Understanding Credit Card Options

Many credit cards offer enticing benefits like discounts at stores, access to airport lounges, and even early entry to live events. Even so, if a card comes with an annual fee, you have to weigh those perks carefully.

That said, not every card suits every person. “It depends on your income, how much you spend using credit cards, and your credit score,” shares Natasha McMillan, a director at Ratehub.ca.

There are numerous cards available, each featuring its own unique list of benefits. Sometimes a card with extra perks may have an annual fee of up to $799. However, McMillan notes that most fees hover around $120 a year.

She encourages consumers to think about their life stage before picking a card. For students and young adults, no-fee cards can be a smart choice, allowing them to build credit without incurring charges.

McMillan also points out that secured credit cards, which require a cash deposit, can effectively help individuals who are either starting out or trying to rebuild their credit. These cards typically don’t have monthly fees or annual charges, making them user-friendly.

For young professionals who manage their spending well, a paid credit card could align nicely with their lifestyle and offer relevant benefits. But it’s crucial, according to Melissa Leon, author of *Happy Go Money*, to do some calculations in advance.

“List out the numbers. Think about the annual fee and estimate your likely returns,” she says. Here, the “earning percentage” refers to the rewards you gain per dollar spent.

If a card requires you to meet a certain spending threshold to unlock its benefits, it might not be worth it, Leon warns. “You should be fitting the card into your life, not the other way around,” she adds.

Jessica Morgan, who runs Canadianbudget.ca, echoes the sentiment about knowing your annual spending habits prior to applying for a paid credit card. Some cards might offer better perks if you frequently refuel at gas stations, while others cater to those who dine out often or travel a lot.

“If those categories match your spending habits, it could be wise to choose a card tailored to them,” says Morgan.

McMillan believes that cards with annual fees usually provide higher cashback rates, but this only makes sense if you’re not carrying debt on them.

“Premium credit cards are generally ideal for people who use their cards often and pay off the balances in full each month,” she notes, emphasizing the importance of actually using the benefits to justify the costs.

With rising living costs, though, many people are leaning toward cash-back credit cards to help manage everyday expenses, according to McMillan.

Leong compares paid credit cards to subscription services. She suggests setting a reminder for when your annual fee is due, so you can evaluate if it’s still a smart investment.

“Ask yourself: Have you made use of the benefits? Is it still worth it? Do you carry a balance?” she recommends.

While many people are drawn to the perks of paid cards, that doesn’t always pan out. Leung notes that if someone fails to utilize a benefit before the fee renews, they are likely not going to start using it afterward either.

Leon advises that rewards shouldn’t be the main priority for those with existing balances. Instead, you might want to choose a card that has a low interest rate and no fees, and curtail new spending until any debt is cleared.

Many Canadians hold multiple credit cards, and Morgan suggests that having several can provide added flexibility. If these cards don’t have fees, then there’s really no downside.

However, she warns against applying for too many cards at once, as this can negatively impact your credit score. “Be cautious about how often you apply,” Morgan says.

“The best strategy to gain from credit card benefits is to avoid accruing interest,” she concludes.