As a newcomer, understanding Canadian credit cards is a way to start building your financial future here. In this article, we’ll offer tips to help you use them wisely.
What is a Credit Card and How Does it Work?
A credit card is a financial tool that allows you to borrow money up to a certain limit for purchases, cash advances, or balance transfers. You repay over time, either in full or with monthly payments. As you pay off what you owe, your available credit renews, offering flexibility and a convenient and secure way to shop.[1]
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How Credit Cards Benefit Newcomers:
For newcomers, a credit card could be a way to manage expenses. It can also help build your credit history, a factor in obtaining loans, renting an apartment, or even securing certain jobs in Canada.[1]
Credit Card Terms Made: Simple[1]:
When researching or applying for a Canadian credit card, you may see some unfamiliar financial terms. Here are some simple definitions to help make things clearer:
- Billing Cycle: The regular time period, usually monthly, when your credit card statement is generated. If you don’t pay your balance in full by the due date, interest will likely apply.
- Minimum Payment: The smallest amount you must pay by the due date. If the minimum payment is late, your interest rate(s) may increase.
- Interest Rate: This is the interest rate you will be charged on borrowing (like loans or credit card debt) over a year.
Understanding Types of Credit Card Transactions and Fees[1]:
Credit cards are versatile and can be used for several types of transactions, each with unique terms:
- Purchases: The most common transaction—your credit card issuer pays the merchant, and you repay the balance.
- Cash Advances: Withdrawing cash from your credit card. These often have high fees and start accruing interest immediately.
- Balance Transfers: Moving debt from one credit card to another, often with promotional interest rates.
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How is interest applied?
Interest is charged if the balance isn’t paid in full by the due date, typically after a grace period (the time between your billing cycle end and the due date). Note that certain transactions, like cash advances, may incur immediate interest with no grace period.
Other fees to consider:
Credit cards may come with various additional fees, including:
- Annual Fees: Some cards charge a yearly fee for having the card, which can vary in cost.
- Foreign Transaction Fees: If you make purchases abroad, you might pay 2-3% extra on each transaction.
- Over-Limit Fees: When the balance on your credit card is over the credit limit, you may have to pay an over-the-limit-fee.
- Late Payment Penalties: Missing a payment can result in a fee and may negatively affect your credit score.
- Balance Transfer Fees: Balance transfer fees only apply to promotional Balance Transfer offers. The fee is based on a percentage of your total Balance Transfer amount.
Using Your Credit Card Abroad[1]:
Using your card overseas may be more convenient and secure than cash, but watch out for:
- Foreign Transaction Fees: Look for cards that waive these fees to save money when travelling.
- Better Exchange Rates: Credit cards may often provide better rates than cash exchanges.
- Security: Remember that credit cards may be safer than carrying large sums of cash.
Building a Healthy Credit History: Why it Matters[2]:
In Canada, your credit history plays an important role in many financial decisions. Credit cards might be one of the easiest ways to start building your credit profile.
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How your credit history affects your finances:
Lenders, landlords, and even some employers may assess your credit history to evaluate your financial reliability. A good credit score could help you qualify for loans, secure lower interest rates, or rent a home.
Building your credit score: tips for responsible credit card usage[3]:
- Do: Make payments on time.
- Do: Keep your credit use low—aim to use less than 30% of your available limit.
- Don’t: Max out your credit card or miss payments, as these could harm your credit score.
Some Benefits of Credit Cards for Newcomers:
In addition to building a strong credit history, credit cards offer several features that might help newcomers like you[4]:
- Earning Perks and Rewards:
Many credit cards offer rewards programs, including cashback, travel rewards, or points redeemable for discounts. For instance, you might earn points for every dollar spent, which could then be used for perks such as flights, hotels, or gift cards. - Insurance Features[5]:
Some credit cards come with built-in insurance, such as travel insurance, purchase protection, or extended warranties.
Discover TD’s Credit Card Offerings for Newcomers:
TD Bank offers a range of credit cards[6] designed to suit different needs – including some you may have as a newcomer. Whether you’re looking for a card with no annual fee, one with cashback rewards, or a travel-friendly card, TD might have an option that works for you.
Some popular TD credit cards include:
Canadian credit cards don’t have to be intimidating. They may be a valuable tool for newcomers, offering convenience, perks, and an opportunity to build credit history. By understanding how they work and using them responsibly, you may tap into their benefits and avoid unnecessary fees.
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Why Choose TD?
150 years helping Canadians:
TD has a proud history of delivering financial solutions to Canadians for more than 150 years. TD also brings a century of experience helping newcomers navigate the unique challenges of the Canadian banking system.
With over a thousand branches, and the ability to also serve you in more than 80 different languages, TD has become one of the largest and most trusted banks in Canada, now serving 16 million Canadians.
TD offers online support and resources of interest to newcomers on topics such as banking basics, moving to Canada, credit score essentials, and more. TD is open longer hours for your convenience and has thousands of ATMs across Canada to help you take care of your everyday banking needs quickly and easily.
Ready to Bank?
Learn more about TD New to Canada Banking Package today. Book an appointment to talk with a TD Personal Banking Associate about the TD New to Canada Banking Package. You can book online right away, or visit the TD website to learn more.
Legal Disclaimer:
Information provided by TD Bank Group and other sources in this article is believed to be accurate and reliable when placed on this site, but we cannot guarantee it is accurate or complete or current at all times. The information in this article is for informational purposes only and is not intended to provide financial, legal, accounting or tax advice, and should not be relied upon in that regard. This information is not to be construed as a solicitation to buy. Products and services of the TD Bank Group are only offered in jurisdictions where they may be lawfully offered for sale. All products and services are subject to the terms of the applicable agreement. The information in this article is subject to change without notice.
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[1] Government of Canada, ‘How Credit Cards Work’, Canada.ca, Ottawa, Financial Consumer Agency of Canada, 2024, https://www.canada.ca/en/financial-consumer-agency/services/credit-cards/credit-card-work.html, (accessed 28 January 2025).
[2] Government of Canada, ‘Credit Report and Score Basics’, Canada.ca, Ottawa, Financial Consumer Agency of Canada, 2024, https://www.canada.ca/en/financial-consumer-agency/services/credit-reports-score/credit-report-score-basics.html, (accessed 27 January 2025).
[3] Government of Canada, ‘Improving Your Credit Score’, Canada.ca, Ottawa, Financial Consumer Agency of Canada, 2024, https://www.canada.ca/en/financial-consumer-agency/services/credit-reports-score/improve-credit-score.html, (accessed 27 January 2025).
[4] TD, Perks and Rewards, TD Canada Trust, Toronto, TD Bank Group, 2025, http://www.td.com/ca/en/business-banking/how-to/manage-my-business-credit-card/perks-rewards, (accessed 29 January 2025).
[5] TD Bank Group, ‘TD Credit Card Payment Protection’, TD Canada Trust, Toronto, TD Bank Group, 2024, https://www.td.com/ca/en/personal-banking/products/insurance/td-credit-card-payment-protection, (accessed 28 January 2025).
[6] TD Bank Group, ‘Apply Online for a Credit Card in Canada’, TD Canada Trust, Toronto, TD Bank Group, 2024, https://www.td.com/ca/en/personal-banking/products/credit-cards, (accessed 27 January 2025).
[7]. Account must be open and in good standing to earn and redeem Cash Back Dollars. Redemptions of Cash Back Dollars at any time on request must be for a minimum amount of $25. Where Cash Back Dollars are redeemed on an annual basis, the annual earnings period will start from when the Card is used to make Purchases until the Account’s January billing cycle of the following year, after which time the annual earnings period will continue each year from the Account’s January billing cycle to the January billing cycle of the following year. Cash Back Dollars will continue to accrue until redemption instructions are provided. There is no maximum annual amount of Cash Back Dollars that can be earned. For complete details on how to redeem Cash Back Dollars, please see the “TD Cash Back Program Terms and Conditions” section of the TD Cash Back Visa Cardholder Agreement available at www.tdcanadatrust.com/products-services/banking/credit-cards/agreements.jsp.
[8] TD Bank Group, ‘TD Credit Card Payment Protection’, TD Canada Trust, Toronto, TD Bank Group, 2024, https://www.td.com/ca/en/personal-banking/products/insurance/td-credit-card-payment-protection, (accessed 28 January 2025).
