require a security deposit, meaning that you don’t have to prove you can pay the money back. Two examples of standard credit cards are balance transfer and low interest credit cards. With the former type, clients can transfer their balance from a high interest card to a low interest one. The latter either offers a low initial annual interest rate or a single fixed rate. These cards are especially suitable for costly purchases because they allow up to a full year to return the money with very little or no interest.

Credit cards with bonuses give their holder points for every penny charged on the card. The customer can then cash in these points. The catch is that you need really good credit to be approved for this type of card. All big banks in Canada (e.g. Royal Bank of Canada, Bank of Montreal, Canadian Imperial Bank of Commerce, Bank of Nova Scotia, and TD Bank) offer credit cards that bring reward points. The Bank of Montreal, for instance, advertises Gold Air Miles and No Fee Air Miles credit cards. The first gives one air mile for purchases worth $15 and comes with a $99 annual fee and interest rate of 19.5 percent. The second card is on offer with 1 air mile for $20 in purchases, no annual fee, and interest of 19.5 percent.

Another popular type is the so-called cash back credit card. You can get cash bonuses for using it, so the more you pay, the more you get. Most users of these cards get back 1 percent of the total purchases on average, with the exception of interest. Again, the catch – credit card companies charge up to $100 a year in fees because these programs can be quite expensive.

Finally, among the specific credit cards worth next to noting are hotel and gas cards. Some hotel cards are co-branded, meaning you can use them to pay for your stay at a given hotel franchise along with all other types of purchases, and you earn points both ways. Gas cards can be general or branded. The general ones are a better option if you are one of those indiscriminate drivers who care only which gas station is closest. If you tend to favour a specific company you’re better off with a brand-specific card, which rewards you for buying gas exclusively from this company. If you are a road-trip person, again, general cards are the way to go because some chains exist solely within a specific region.

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