Many are lost with all the credit card offers that exist in Canada. Before analyzing each loyalty program, let's begin by helping you to understand how credit cards work. You will deepen your knowledge of credit card networks, card types, fees, benefits, credit report and gain insight on which credit card to begin with!
Starting with credit cards
We will take, as an example, the questions sometimes seen on the Facebook group.
Let’s take the example of a recent post: it is not uncommon to read on Facebook:
I own a World Elite, it’s the best!
Which does not mean anything given the number of institutions that offer a World Elite card. The advantages and offers of cards vary from one bank to another even for a similar product called World Elite!
If you prefer the video version here it is! If not, continue reading.
Credit card networks
There are three major networks on the market:
- American Express
Each of these networks will grant banks licenses on their credit card brand products and give them a framework of regulations to comply with (minimum income required, fees, etc.).
Each network will offer banks different types of products:
No minimum income required for most
Mastercard (no minimum income)
World Mastercard ($60,000 individual or $100,000 household)
World Elite Mastercard ($80,000 individual or $150,000 household)
Classic Visa / Gold / Platinum (no minimum income)
Visa Infinite ($60,000 individual or $100,000 household)
Visa Infinite Privilege ($200,000 household)
Each of these products has different basic features:
- Minimum individual / household income required
- Insurance packages
Then each bank will be able to add:
- welcome offers
- benefits for card holders
- additional insurance warranties
The goal: to make their credit cards more attractive in comparison to their competitors’ cards, and to offer them to their (new) customers!
You now understand why it is really inaccurate to say:
I have a World Elite.
Rather, we will say:
I have the National Bank’s World Elite Mastercard®.
Different types of cards on the market
You have to understand:
- benefits / perks
Several types of cards are on the market and belong to a class that can be subdivided into several subgroups.
Each credit card network (American Express, Mastercard, Visa) can offer different types of cards
The debit card
With a debit card, money is immediately taken from your checking account when you withdraw cash from an ATM or when you buy something.
The debit card will generally not offer any point-related benefits.
Mastercard and Visa have debit cards.
The credit card
There are credit cards for:
- professionals, the self-employed, small businesses
- corporations / large enterprise
The credit card is not linked to your checking account. This has the great benefit of allowing you to own credit cards from institutions other than your current bank / credit union.
The credit card has limit that is pre-set by the issuer and it allows you to defer payment in relation to the time of purchase.
The balance of a credit card can be carried over from month to month at the cost of a high interest rate.
In the travel hacking world, YOU MUST fully pay your credit card each month.
The charge card
Some institutions, such as American Express, issue charge cards.
The charge card is not linked to your checking account.
Its limit is unknown to the customer (only the issuer knows it) and it allows you to defer payment in relation to the time of purchase.
The charge card monthly balance MUST be entirely paid each month and cannot be carried forward with an interest rate.
The prepaid card
The three networks offer prepaid cards: you will load the amount you want on it and use in the same way you would use a debit card.
These card will be of little interest and only used, for example, to load money in a foreign currency for a trip. An example of a prepaid card is the BMO U.S. Dollar Mastercard.
The different credit cards
There are more than 200 credit cards in Canada as you can see in our comparison tool. No wonder you’re having a hard time finding your way around: That’s why milesopedia is here and provides you with a ranking of the best card offers!
The features differ for each of these cards and various perks such as the following exist:
- a warranty when your card is stolen or lost
- 24-hour customer service in the event of a stolen card, with emergency replacement of this card
- travel assistance and insurance
- personal assistance
- Concierge services
Amidst all the credit cards, several different types of cards exist. Here’s a short description so you can better differentiate them:
Credit card fees
Annual fees are very much part of the process of earning rewards.
Too often, we see people stepping back from selecting cards based on this criteria and choosing a no-fee credit card. Unfortunately, they are often misled in doing so: it will be rare to see a no-fee credit card having a real advantage.
However, what we have to be most on the lookout for is promotions! However, what we have to be most on the lookout for are promotions! Like when credit cards such as the BMO AIR MILES World Elite Mastercard have a first free year promotion!
We could divide the annual credit card fees into four types:
|Basic card||Visa Classic||$0 – $50|
|Standard card||World Mastercard||$50 – $120|
|Premium card||World Elite / Visa Infinite||$120 – $150|
|High-end card||Visa Infinite Privilege / American Express Platinum||$399 – $899|
The most interesting cards will often be the standard/premium/high-end cards.
Although these include an annual fee, the benefits gained (as well as the welcome bonus in the first year) gained more than offset the fees paid!
But it isn’t uncommon for a card without an annual fee to also have an interesting welcome bonus, such as the Best Western Rewards® Mastercard.
Costs related to purchases, withdrawals, transfers
Here, we will talk about the fees charged by your institution in situations such as:
- cash advances
- purchases made abroad / in foreign currencies
- exceeding credit limits
All of these fees can usually be avoided with good credit card management and with a judicious choice in cards, such as cards with no foreign currency fees.
Points and miles collectors are generally not know to have credit card interest charges!
Indeed, if you have unpaid balances on your credit cards, it is useless to start this “hobby” of loyalty programs: the interest fees paid will completely offset the profits gained by the credit cards.
It is therefore important to carefully pay your bills at the end of each period and to check that no payment has been forgotten. Interest could run over time if you don’t pay attention to it and compromise your budget or even your credit report.
Should you negotiate your annual fee?
The perks of credit cards
It would be unreal to detail all the perks of credit cards.
As we have seen above, each network has different advantages for its products. The banks then add their own “layer” of additional perks.
Options, therefore, vary depending on the type of card and the issuer (some will therefore be unavailable for some issuers).
However, we can summarise the broad outlines of these benefits in a few points.
- Extended Warranty: Double / Triple the retailer’s original manufacturer’s warranty for up to one year by paying for your purchases with an eligible card.
- Price protection: If you find the same item at a lower price within 60 / 90 days of the purchase charge on your eligible card, you may be refunded the price difference.
- Purchase protection: Get protection for most items you purchase with your eligible card if your item is damaged or stolen within 90 / 120 days of the purchase date.
- Concierge services: Get exclusive and personal assistance when booking dinners and tickets to activities, locating items that are difficult to find, buying and delivering gifts or gettting services for your company.
- Hot line: Get assistance virtually anytime and anywhere for any questions regarding your card.
- Zero Liability: Pay only for purchase charges that you have authorized on your card account. You are not responsible for unauthorized purchases.
- The charge back procedure: It is possible to get a refund for a service / product that was not received and which was charged on the credit card. One can think, for example, of the cancellation of flights by the airline due to unusual circumstances.
- International service: Get help virtually anytime and anywhere, in the language of your choice. Use your credit card services to report the loss or theft of your card, to get an emergency replacement of your card or emergency cash advances, to find out where an ATM is, or to ask questions regarding your account.
- Access to VIP lounges at airports: Depending on the credit card, you may have free / paid access to airport lounges.
Travel coverage: credit card insurance
There are many types insurance coverages:
- Collision / Damage Insurance for car rentals: This insurance covers the costs of damage or theft of your rental vehicle if you use your eligible credit card to book and pay for the entire cost of the rental.
- Accident and Medical Emergency Travel Insurance: This insurance protects you and your family in case of accidental death and dismemberment if you purchase your tickets using your credit card. For greater peace of mind while travelling, your credit card offers emergency medical coverage anywhere in the world for you, your spouse or dependent children travelling with either parent.
- Travel Cancellation Insurance: This insurance protects you and your family in the event of lost, non-refundable or unused payments and deposits in the event that your travel is interrupted or cancelled, if you have purchased your tickets using your eligible credit card.
- Baggage delay insurance:This insurance reimburses the purchase of basic personal or business items should the arrival of your checked baggage from a public carrier be delayed, if you have paid for the purchase of your tickets using an eligible credit card.
- Damage or loss of luggage insurance: This insurance reimburses the repair or replacement of your registered suitcases or carry-on bags that have been damaged or lost by your public carrier, if you have paid the full cost of your tickets using your eligible credit card.
- Hotel or motel burglary insurance:This insurance provides a refund for the loss of your personal belongings due to burglary in your hotel or motel room. Your stay at the hotel must have been paid in full by the means of an eligible credit card.
Special offers to cardholders
Some card will offer experiences and offers.
Some credit card holders will benefit from exceptional offers from high-end retailers, hotels and airlines.
The credit report
When applying for a credit card, the card issuer will check your credit report and review your credit score which represents your current financial situation.
A credit history will compile information such as:
- your current credit (mortgage, car loans, etc)
- your employment history
- your debts (such as late payments, bounced cheques, accounts transferred to a collection agency, judgments, bankruptcies, etc.)
It’s important to know that a credit card application will only have an impact on 10% of your total credit score rating.
80% of your credit score is based on:
- your payment habits (35%)
- your credit usage ratio (30%)
- your credit history (15%)
You should know that information can be kept for six years in your file:
- negative information (e.g. late payment) can affect your credit rating for many years
- positive information will improve your credit rating over the long term (timely payments, multiple cards approved, etc).
To improve your score, we will always suggest that you pay your balances as soon as you can rather than wait until the end of your card billing cycle!
To conclude, credit card issuers want to know:
- whether you’re a good or bad customer
- if you have debts
- if other institutions have (successfully) granted you credit