Canada’s Best Credit Cards 2020
Best secured credit card for building credit
You might be new to Canada, have a problematic credit history, or are just starting out. There are many reasons why you might need to build or rebuild your credit—but whatever the case, you’ll want to take steps towards achieving a healthy credit score. That’s where the no-fee Home Trust Secured Visa can come in. Unlike with conventional credit cards, it’s easy to be approved for a secured card—you just need to be a resident of Canada (except Quebec) and have a deposit. The Home Trust Secured Visa tops our list for its low minimum deposit (you can start with as little as $500) and $0 annual fee. With this card, building your credit score is simple and affordable.
- Annual fee: $0
- Interest rate: 19.99%
- Additional benefits: None
Rogers World Elite Mastercard
Frequent U.S. travellers and cross-border shoppers need a card that won’t break the bank when it comes to the foreign transaction fees that most banks charge. It is usually 2.5% for purchases made in another currency. The Rogers World Elite gets this nod because it offers 3% cash back on U.S.-currency purchases, which works out to a 0.5% return when you factor in foreign transaction fees. Pair that with no annual fee, and 1.5% back on all other purchases, and you have a competitive card.
However, world travellers will want to keep in mind that only the regular 1.5% earn rate will apply on foreign currency purchases outside the U.S., so you won’t come out ahead after being hit with the 2.5% foreign transaction fee.
This card does include travel medical insurance, which covers you for trips up to 10 days. However, it also comes with a $15,000-a-year minimum spend, and a steep annual income requirement, so you’ll want to consider another option if you don’t make $80,000 a year as an individual, or $150,000 as a household.
- Annual fee: $0
- Welcome bonus: $25 when you make your first purchase within your first 3 months
- Earn rate: 3% on purchases in U.S. currency (0.5% after foreign transaction fees); and 1.5% cash back on all other purchases
- Income requirement: $80,000 individual; $150,000 household
- Additional benefits: Travel emergency medical insurance for 10 days; rental car insurance; trip interruption and cancellation coverage
Canada’s best credit cards
How do credit cards work?
It’s important to understand exactly what credit cards do, so you can use them to maximum advantage without falling into financial trouble. There are lots of benefits that come along with having a credit card. For example, they offer credit that can be used when you make a purchase, for balance transfers and/or cash advances. Essentially, your credit is like a short-term loan with a balance that comes due every month. As you pay down your balance, the credit available to you the following month starts to go back up to the maximum credit limit on your card.
A credit card’s strongest advantage is convenience. Simply pay for your purchase with your credit card and you will be billed for the outstanding balance the following month—no cash in your wallet required. Other benefits include the ability to accrue rewards and points—such as cash back or travel points—based on a percentage of your purchases each month, usually between 1% to 4%, depending on which credit card you choose. You can then redeem those points for gift cards, travel or other items offered through the credit card company’s online rewards catalogue.
Credit cards can also help you build credit. If you always pay on time, that will help you achieve a high credit score (650+points), allowing you to borrow for a mortgage or a car loan in the future at a reasonable interest rate from your local financial institution.
Of course, credit cards need to be used responsibly and work best when you are a disciplined spender. Have only one or two cards in your wallet and make sure they match your spending habits. And of course, make sure you can pay off the balance in full (or at the very least make the minimum payment) every month so you don’t have to pay hefty interest on your unpaid balance. This can result in costly fees as well as getting points knocked off your credit score—a real no-no. But with a bit of diligent oversight and self-control, credit cards become helpful and convenient financial tools that can make everyday purchases easy.
Types of credit cards
Rewards credit cards
When it comes to rewards credit cards, the name says it all. These are cards that give you something back when you spend with them, whether it’s points, miles or cash. The more you spend, the more rewards you get. For those who pay off their balance in full every month, these cards can really add value. There are four main types of rewards cards:
Cash-back credit cards
These cards offer a rebate credited to your balance, usually calculated as a percentage of the dollar value of your purchases. Though most cash-back cards have accelerated earn rates in certain categories (groceries and gas, for example), they all also have a minimum base rate for spends outside those categories. Your cash back rewards can help you save on anything you can buy with your card.
Travel credit cards
These cards offer points or miles to be redeemed towards travel-related purchases such as flights, hotels, cruises or vacation packages. Rewards might not be as straightforward as cash back, but travel points cards can help you save big on upcoming trips, with many offering perks including sign-up bonuses, comprehensive travel insurance, and even airport lounge access.
Store credit cards
These cards gift you with points for everyday purchases that can be redeemed for discounts off items from your favourite retailer. The idea is to reward brand loyalty with valuable benefits. The PC Financial Mastercard and the Canadian Tire Mastercard credit cards are great examples.
Hotel credit cards
Similar to travel cards, hotel credit cards reward consumers with points redeemable for hotel stays and perks. These cards are often linked or co-branded with a specific hotel brand or loyalty program, like Marriott Bonvoy or Best Western Rewards
Low-interest credit cards
With standard interest rates sitting at anywhere between 19.99% and 22.99%, most rewards credit cards aren’t the right fit for people who carry a balance. That’s where low-interest cards come in. These cards, which typically charge between 8.99% and 12.99% interest on purchases, allow cardholders access to credit without high interest charges that quickly add up. They don’t usually have much in the way of extras or perks, but the lower rates help to ensure that you’ll come out ahead in the long run if you generally need more time to pay off your card balance.
Balance transfer credit cards
Once you accumulate a debt load on an existing credit card, the interest will compound—rapidly. Your best bet is to transfer the debt to a balance transfer credit card, which lets you move debt from a high-interest card to one with a lower rate. These cards often offer promotional interest rates for a specific period—0% interest for the first 10 months, for example—which can buy you time to pay down your balance with little or no interest. Sometimes, even the regular interest rate on a balance transfer card is lower than usual.
Student credit cards
Student, or “starter,” cards are credit cards aimed at people with no credit history looking to establish a credit score. These entry-level cards tend to have few qualification criteria, no annual fees and provide little in the way of perks or extras, but some do offer some decent rewards on your everyday spending
Secured credit cards
People who lack a good credit score or a local credit history often have trouble getting approval for standard credit cards. This can be a real problem for those wanting to build up their credit towards a future purchase or loan—but secured cards can offer a solution. This kind of card is “secured” with a deposit by the applicant and virtually anyone will be approved. The responsible use of a secured card will help build, or rebuild, your credit score.
How to decide: What is the best credit card for me?
To decide which credit is the best for you, you need to look at your priorities. If you normally carry a balance or you want to reduce your debt, then a low-interest or balance transfer card should be the only types you consider.
People who always pay off their full balance every month need to decide whether a travel or cash-back card makes more sense for them. Travel cards can offer lucrative rewards, but if you don’t like to travel, there’s no point in getting a travel credit card. If this sounds like you, then a cash-back card may be the way to go.
Now that you’ve got your category of card selected, take a look at the earn rate, additional, benefits and which type of points you earn for each card. If you happen to spend a lot on gas and groceries, then look for a card that has a high earn rate for those categories.
The annual fee should also be a consideration in your decision making, but if you think you’re getting good value out of your additional benefits and you’re making more back than you paid with the fee, then it shouldn’t be a big deal.
Credit card points versus cash back: What to consider before applying
In the end, most decisions will come down to whether a cash back or travel rewards credit card suits your needs and spending habits best. As mentioned, travel rewards can be lucrative, but cash back is simple since you don’t need to worry about any potential travel restrictions. Think about the following for each type of card.
The first thing you want to look at is the earn rate. Take a look at your spending habits and pick a card that will earn you the most rewards. For example, if you spend a lot on gas, then pick a card that earns you more cash back at gas stations. High earn rates are great, but keep in mind that many of the top cards have a high income requirement. Cash back is simple to understand, but some credit cards will only give you what you’ve earned after you reach a minimum amount or once per calendar year. Find out how you’ll get paid and make sure you’re okay with it before you apply. If you’re considering a card with an annual fee, make sure the extra cash back you earn is worth more than the fee. If it’s not, stick to a no-fee card.
Selecting a rewards credit card
Generally speaking, cards that earn you points are usually best used for travel redemptions. These cards will likely give you other ways to cash out your points, but the majority of the time, you get the most value for your points when redeeming for travel. Similar to cash-back cards, you want to pick a card that gives you the most points on the categories you spend the most money. You also want to figure out what type of travel you prefer; you could get an airline-branded credit card or a hotel-branded one. There are also credit cards that allow you to redeem for any type of travel. Regardless of what you go with, you need to know how the reward programs work so you can maximize your points.
More on Canada’s best credit cards
For the best credit cards 2020 ranking we ran the numbers for each of the cards in the seven categories based on $2,000 in monthly spending ($1,000 monthly for the student cards) as well as interest rates and offers. We also made some assumptions on spending—grocery spend of $500, gas of $200, restaurants of $200 and bill payments of $125, travel of $175, entertainment of $225, pharmacy purchases of $75 and other purchases of $500. (These were adjusted lower for student cards).
The end game was a magic number—that is, the annual net reward in dollar terms to identify the top cards in each category, plus an honorary mention. As highlighted above, our methodology also took into consideration other factors, including the value of a credit card’s welcome bonuses, insurance benefits and flexibility.
‡MoneySense.ca and Ratehub.ca are both owned by parent company Ratehub Inc. We may be partnered with some financial institutions, but this does not influence the “Canada’s Best Credit Card” rankings. You can read more about this in our Editorial Code of Conduct.