{"id":668,"date":"2017-05-18T11:58:49","date_gmt":"2017-05-18T11:58:49","guid":{"rendered":"http:\/\/localhost\/mrc_blog\/creditcards\/credit-card-basics\/"},"modified":"2023-11-24T05:34:03","modified_gmt":"2023-11-24T05:34:03","slug":"credit-card-basics","status":"publish","type":"post","link":"https:\/\/myratecompass.ca\/blog\/creditcards\/credit-card-basics\/","title":{"rendered":"Credit Card Basics"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_17 counter-hierarchy counter-decimal ez-toc-grey\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" style=\"display: none;\"><i class=\"ez-toc-glyphicon ez-toc-icon-toggle\"><\/i><\/a><\/span><\/div>\n<nav><ul class=\"ez-toc-list ez-toc-list-level-1\"><li class=\"ez-toc-page-1 ez-toc-heading-level-2\"><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/myratecompass.ca\/blog\/creditcards\/credit-card-basics\/#i\" title=\"\u00a0\">\u00a0<\/a><\/li><li class=\"ez-toc-page-1 ez-toc-heading-level-2\"><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/myratecompass.ca\/blog\/creditcards\/credit-card-basics\/#What_is_a_Credit_Card\" title=\"What is a Credit Card?\">What is a Credit Card?<\/a><\/li><li class=\"ez-toc-page-1 ez-toc-heading-level-2\"><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/myratecompass.ca\/blog\/creditcards\/credit-card-basics\/#How_Do_Credit_Cards_Work\" title=\"How Do Credit Cards Work?\">How Do Credit Cards Work?<\/a><\/li><li class=\"ez-toc-page-1 ez-toc-heading-level-2\"><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/myratecompass.ca\/blog\/creditcards\/credit-card-basics\/#Issuers_vs_Networks\" title=\"Issuers vs. Networks\">Issuers vs. Networks<\/a><\/li><li class=\"ez-toc-page-1 ez-toc-heading-level-2\"><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/myratecompass.ca\/blog\/creditcards\/credit-card-basics\/#Comparing_Credit_Cards\" title=\"Comparing Credit Cards\">Comparing Credit Cards<\/a><\/li><li class=\"ez-toc-page-1 ez-toc-heading-level-2\"><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/myratecompass.ca\/blog\/creditcards\/credit-card-basics\/#How_to_Apply_for_a_Credit_Card\" title=\"How to Apply for a Credit Card\">How to Apply for a Credit Card<\/a><\/li><\/ul><\/nav><\/div>\n<span class=\"rt-reading-time\" style=\"display: block;\"><span class=\"rt-label rt-prefix\">Reading Time:<\/span> <span class=\"rt-time\">4<\/span> <span class=\"rt-label rt-postfix\">Min<\/span><\/span>\t\t<div data-elementor-type=\"wp-post\" data-elementor-id=\"668\" class=\"elementor elementor-668\" data-elementor-post-type=\"post\">\n\t\t\t\t\t\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-3b732b0b elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"3b732b0b\" data-element_type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-6e30c53\" data-id=\"6e30c53\" data-element_type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t\t\t<div class=\"elementor-element elementor-element-63eec2fa elementor-widget elementor-widget-text-editor\" data-id=\"63eec2fa\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t<style>\/*! elementor - v3.17.0 - 08-11-2023 *\/\n.elementor-widget-text-editor.elementor-drop-cap-view-stacked .elementor-drop-cap{background-color:#69727d;color:#fff}.elementor-widget-text-editor.elementor-drop-cap-view-framed .elementor-drop-cap{color:#69727d;border:3px solid;background-color:transparent}.elementor-widget-text-editor:not(.elementor-drop-cap-view-default) .elementor-drop-cap{margin-top:8px}.elementor-widget-text-editor:not(.elementor-drop-cap-view-default) .elementor-drop-cap-letter{width:1em;height:1em}.elementor-widget-text-editor .elementor-drop-cap{float:left;text-align:center;line-height:1;font-size:50px}.elementor-widget-text-editor .elementor-drop-cap-letter{display:inline-block}<\/style>\t\t\t\t<h2><span class=\"ez-toc-section\" id=\"i\"><\/span>\u00a0<span class=\"ez-toc-section-end\"><\/span><\/h2><h2><span class=\"ez-toc-section\" id=\"What_is_a_Credit_Card\"><\/span><strong>What is a Credit Card?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2><p>When a business such as a bank lends you money it is called <strong>credit<\/strong>. A credit card essentially allows you to spend the bank&#8217;s money and pay them back later, all through the use of a small plastic card.<\/p><p>Credit cards are convenient, secure, and help build your credit rating if you use them responsibly. Paying for goods with a credit card also gives you the backing of the credit card company&#8217;s fraud handling measures. If your card is used fraudulently without your knowledge, the credit card company will almost certainly pay you back.<\/p><p>However, it&#8217;s important to remember that <a class=\"wpil_keyword_link \" href=\"https:\/\/myratecompass.ca\/credit-cards\/by-category\"  title=\"credit cards\" data-wpil-keyword-link=\"linked\">credit cards<\/a> have annual fees and\/or interest to pay. If you don&#8217;t pay off the entire balance each month, then you will pay interest on the balance. If you use a credit card at an ATM you will likely be charged a cash advance fee.<\/p><p>Your credit card will also have a <strong>credit limit<\/strong> \u2013 the maximum amount \u00a0you are allowed to borrow on the credit card at one time. Once you&#8217;ve paid off some or all of the credit used, you&#8217;ve essentially reset it and the amount paid becomes available again minus interest and charges (as opposed to bank <a class=\"wpil_keyword_link \" href=\"https:\/\/myratecompass.ca\/loans\"  title=\"loans\" data-wpil-keyword-link=\"linked\">loans<\/a> where the credit is non-revolving.)<\/p><h2><span class=\"ez-toc-section\" id=\"How_Do_Credit_Cards_Work\"><\/span><strong>How Do Credit Cards Work?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2><p>Your bank will typically give you a <strong>monthly billing cycle<\/strong>. This doesn&#8217;t necessarily run from the first of each month to the last but is based on your account open date.<\/p><p>At the end of each billing cycle, your bank will send you a <strong>credit card statement<\/strong> that shows how much you owe them. You can choose to pay the entire amount \u2013 this means you won&#8217;t have to pay any interest \u2013 or you can choose to pay the minimum amount or some amount in the middle. There is an interest-free grace period where you \u00a0are not charged interest on your balance.<\/p><p>If you pay less than the full amount, \u00a0<strong>interest<\/strong> is charged. which is a percentage of the amount you owe them. Credit card interest is usually calculated daily and charged monthly. Typically, a bank will charge 19.99% interest per month.<\/p><p>Credit card providers typically charge other fees including:<\/p><ul><li>An annual fee<\/li><li>A fee when you make a payment in a foreign country or in a foreign currency<\/li><li>A fee for paying your bill late<\/li><li>A fee for using your card to advance cash, such as taking money out at an ATM.<\/li><\/ul><p>A <strong>charge card<\/strong> is a special type of credit card that requires you to repay the entire balance in full each month. American Express is well known for its charge cards.<\/p><div class=\"articleBannerM\"><div class=\"\">\u00a0<\/div><\/div><h2><span class=\"ez-toc-section\" id=\"Issuers_vs_Networks\"><\/span><strong>Issuers vs. Networks<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2><p>You get a credit card either from a bank or other financial institution \u2013 the <strong>issuer<\/strong>. They are the ones who physically issue you the card, extend you a credit limit, set the terms and conditions of use, and deal with customer inquiries.<\/p><p>However, each bank doesn&#8217;t run their own credit card network \u2013 they all use one or more credit card <strong>networks<\/strong>. Some of the major credit card networks in use in Canada are MasterCard, <a class=\"wpil_keyword_link \" href=\"https:\/\/myratecompass.ca\/credit-cards\/visa-credit-card\"  title=\"Visa\" data-wpil-keyword-link=\"linked\">Visa<\/a>, and American Express. These companies handle the immense infrastructure required to support a worldwide credit card system.<\/p><h2><span class=\"ez-toc-section\" id=\"Comparing_Credit_Cards\"><\/span><strong>Comparing Credit Cards<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2><p>There are literally hundreds of different credit cards on the market, all with different interest rates, terms, fees, and benefits. There&#8217;s no perfect card and choosing the best one for your needs comes down to your financial situation, credit history, needs, and requirements.<\/p><p>Your <strong>credit history<\/strong> will be a big factor in the type and number of credit cards banks will offer you. If you have good credit, then you&#8217;ll be offered cards with low-interest rates, high credit limits and additional perks such as the ability to collect air miles or discounts on hotels. If you have a poor credit rating, you will be considered more of a risk and, therefore, only \u00a0get cards with higher interest rates and a lower credit limit.<\/p><p>Your age can factor into this too \u2013 if \u00a0you are young, you won&#8217;t have built up much credit history. Consider a student credit card or a charge card to build up your credit rating. Only by using credit responsibly will your credit rating improve.<\/p><p>Your income will also play a big part in which credit cards are open to you \u2013 banks want to know that you&#8217;ll be able to repay the credit they are extending you. With a steady income \u00a0flow coming into your bank account they can see that you have the means to repay your debts.<\/p><p>Apart from choosing the credit card with the lowest interest rate and fees for your situation, you might also want to \u00a0consider the extra perks that \u00a0come with some credit cards. Some \u00a0offer <a href=\"\/best-credit-cards\/best-cash-back-credit-cards-canada\" target=\"_blank\" rel=\"noopener\">cash-back<\/a> when you spend in certain shops; others offer a points system that you can use to for example pay for travel with your credit card.<\/p><h2><span class=\"ez-toc-section\" id=\"How_to_Apply_for_a_Credit_Card\"><\/span><strong>How to Apply for a Credit Card<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2><p><a href=\"http:\/\/localhost\/mrc_blog\/creditcards\/5-things-to-consider-when-applying-for-your-first-credit-card\/\" target=\"_blank\" rel=\"nofollow noopener\">Applying for a credit card<\/a> is quite easy, whether you do it in person, at a bank, or online. The card issuer will need some documents from you to gauge whether you are a good fit for their credit card <a class=\"wpil_keyword_link \" href=\"https:\/\/myratecompass.ca\/deals\" title=\"offers\" data-wpil-keyword-link=\"linked\">offers<\/a>.<\/p><p>They will typically ask for pay stubs that show your income, bank statements, or an alternative proof of income. They will also ask for documents that prove your identity and residence, such as a government-issued ID and a utility bill in your name.<\/p><p>Every credit card will have different eligibility requirements. Some will require that you have a minimum annual income. Most require that you are 18 years old, \u00a0while others 21.<\/p><p>After you have given the credit card issuer these details and documents, they will typically look over your application and approve\/decline it. If \u00a0approved, your credit card will be sent to your home address in 7 to 10 business days and you \u00a0can begin spending once you activate it.<\/p><div class=\"articleBannerM\"><div class=\"\">\u00a0<\/div><\/div>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t\t\t\t<\/div>\n\t\t","protected":false},"excerpt":{"rendered":"<p><span class=\"rt-reading-time\" style=\"display: block;\"><span class=\"rt-label rt-prefix\">Reading Time:<\/span> <span class=\"rt-time\">4<\/span> <span class=\"rt-label rt-postfix\">Min<\/span><\/span> \u00a0 What is a Credit Card? When a business such as a bank lends you money it is called credit. A credit card essentially allows you to spend the bank\u2019s money and pay them back later, all through the use of a small plastic card. Credit cards are convenient, secure, and help build your credit&hellip; <a class=\"more-link\" href=\"https:\/\/myratecompass.ca\/blog\/creditcards\/credit-card-basics\/\">Continue reading <span class=\"screen-reader-text\">Credit Card Basics<\/span><\/a><\/p>\n","protected":false},"author":5,"featured_media":669,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"om_disable_all_campaigns":false,"footnotes":""},"categories":[1],"tags":[21],"class_list":["post-668","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-creditcards","tag-blog-post-template-1-main-template-to-use","entry"],"aioseo_notices":[],"featured_image_urls":{"full":["https:\/\/myratecompass.ca\/blog\/wp-content\/uploads\/2021\/10\/Image-E_13249866_original.jpg",924,609,false],"thumbnail":["https:\/\/myratecompass.ca\/blog\/wp-content\/uploads\/2021\/10\/Image-E_13249866_original.jpg",150,99,false],"medium":["https:\/\/myratecompass.ca\/blog\/wp-content\/uploads\/2021\/10\/Image-E_13249866_original.jpg",300,198,false],"medium_large":["https:\/\/myratecompass.ca\/blog\/wp-content\/uploads\/2021\/10\/Image-E_13249866_original.jpg",750,494,false],"large":["https:\/\/myratecompass.ca\/blog\/wp-content\/uploads\/2021\/10\/Image-E_13249866_original.jpg",750,494,false],"1536x1536":["https:\/\/myratecompass.ca\/blog\/wp-content\/uploads\/2021\/10\/Image-E_13249866_original.jpg",924,609,false],"2048x2048":["https:\/\/myratecompass.ca\/blog\/wp-content\/uploads\/2021\/10\/Image-E_13249866_original.jpg",924,609,false],"post-thumbnail":["https:\/\/myratecompass.ca\/blog\/wp-content\/uploads\/2021\/10\/Image-E_13249866_original.jpg",924,609,false],"post-image-medium":["https:\/\/myratecompass.ca\/blog\/wp-content\/uploads\/2021\/10\/Image-E_13249866_original.jpg",379,250,false]},"post_excerpt_stackable":"<p>Table of Contents \u00a0What is a Credit Card?How Do Credit Cards Work?Issuers vs. NetworksComparing Credit CardsHow to Apply for a Credit Card Reading Time: 4 Min \u00a0What is a Credit Card?When a business such as a bank lends you money it is called credit. A credit card essentially allows you to spend the bank&#8217;s money and pay them back later, all through the use of a small plastic card.Credit cards are convenient, secure, and help build your credit rating if you use them responsibly. Paying for goods with a credit card also gives you the backing of the credit card&hellip;<\/p>\n","category_list":"<a href=\"https:\/\/myratecompass.ca\/blog\/.\/creditcards\/\" rel=\"category tag\">Credit Cards<\/a>","author_info":{"name":"Mohamed Konate","url":"https:\/\/myratecompass.ca\/blog\/author\/mohamedkonate\/"},"comments_num":"0 comments","featured_image_urls_v2":{"full":["https:\/\/myratecompass.ca\/blog\/wp-content\/uploads\/2021\/10\/Image-E_13249866_original.jpg",924,609,false],"thumbnail":["https:\/\/myratecompass.ca\/blog\/wp-content\/uploads\/2021\/10\/Image-E_13249866_original.jpg",150,99,false],"medium":["https:\/\/myratecompass.ca\/blog\/wp-content\/uploads\/2021\/10\/Image-E_13249866_original.jpg",300,198,false],"medium_large":["https:\/\/myratecompass.ca\/blog\/wp-content\/uploads\/2021\/10\/Image-E_13249866_original.jpg",750,494,false],"large":["https:\/\/myratecompass.ca\/blog\/wp-content\/uploads\/2021\/10\/Image-E_13249866_original.jpg",750,494,false],"1536x1536":["https:\/\/myratecompass.ca\/blog\/wp-content\/uploads\/2021\/10\/Image-E_13249866_original.jpg",924,609,false],"2048x2048":["https:\/\/myratecompass.ca\/blog\/wp-content\/uploads\/2021\/10\/Image-E_13249866_original.jpg",924,609,false],"post-thumbnail":["https:\/\/myratecompass.ca\/blog\/wp-content\/uploads\/2021\/10\/Image-E_13249866_original.jpg",924,609,false],"post-image-medium":["https:\/\/myratecompass.ca\/blog\/wp-content\/uploads\/2021\/10\/Image-E_13249866_original.jpg",379,250,false]},"post_excerpt_stackable_v2":"<p>Table of Contents \u00a0What is a Credit Card?How Do Credit Cards Work?Issuers vs. NetworksComparing Credit CardsHow to Apply for a Credit Card Reading Time: 4 Min \u00a0What is a Credit Card?When a business such as a bank lends you money it is called credit. A credit card essentially allows you to spend the bank&#8217;s money and pay them back later, all through the use of a small plastic card.Credit cards are convenient, secure, and help build your credit rating if you use them responsibly. Paying for goods with a credit card also gives you the backing of the credit card&hellip;<\/p>\n","category_list_v2":"<a href=\"https:\/\/myratecompass.ca\/blog\/.\/creditcards\/\" rel=\"category tag\">Credit Cards<\/a>","author_info_v2":{"name":"Mohamed Konate","url":"https:\/\/myratecompass.ca\/blog\/author\/mohamedkonate\/"},"comments_num_v2":"0 comments","jetpack_featured_media_url":"https:\/\/myratecompass.ca\/blog\/wp-content\/uploads\/2021\/10\/Image-E_13249866_original.jpg","_links":{"self":[{"href":"https:\/\/myratecompass.ca\/blog\/wp-json\/wp\/v2\/posts\/668","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/myratecompass.ca\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/myratecompass.ca\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/myratecompass.ca\/blog\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/myratecompass.ca\/blog\/wp-json\/wp\/v2\/comments?post=668"}],"version-history":[{"count":16,"href":"https:\/\/myratecompass.ca\/blog\/wp-json\/wp\/v2\/posts\/668\/revisions"}],"predecessor-version":[{"id":6107,"href":"https:\/\/myratecompass.ca\/blog\/wp-json\/wp\/v2\/posts\/668\/revisions\/6107"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/myratecompass.ca\/blog\/wp-json\/wp\/v2\/media\/669"}],"wp:attachment":[{"href":"https:\/\/myratecompass.ca\/blog\/wp-json\/wp\/v2\/media?parent=668"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/myratecompass.ca\/blog\/wp-json\/wp\/v2\/categories?post=668"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/myratecompass.ca\/blog\/wp-json\/wp\/v2\/tags?post=668"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}