Choosing your first credit card as a student in Canada is an important step in building your financial future. With so many options out there, it can be tricky to know which one is right for you. This guide will help you understand what to look for and how to manage your card responsibly.
1. Why Should Canadian Students Get a Credit Card?
- Build Credit Early: A credit card helps you build your credit score, which will be important when applying for loans, renting apartments, or even securing a job in the future.
- Develop Financial Discipline: Using a credit card responsibly teaches you how to manage money, stick to a budget, and pay off balances on time.
- Earn Rewards and Perks: Many student credit cards offer cashback, points, or other rewards for everyday purchases like groceries or streaming services.
2. What to Look for in a Student Credit Card
a. No (or Low) Annual Fee
As a student, it’s a good idea to avoid cards with high annual fees. Many student credit cards come with no annual fee, meaning you won’t have to pay extra just to keep the card.
b. No (or Low) Credit Score Requirement
Some student credit cards are designed for individuals with little or no credit history. These are easier to get approved for, making them ideal for first-time credit card users.
c. Interest Rate (APR)
The annual percentage rate (APR) is the interest you’ll pay if you don’t pay off your balance in full each month. Try to find a card with a low APR, but aim to avoid carrying a balance to prevent paying any interest.
Tip: Always pay off your balance in full each month to avoid high interest charges!
d. Rewards and Cashback
Many student credit cards in Canada offer rewards programs:
- Cashback: You earn a percentage of your purchases back in cash.
- Points: You can redeem points for gift cards, travel, or other rewards.
Look for simple rewards programs that match your spending habits, such as 1-2% cashback on groceries, dining, or public transportation.
e. Credit Limit
As a student, your credit limit will likely be lower, typically between $500 and $1,500. This helps prevent overspending but may feel restrictive. It’s important to keep your balance well below your credit limit to maintain a good credit score.
3. Other Features to Consider
a. Introductory Offers
Some credit cards come with introductory offers, like 0% interest for the first few months or bonus rewards when you spend a certain amount in the first 3 months. These offers can be tempting, but make sure you can manage any payments before the higher interest rates kick in.
b. No Foreign Transaction Fees
If you plan to study abroad or travel, look for a credit card with no foreign transaction fees. These fees can add 1-3% to any purchase you make outside of Canada.
c. Fraud Protection
Most credit cards come with fraud protection, which means you won’t be responsible for unauthorized charges. However, make sure to check your statements regularly and report any suspicious activity immediately.
4. How to Use Your Credit Card Responsibly
a. Pay Your Balance in Full
To avoid interest charges, always pay off your balance in full every month. This will also help you build a strong credit score over time.
b. Keep Your Credit Utilization Low
Credit utilization refers to how much of your available credit you’re using. Try to keep this below 30% of your credit limit. For example, if your credit limit is $1,000, aim to use no more than $300 at a time.
c. Always Make Payments on Time
Missing payments can hurt your credit score and lead to late fees. Set up automatic payments or reminders to ensure you never miss a payment.
d. Spend Wisely
It can be tempting to spend more than you can afford with a credit card. Always stick to your budget and only charge what you can afford to pay off.
5. Popular Student Credit Cards in Canada
Here are a few student credit cards available in Canada that meet the criteria we discussed:
- Scotiabank SCENE Visa Card for Students:
- No annual fee
- Earn SCENE points (great for movies, dining, and entertainment)
- 5,000 SCENE points as a welcome bonus
- Tangerine Money-Back Credit Card:
- No annual fee
- 2% cashback in two spending categories of your choice (like groceries, gas, or restaurants)
- 0.5% cashback on all other purchases
- CIBC Dividend Visa Card for Students:
- No annual fee
- 2% cashback on groceries, 1% on gas, 0.5% on everything else
- $60 in cashback as a welcome bonus
6. What if You Don’t Qualify for a Student Credit Card?
If you have trouble qualifying for a student credit card due to lack of credit history, here are a few alternatives:
- Get a Secured Credit Card: These cards require a cash deposit as collateral but are easier to get approved for and help you build credit.
- Become an Authorized User: Ask a family member to add you as an authorized user on their card. This can help you build credit without being the primary cardholder.
7. Monitoring Your Credit Score
In Canada, there are two main credit bureaus: Equifax and TransUnion. Many credit card issuers offer free access to your credit score, allowing you to track your progress. Regularly monitoring your credit score will help you see the impact of responsible credit use.
In Summary
When choosing a student credit card in Canada, focus on cards with no annual fees, low interest rates, and rewards that match your spending habits. Use your card responsibly by paying off your balance in full, keeping your credit utilization low, and making payments on time. By following these steps, you’ll be on the path to building a solid credit history and good financial habits!
