Calgary

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Credit Cards and Credit Scores

Basics of obtaining credit cards and building credit scores as a newcomer in Calgary.

Sections

Types of Credit Cards Available

  1. Basic Credit Cards:

    • No annual fees.
    • Limited rewards or benefits.
    • Ideal for those starting to build credit.

  2. Rewards Credit Cards:

    • Offer points, cashback, or travel rewards for purchases.
    • Examples: Aeroplan, Air Miles, or cashback cards.
    • May have annual fees but provide significant perks.

  3. Secured Credit Cards:

    • Require a security deposit (e.g., $500 deposit for a $500 credit limit).
    • Designed for newcomers or those with no/poor credit history.
    • Helps build or rebuild credit.

  4. Low-Interest Credit Cards:

    • Lower interest rates (e.g., 8-12%) compared to standard cards (19-22%).
    • Suitable for those who may carry a balance.

  5. Premium Credit Cards:

    • High annual fees (e.g., $120-$700).
    • Offer extensive perks like travel insurance, concierge services, and higher rewards rates.
    • Require good to excellent credit scores.

  6. Student Credit Cards:

    • Tailored for students with no credit history.
    • Low or no annual fees and basic rewards.

  7. Business Credit Cards:

    • Designed for small business owners.
    • Offer higher credit limits and business-related perks.

Costs Associated with Credit Cards

  1. Annual Fees:

    • Range from $0 to $700+ depending on the card type.
    • Premium cards typically have higher fees.

  2. Interest Rates:

    • Standard rates: 19.99% to 22.99% on purchases.
    • Cash advances: Higher rates (22.99%+), with no grace period.
    • Low-interest cards: 8% to 12%.

  3. Foreign Transaction Fees:

    • Typically 2.5% on purchases made in foreign currencies.
    • Some cards waive this fee (e.g., Scotiabank Passport Visa Infinite).

  4. Late Payment Fees:

    • Usually $25-$40 if you miss the minimum payment deadline.

  5. Over-Limit Fees:

    • Charged if you exceed your credit limit (not all cards allow this).

How to Apply for a Credit Card in Calgary

For Locals (Canadian Citizens or Permanent Residents):

  1. Eligibility Requirements:

    • Be at least 18 years old in Alberta.
    • Have a valid Social Insurance Number (SIN).
    • Provide proof of income or employment (for unsecured cards).

  2. Application Process:

    • Apply online, in person at a bank branch, or through a credit card issuerโ€™s website.
    • Provide personal details (name, address, SIN, income, etc.).
    • Approval depends on your credit score and financial history.

For Newcomers (Immigrants or International Students):

  1. Challenges:

    • Lack of Canadian credit history can make it harder to qualify for unsecured cards.

  2. Options for Newcomers:

    • Secured Credit Cards: Offered by banks like TD, RBC, and Scotiabank.
    • Newcomer Programs: Many banks (e.g., Scotiabank StartRight, RBC Newcomer Advantage) offer unsecured credit cards to newcomers without a credit history.

  3. Documents Required:

    • Passport and visa/permit (e.g., work permit, study permit, or PR card).
    • Proof of address in Calgary.
    • SIN (if available).

2. Credit Scores in Canada

Your credit score is a three-digit number that represents your creditworthiness. Itโ€™s crucial for securing loans, renting apartments, and even some jobs in Calgary.

How Credit Scores Work

  1. Credit Score Range:

    • 300-559: Poor
    • 560-659: Fair
    • 660-724: Good
    • 725-759: Very Good
    • 760-900: Excellent

  2. Credit Bureaus in Canada:

    • Equifax and TransUnion are the two main credit reporting agencies.
    • You can request a free credit report once a year from each bureau.

  3. Importance of Credit Scores:

    • Affects your ability to get loans, mortgages, or credit cards.
    • Influences the interest rates youโ€™re offered.

Factors That Affect Credit Scores

  1. Payment History (35%):

    • Paying bills on time is the most critical factor.

  2. Credit Utilization (30%):

    • The percentage of your credit limit youโ€™re using.
    • Aim to keep utilization below 30%.

  3. Credit History Length (15%):

    • The longer your credit accounts have been active, the better.

  4. Credit Mix (10%):

    • Having a mix of credit types (e.g., credit cards, loans) is beneficial.

  5. New Credit Inquiries (10%):

    • Too many hard inquiries (e.g., applying for multiple credit cards) can lower your score.

Steps to Improve Your Credit Score

  1. Pay Bills on Time:

    • Set up automatic payments to avoid late payments.

  2. Keep Credit Utilization Low:

    • Use less than 30% of your credit limit.

  3. Avoid Frequent Credit Applications:

    • Space out applications to minimize hard inquiries.

  4. Check Your Credit Report:

    • Regularly review your credit report for errors and dispute inaccuracies.

  5. Build Credit History:

    • Keep older accounts open to maintain a longer credit history.

  6. Use a Secured Credit Card:

    • If youโ€™re new to credit, a secured card can help establish a positive history.

3. Calgary-Specific Considerations and Services

  1. Major Banks in Calgary:

    • Big Five Banks: RBC, TD, Scotiabank, BMO, and CIBC.
    • These banks have branches across Calgary and offer credit cards tailored to locals and newcomers.

  2. Credit Unions:

    • Local credit unions like Servus Credit Union or First Calgary Financial may offer lower fees and personalized service.

  3. Newcomer Programs:

    • Scotiabank StartRight Program: Offers unsecured credit cards, no-fee bank accounts, and financial advice for newcomers.
    • RBC Newcomer Advantage: Provides credit cards without a credit history requirement.

  4. Financial Literacy Resources:

    • Momentum Calgary: Offers financial literacy programs, including credit-building workshops.
    • Credit Counselling Society: Provides free credit counselling and debt management advice.

  5. Local Support for Credit Issues:

    • If youโ€™re struggling with debt or credit issues, organizations like Money Mentors in Calgary can help with budgeting and debt repayment plans.

4. Tips for Managing Credit Cards and Credit Scores in Calgary

  1. Set a Budget:

    • Avoid overspending by tracking your expenses and sticking to a budget.

  2. Use Rewards Wisely:

    • Choose a credit card that aligns with your spending habits (e.g., travel rewards for frequent flyers).

  3. Avoid Cash Advances:

    • These incur high fees and interest from the day of the transaction.

  4. Monitor Your Credit Regularly:

    • Use free tools like Borrowell or Credit Karma to check your credit score.

  5. Be Cautious with Joint Accounts:

    • If you share a credit account, both parties are responsible for payments, which can impact your credit score.

By understanding the credit system and leveraging the resources available in Calgary, you can build a strong financial foundation and achieve your financial goals. Let me know if youโ€™d like more specific recommendations or assistance!