How to Apply for a Credit Card and Tips to Help You Get Approved
There’s a first time for everything, including applying for a credit card. And even if it’s not your first time, the application process can be overwhelming nonetheless.
Every time you apply, issuers do a credit check, which negatively impacts your credit score if done repeatedly. With so many different credit cards available in Canada today, how do you ensure that the card you apply for is a good fit for you, therefore minimizing your chances of rejection? And how do you go through the application process itself?
Credit Card Application Step 1:
Determine Your Credit Needs/Wants
What credit card should be yours? First, you need to figure out what kind of credit consumer you are. There are different types of credit users and each has a different spending pattern.
A revolver is a term in the credit card industry for a credit user who carries a balance month after month, paying it off over time. They’re revolvers because the balance “revolves” from one month into the next.
If this describes your credit usage, you’re going to want to apply for cards with low interest rates: you’ll be paying interest on the balance you carry, and those charges can accumulate into larger debt if they’re on a card with excessive interest rates.
You might also want a card with low interest rates on balance transfers. Many revolvers take advantage of 0% introductory interest rate offers on balance transfers, paying off as much of the balance as they can under the 0% rate until the promotional period ends. These balance transfer promotional periods might last from 3 months to 3 years.
Aside from purchase interest rates and balance transfer rates, here are some other important credit card features that revolvers should be particularly aware of:
- Interest-free period – the period in which you can avoid paying interest if you pay the full balance by a specified due date each month
- Late payment fees – the fee you pay if you miss a payment or pay later than your specified monthly due date
- Annual fee – the fee you pay to use the credit card each year
- Foreign transaction fees – the fee you pay for a transaction in a foreign country
A transactor is the credit industry term for someone who is the opposite of a revolver. If you are a transactor, you pay off your balance in full and on time every month. You avoid paying interest because you don’t carry a balance.
Transactors are the ideal candidates for rewards and cash back cards of all kinds, because they can reap all the benefits of charging purchases to their cards without losing money due to interest costs.
That said, just because transactors pay their balance every month, doesn’t mean they avoid fees all together. Rewards cards usually come with high annual fees, so transactors must make sure that they can make up for the cost of the annual fee with the benefits they receive. Other fees and card features for transactors to be aware of include:
- Sign-up bonus – special rewards that a card issuer gives new cardholders. Note that receiving a sign-up bonus is sometimes contingent on charging a certain amount to the card within a specified period of time.
- Reward point value – the real dollar value of a single reward point
- Flat cash back/reward rates – the per $1 rate at which you can earn cash back or rewards from all spending on the card
- Accelerated cash back/reward rate – the high rate at which you can earn cash or rewards from spending money in certain categories, e.g. groceries, gas, dining out, etc.
- Reward restrictions – any restriction on redeeming rewards such as blackout dates for booking travel or expiration dates for rewards points
- Foreign transaction fees – particularly relevant if you do a lot of travel or online shopping in foreign currencies
- Elite status – a second tier of benefits offered by some card issuers reserved for their longest running credit card customers and those with the perfect credit and the highest income
A credit builder is a term for someone who is attempting to build or rebuild their credit. If you’re new to owning a credit card, have recently immigrated to Canada, have a poor credit score or you’ve experienced a bankruptcy, you are a credit builder.
Credit history (the record of your use of debt) is extremely important and affects everyone who wants to apply for a credit card, loan or mortgage. If you have no credit, you are essentially a financial non-starter in Canada. But fortunately the basics of credit are easy to learn and building credit is always possible, even if you’re starting over.
Those new to Canadian credit—like students and immigrants—can apply for credit cards specifically designated for their needs and circumstances. And anyone with no or low credit can apply for a secured credit card.
A secured credit card is slightly different than a ‘regular’ card, in that it requires a deposit which then becomes the card’s credit limit. A secured cardholder’s progress in paying back their card charges is reported frequently to the credit bureaus, which in turn improves the cardholder’s credit score. Other important card features for credit builders are:
- Minimum/maximum deposit – the lowest and highest amounts that can be deposited for the card, which in turn determines the card’s credit limit
- Interest-bearing investment – some banks put your deposit in an interest-bearing investment vehicle as you build credit
- Annual fee
- Purchase interest rate
- Eventual option to upgrade to an unsecured card
Credit Card Application Step 2:
Determine Your Credit Card Eligibility
There’s no point in applying for a credit card that you won’t be eligible for. Instead of filling out a credit card application prematurely, get a sense of what level of credit cards you’re likely to be approved for by reviewing where you stand with the following criteria.
High-value credit cards with the highest rewards and cash back levels are appealing to all of us, but they’re usually only available to those with high credit scores—about 725 or above. Knowing your credit score can give you a sense of whether you’re likely to be approved for a high-value rewards card, something more basic, or a secured card.
Canadians are entitled to one free credit score a year from the major credit bureaus: TransUnion and Equifax. Find out how to get that credit score here.
If you’re shooting for rewards or cash back, you’ll need to meet a card issuer’s income requirements. Some cards require a minimum income level for the individual applicant only, while other card issuers might also allow the use of a combined household income in the card application.
If you’re close but don’t quite meet the minimum income or credit score requirements, sometimes having another financial product, like a bank account, a loan or another credit card with the same issuing bank, will increase the chances of your credit card application being approved.
Age and Residential Status
The minimum standard of age eligibility for a credit card in Canada is either 18 or 19 years of age, depending on the province you live in. Applicants also must be residents of Canada.
Credit Card Application Step 3:
Compare Your Credit Card Options
Once you’ve figured out the kind of credit user you are and where your eligibility stands, it’s time to find the credit card that’s right for you. Don’t jump on applying for the first card you come across. Compare the different options in the card category that interests you, and pick the card that you’re not only likely to qualify for, but which will also include at least some of the features you want:
Balance transfers are great if you want to take advantage of introductory offers or interest-free periods to pay your debt without paying interest. Some cards will let you transfer at 0%.
The Scotiabank Value Visa Card charges a $29 annual fee and offers a 0.99 % interest rate on balance transfers for the first 6 months.
|Credit Card||Balance Transfer Intro Rate||Annual Fee||Card Review||Apply for Card|
For 6 months
|$29||Read Review||Apply Now|
If you’re a revolver who wants to carry a balance from month to month without generating high levels of additional interest charges, then a low interest card is what you want.
Compare the RBC Visa Classic Low Rate Option against the American Express Essential. The former offers a low $20 annual fee and a decent 11.99% purchase rate (depending on your credit score), but the latter comes with no annual fee and a better purchase rate of 8.99%.
|Credit Card||Purchase Rate||Annual Fee||Card Review||Apply for Card|
If you love to travel, a travel rewards card can help you get to where you want to go for less money—or even for free. But different travel rewards cards offer different perks, even if they might seem similar on first glance.
Compare the American Express Gold Rewards card with the BMO Air Miles World Elite Mastercard. They come with a similar annual fee at $150 on the Amex and $120 for BMO’s card, but offer very different sign-up bonuses. American Express Gold gives you 25,000 Amex Membership Rewards when you charge $1,500 to the card in the first 3 months, while the World Elite Mastercard offers 3,000 Air Miles, plus an annual fee waiver, plus a companion flight rebate to those that charge $3,000 to the card in the same time period (offer is subject to change).
|Credit Card||Sign Up Bonus Points||Annual Fee||Card Review||Apply for Card|
minimum spend of $1500 in the first 3 months
|$150||Read Review||Apply Now|
minimum spend of $3,000 in the first 3 months
|$120||Read Review||Apply Now|
The purchase interest rate on Amex’s card is 30% while BMO World Elite carries 19.99%, but remember that these cards are intended for transactors, not revolvers.
Travel isn’t your thing? No problem, there are plenty of rewards credit cards offering discounts on groceries, entertainment, dining and gas.
The Scotia GM Visa Infinite Card and the American Express CobaltTM card’s rewards structures cater to very different lifestyles. The Scotia card earns up to 5% in GM Earnings for the first $10,000 spent on everyday purchases annually and 2% after that. GM Earnings can then be redeemed for a substantial discount on a GM vehicle.
The Amex’s CobaltTM card offers 5 Amex Membership Rewards points per $1 spent, but this accelerated rate is for purchases at restaurants and bars, as well as on groceries and food delivery. The points can then be redeemed for meals, movie tickets, streaming services, retail and events.
|Credit Card||Rewards Points||Annual Fee||Card Review||Apply for Card|
|5 Amex Membership Rewards points per $1 spent||$120||Read Review||Apply Now|
|5 % in GM Earnings for the first $10,000 spent, 2% after that||$79||Read Review||Apply Now|
*American Express is not responsible for maintaining or monitoring the accuracy of information on this website. For full details and current product information click the Apply link.
Cash Back Cards
Cash is king, so many Canadians prefer pure cash back cards as opposed to rewards cards. Cash back is usually redeemed as a statement credit toward paying down a card’s balance.
While bad credit will limit the type of credit cards available to you, it won’t shut you out of having a credit card completely. Even if you’re building or re-building credit from scratch, there are still some good Canadian cards out there for you.
The Refresh Financial Secured Visa and the Home Trust Secured Visa No Annual Fee card are two such options, and while both are secured cards with many similarities, they have slight differences that make them appealing to different types of credit builders. Applying for the Refresh card does not involve a credit history check of any kind, essentially guaranteeing approval for the card and making it ideal for those with very low credit scores or prior bankruptcy. Applying for the Home Trust card does involve a credit check, but it has no annual fee, whereas the Refresh card charges $48.95 in combined annual and monthly fees for a year of membership.
|Credit Card||Requirements||Annual Fee||Card Review||Apply for Card|
|No credit check||$48.95||Read Review||Apply Now|
|Credit check||$0||Read Review||Apply Now|
Credit Card Application Step 4:
After you set your sights on a card that suits your credit score, income, financial needs, and lifestyle, it’s time to finally apply for it. These days, the quickest and easiest way to fill out a credit card application is to apply online. Sure, you can still apply by mail or by phone, but a snail mail application might take weeks for you to find out if the card issuer approved or rejected you, and you could forget to send in important forms or supporting documents. Applying by phone might subject you to long hold times, and you can’t apply outside office hours.
Different card applications require different information, but the below guidelines should give you a general idea of what’s in store for you. Try to get the following details in order before you apply online:
- Basic personal information (name, current address and phone number)
- One previous address
- Current rent or mortgage payment
- Current occupation and employer’s address
- Your personal annual income
- Your household income and spouse’s income (if applicable)
- Social insurance number
- Mother’s maiden name (provides an extra layer of security when dealing with the credit card company in the future)
Credit Card Application Step 5:
Wait to Be Approved
If you fill out a credit card application online during business hours, it’s possible to be approved in minutes. Sometimes the credit issuer will need additional information from you, but they will usually notify you via email if a representative will be calling over the next few days. As for when you’re getting the card following approval, they might tell you that it takes 2 to 3 business days, but be prepared to wait 7 to 10.
What If You’re Declined?
There are a variety of reasons why your credit card application might be declined. Here are some to keep in mind:
- You don’t meet the card’s minimum income requirements
- You’re not a resident of Canada
- The information on your application doesn’t match your credit report
- Your credit score is too low to qualify for that particular card (that’s the most common reason)
Being declined for a card is not the end of the world. Try to find a card with lower income and/or credit score requirements. If your credit is poor, or you have no credit history, you should consider applying for a secured card, as they’re approved for almost anyone who can make the security deposit. After you build up your credit score with the secured card you’ll have a better chance at being approved for a more lucrative unsecured card the next time you apply.
*This post was not sponsored. The views and opinions expressed in this review are purely my own.