What Are The Different Types of Credit Cards?

Card perks, interest rates, fees and eligibility criteria vary widely among Canadian credit cards. Begin your search by considering the type of credit card that best matches your lifestyle and spending habits.

Types of credit cards at a glance

Broadly speaking, credit cards fall into seven major categories.

1. No-fee credit cards

If you hate the idea of an annual fee, consider a no-fee credit card. These cards offer convenience — and maybe a few perks — without an annual fee. They may still charge some other fees, such as foreign exchange fees and balance transfer fees.

Is a no-fee credit card right for me?

A no-fee credit card is ideal if you'd rather not pay an annual fee to have a credit card. A no-fee card may still offer rewards and insurance, but coverage and benefits will be more modest than cards with fees. A card with an annual fee may be worthwhile if you earn more in rewards than you spend to have the card.

2. Rewards credit cards

Rewards cards are one of the most common types of credit cards. General rewards cards earn points that can be redeemed for free or discounted experiences, retail items and more. Sometimes these cards are linked to specific stores, so you can only redeem your rewards at that retailer. Popular Canadian rewards programs include American Express Membership Rewards points, PC Optimum points and Scene+ points.

Travel and cash-back cards both fall into the rewards credit card category.

Travel credit cards

Travel credit cards reward travel spending and let you redeem points for flights, hotel stays — even vacation packages. Popular travel rewards programs in Canada include Blue Rewards and Avion. You can also choose cards that earn rewards in a specific airline or hotel loyalty program, like Aeroplan, WestJet Rewards or Marriott Bonvoy

Cash-back credit cards

Cash-back cards offer a percentage of your purchases as “cash,” which is usually applied as a statement credit.

Is a rewards credit card right for me?

A rewards credit card is ideal for anyone interested in earning general rewards points, miles or cash back. When picking a rewards card, consider how points are earned.

First, consider what type of rewards are most useful to you. If you travel a lot, consider a card that earns you discounts on flights or hotels. If you like a little help with your credit card bill now and then, consider a card that earns cash back for statement credits.

Next, consider how the card earns rewards. Some rewards cards offer higher earn rates for groceries or gas, while others prioritize travel-related spending. Choose a card that will reward you well for the things you buy most.

Finally, consider the annual fee. A higher annual fee may mean better perks, such as travel insurance or airport lounge access, but it’s only worth paying if you use those perks extensively.

3. Low-interest credit cards

Many Canadian credit cards have an interest rate around 20%, but certain low-interest credit cards offer rates closer to 10%. These cards are ideal for individuals who don't pay off their entire bill each month.

Balance transfer credit card

Some low-interest credit cards have balance transfer promotions. These promotions offer discounted rates on balances transferred from another credit card, sometimes as low as 0%. But the rock-bottom rates of a balance transfer credit card don’t last forever — the card’s interest reverts to a higher rate once the promotional period is over.

Is a low-interest credit card right for me?

A low-interest credit card is ideal for anyone who regularly carries a balance on their credit card. Balance-transfer cards may be a practical choice if you'd like a chance to pay down your debt while pressing pause on the interest.

If you’re considering a balance-transfer credit card, read the fine print. Familiarize yourself with the offer details, including the length of the promotional interest rate and any fees that may apply to balance transfers.

4. Business credit cards

Business credit cards offer features, benefits and insurance specifically designed for companies and entrepreneurs. Higher credit limits are common with business cards. Insurance coverage may include protection from employee card misuse. And rewards programs often offer accelerated earn rates for business spending.

Is a business credit card right for me?

A business credit card is a good choice for business owners who want a credit card tailored to their needs. These credit cards often reward business spending and may even offer tools to help you track and organize your business finances.

The downside? Business credit cards can potentially affect your personal credit score, so weigh your options before applying and explore employee card misuse insurance if you plan to give supplementary cards to your staff.

5. Credit cards for low or no credit

People with a low credit score or no credit history may want to explore their secured and prepaid credit card options.

Secured credit cards require a refundable deposit that the lender will keep if you stop making payments. The amount you deposit becomes your available credit limit. Secured cards tend to be easier to qualify for than traditional, unsecured cards. When used responsibly, a secured card may help you build or rehabilitate your credit.

A prepaid credit card works like a debit card: funds deposited onto the card become your spending limit. Prepaid cards don’t impact your credit and don’t charge interest, since you’re not actually borrowing any money. You can usually add more funds to a prepaid card through an app, online money transfer, e-Transfer or in-store.

Is a prepaid or secured credit card right for me?

A prepaid or secured credit card is best suited to someone with a low credit score or no credit history. These cards are designed to offer convenient payment options to people who are building or rehabilitating their credit score. However, prepaid and secured cards don't actually allow you to borrow money — you need to have enough cash on hand to make the deposit or preload the card.

6. Student credit cards

Numerous banks and credit unions offer student credit cards. These cards typically charge low fees and offer perks like cash back.

Despite the name, you don’t necessarily need to be in school to qualify for a student credit card. Student cards are generally designed for people of a specific financial profile — one that may be more common for students but could apply to anyone, regardless of age or occupation.

Is a student credit card right for me?

A student credit card may be practical for someone seeking an accessible credit option with a low or no annual fee. Student cards often have more lenient eligibility criteria, making them suitable for people with lower credit scores or no credit history, even if those people might not necessarily be students.

7. Metal credit cards

Metal credit cards are typically made of titanium or stainless steel. But their composition isn’t the only feature that sets them apart.

Metal credit cards often boast premium perks, like airport lounge access, strong earn rates for rewards, hotel upgrades, robust insurance coverage and more. They usually have high annual fees and require a high annual income.

Is a metal credit card right for me?

Maybe, if you’re willing to pay for above-average card perks. A metal credit card may be worth considering for anyone who doesn’t mind paying a high annual fee in exchange for deluxe benefits and insurance. Ensure you’re familiar with the eligibility criteria before applying, as many metal credit cards have strict annual income and credit score requirements.

How do I choose the best credit card for me?

When comparing credit cards, consider these factors:

As you consider your credit card options, remember that you can upgrade or apply for a new credit card at a later date if your circumstances change.