How to Choose Your First Credit Card as a Newcomer to Canada
Dec 9, 2024
Written by
Written by
Brianna Harrison (Credit Card & Travel Writer)
Brianna Harrison (Credit Card & Travel Writer)
Table of contents
Title
Title
Title
As a newcomer to Canada, applying for a bank account and first credit card are key steps to settling into the country. There are many benefits to having a credit card, like building credit and earning rewards. But with so many options, it’s important to choose wisely.
In this guide, we’ll cover everything you need to know about credit cards for newcomers—from benefits and reasons to get one to tips on finding the best card for your needs.
If you haven’t opened a bank account already, click here to read about some of the best banks for newcomers in Canada.
What is a Credit Card, and Why Should You Get One?
A credit card lets you borrow money to make purchases. When you use it, you’re borrowing from the credit card company, and you’ll need to pay back what you spent, either in full at the end of the billing cycle or over time (with interest if you don’t pay the full amount).
As a newcomer to Canada, getting a credit card can be beneficial for a few reasons:
Builds credit history: Using a credit card responsibly can help build your credit score, which is important for renting an apartment, getting a loan, or even a mortgage.
Earn rewards: Many credit cards offer rewards programs and perks like cashback, points for travel, and other benefits.
Perks and benefits: Most higher-tier credit cards offer shopping and travel coverage and perks like airport lounge access, member discounts, and priority treatment.
Convenient and secure: Credit cards are safer than cash and are accepted almost everywhere. They also offer fraud protection if your card is stolen or lost.
Emergency funds: A credit card can act as a safety net if you have any unexpected expenses, giving you about a month to pay it off.
Take a look at our in-depth article on the benefits of credit cards.
Why Do You Need a Credit Card to Build a Credit Score?
The Canadian economy is credit-based, meaning anytime you apply for a credit product (credit card, loan, mortgage, etc.) or even apply for a rental, lenders or the landlord will take a look at your credit history.
If you have no credit history or a low credit score (which is the case for most newcomers), you will likely not be approved for most credit products. However, opening a credit card and using it responsibly is one of the best ways to build your credit score and establish a positive payment history.
Below is an overview of the different types of credit cards and basic terms you should know. For more in-depth info on how credit cards work, read this article.
Basic Credit Card Terms You Should Know
These six terms are essential in helping you understand how credit cards work:
Credit Limit: The maximum you’re allowed to borrow on your credit card. For example, if your limit is $3,000, you should not spend more than that without paying some of it back. Going over this limit can lower your credit score and lead to fees.
Billing Cycle: The period during which purchases, payments, and other transactions are recorded. A billing cycle usually lasts one month, and at the end, you’ll receive a statement showing your balance, minimum payment, and due date.
Statement Balance: The total amount you owe on your credit card at the end of the billing cycle. You should always aim to pay this amount in full by the due date to avoid paying interest.
Minimum Payment: The minimum amount you need to pay monthly to keep your account open and in good standing. This is usually a small percentage of your total balance (about 2-3%). However, you should avoid paying the minimum and always pay the full amount to avoid interest and raise your credit score.
Grace Period: A set time (usually between 21 to 55 days) from the statement date when you can pay off your balance without being charged interest.
Interest Rate (APR): If you don’t pay off your balance in full each month, you will be charged interest on the remaining balance. Interest rates are typically between 18% to 24%, calculated yearly. For example, if you don’t pay off a credit card bill of $3,000 and you are charged 20% interest, you will need to pay $3,050.10 the next month.
Secured vs Unsecured Credit Cards
You have two options when it comes to applying for a credit card: secured or unsecured.
Secured credit cards
A secured credit card is designed to rebuild or establish your credit history, perfect for newcomers to Canada and those who don’t qualify for a “regular,” unsecured card.
To use a secured credit card, you make a cash deposit, which serves as collateral. This is your credit limit, and you cannot spend more than that. For example, if you put a deposit of $1,000, your credit limit is $1,000.
Most secured credit cards don’t have many perks or allow you to earn rewards, but they report your on-time payments to the credit bureaus, helping you build a positive credit history.
Unsecured credit cards
Unsecured credit cards do not require a security deposit, but you’ll likely need a fair to good credit score to be approved. Most unsecured cards allow you to earn rewards, points, or cashback, and come with perks such as insurance and travel benefits.
They usually have lower interest rates and higher credit limits but can come with higher annual fees and a minimum income requirement.
If you are established in Canada and have a good credit score, you should have no problem being approved for an unsecured credit card.
Click here for a deep dive into secured vs unsecured credit cards.
Types of Credit Cards
Credit cards fall under two main categories: cashback and rewards credit cards. Unless you have a free, low-tier credit card, almost all cards will earn you some type of rewards. It’s important to consider the benefits, drawbacks, and which credit card works best for your lifestyle.
Cashback Credit Cards
Cashback cards give back a small percentage of what you spend as cash. For example, if you have a credit card that gives you 1% cashback and spend $100, you’ll get $1 back. This cashback usually shows up as a credit on your statement once a year, but some credit cards give it to you instantly.
Many cashback credit cards, like the Scotia Momentum Visa Infinite Card, give you a higher amount of cashback in certain categories. This card gives you 4% back on groceries and recurring payments (including rent!), 2% back on gas and transit, and 1% back on everything else.
Rewards Credit Cards
Rewards credit cards give you points or miles for every dollar you spend. These points can be redeemed for travel, statement credits, gift cards, and discounts. They are pretty versatile, but in most cases, we recommend using them for travel.
One of our favourites is the American Express Cobalt card, which earns you up to 5x MR Points for every dollar you spend. With the American Express rewards program, the best way to use your points is for travel, but you can also redeem them for other things.
Credit Card Tips for Newcomers
Here are some tips on using your credit card responsibly so you don’t incur interest or other fees. This way, you can start building your credit:
Use your credit card regularly: Using your card for regular expenses, like groceries, recurring bills, or rent, helps build your credit history. However, only spend what you can afford to pay off in full each month.
Stay under 30% of your credit limit: Aim to spend less than 30% of your credit limit. For example, if your credit limit is $2,000, aim to spend under $600 monthly. Staying under this threshold improves your credit utilization ratio, an important factor in calculating your credit score.
Use your credit card to pay rent: Use Chexy to pay your rent with your credit card. You can earn rewards on your biggest monthly expense and build your credit as timely rent payments are sent to Equifax, one of Canada’s credit bureaus.
Pay your bill in full and on time each month: Paying your balance in full avoids interest charges and keeps you debt-free, along with maintaining a good credit score. Set reminders or automatic payments from your bank account to ensure you never miss a payment.
Don’t apply for more than one or two credit cards at a time: Applying for multiple credit cards in a short period can hurt your credit score, as each application is a “hard inquiry” on your credit report. Too many of these can look like a red flag to lenders.
Ask for a credit limit increase: Once every six months or so, ask for a credit limit increase. This raises your credit utilization ratio and the amount you can spend.
How to Choose Your First Newcomer Credit Card
There are many types of credit cards, and it can be difficult to choose just one. However, the best way to decide is to consider your lifestyle and several key factors, like:
Annual fees: Some credit cards charge annual fees, while others don’t. For your first card, it’s best to go with a no or low-fee credit card, especially if you’re still learning how to manage credit and don’t plan to use it for big rewards.
Income requirements: Some higher-tier credit cards require a minimum personal or household income, so ensure you fit that requirement.
Credit building options: If you want to fast-track building your credit, a secured credit card or one offered as part of a newcomer banking package can be a good option.
Reward type: Decide whether you prefer cashback or earning points. If you tend to spend a lot in certain categories, like groceries or eating out, look for a card that rewards you for those spending categories.
Foreign transaction fees: If you plan to travel outside of Canada, consider applying for a no-FX fee credit card, which doesn’t charge you the 2.5% to 3% fee most cards will when using it abroad.
Some new to Canada bank accounts also allow you to apply for a credit card with almost guaranteed approval. For example, if you open a bank account through the TD New to Canada Banking Package, you can apply for one of three credit cards with up to a $15,000 credit limit.
Best Credit Cards for Newcomers to Canada
As we discussed above, there are many things to consider when choosing a credit card. However, these are our three top picks as the best credit cards for newcomers to Canada:
Scotiabank Scene+ Visa Card
Best for: Earning Scene+ points with no annual fee
The Scotiabank Scene+ Visa Card is a great first credit card for newcomers and students alike. There are no annual fees or minimum income requirements, and it is a great starter card for earning points.
You can earn up to 2x the points per dollar spent with the Scene+ program.
Scotiabank Passport Visa Infinite Card
Best for: Newcomers with permanent resident or foreign worker status who like to travel
Another great newcomer credit card, the Scotiabank Passport Visa Infinite Card is perfect for permanent residents who like to travel. It comes with travel insurance coverage, six free airport lounge passes, and no foreign exchange fees.
You can earn up to 3x the points per dollar spent.
Secured Neo Mastercard
Best for: Secured card for cash-back rewards
You can apply for a secured credit card if you don’t qualify for a bank’s newcomer program. Neo Financial’s Secured Mastercard is one of the best in Canada. It offers guaranteed approval, and you can start with as little as a $50 deposit and raise it over time.
You can earn up to 4% cash back, depending on how much you put as your credit limit.
If you’re a renter in Canada, consider using Chexy to pay your rent with your new credit card. You can earn rewards and build credit on your monthly rental payments. If your credit card doesn’t earn many rewards, you can use your debit card instead. Click here for more info on why and how you can pay your rent with a debit card.
Subscribe to our newsletter below for up-to-date credit card, travel, and rental content.
FAQs
What are some financial benefits for newcomers to Canada?
Some of the most common newcomer to Canada benefits include:
Read more about eligibility and how to apply by clicking on each link.
What is the credit limit for a newcomer in Canada?
Most bank accounts for newcomers offer credit cards with a limit of up to $15,000. If you get a secured credit card instead, the security deposit determines your credit limit. For example, if you put a deposit of $500, your credit limit is $500.
What is the credit score of a newcomer in Canada?
Newcomers start with no credit score or zero, meaning they haven’t built a financial history in Canada. By getting a credit card and using the tips above to build your credit score, you can go from zero to a fair or good credit score in about six months or more.
As a newcomer to Canada, applying for a bank account and first credit card are key steps to settling into the country. There are many benefits to having a credit card, like building credit and earning rewards. But with so many options, it’s important to choose wisely.
In this guide, we’ll cover everything you need to know about credit cards for newcomers—from benefits and reasons to get one to tips on finding the best card for your needs.
If you haven’t opened a bank account already, click here to read about some of the best banks for newcomers in Canada.
What is a Credit Card, and Why Should You Get One?
A credit card lets you borrow money to make purchases. When you use it, you’re borrowing from the credit card company, and you’ll need to pay back what you spent, either in full at the end of the billing cycle or over time (with interest if you don’t pay the full amount).
As a newcomer to Canada, getting a credit card can be beneficial for a few reasons:
Builds credit history: Using a credit card responsibly can help build your credit score, which is important for renting an apartment, getting a loan, or even a mortgage.
Earn rewards: Many credit cards offer rewards programs and perks like cashback, points for travel, and other benefits.
Perks and benefits: Most higher-tier credit cards offer shopping and travel coverage and perks like airport lounge access, member discounts, and priority treatment.
Convenient and secure: Credit cards are safer than cash and are accepted almost everywhere. They also offer fraud protection if your card is stolen or lost.
Emergency funds: A credit card can act as a safety net if you have any unexpected expenses, giving you about a month to pay it off.
Take a look at our in-depth article on the benefits of credit cards.
Why Do You Need a Credit Card to Build a Credit Score?
The Canadian economy is credit-based, meaning anytime you apply for a credit product (credit card, loan, mortgage, etc.) or even apply for a rental, lenders or the landlord will take a look at your credit history.
If you have no credit history or a low credit score (which is the case for most newcomers), you will likely not be approved for most credit products. However, opening a credit card and using it responsibly is one of the best ways to build your credit score and establish a positive payment history.
Below is an overview of the different types of credit cards and basic terms you should know. For more in-depth info on how credit cards work, read this article.
Basic Credit Card Terms You Should Know
These six terms are essential in helping you understand how credit cards work:
Credit Limit: The maximum you’re allowed to borrow on your credit card. For example, if your limit is $3,000, you should not spend more than that without paying some of it back. Going over this limit can lower your credit score and lead to fees.
Billing Cycle: The period during which purchases, payments, and other transactions are recorded. A billing cycle usually lasts one month, and at the end, you’ll receive a statement showing your balance, minimum payment, and due date.
Statement Balance: The total amount you owe on your credit card at the end of the billing cycle. You should always aim to pay this amount in full by the due date to avoid paying interest.
Minimum Payment: The minimum amount you need to pay monthly to keep your account open and in good standing. This is usually a small percentage of your total balance (about 2-3%). However, you should avoid paying the minimum and always pay the full amount to avoid interest and raise your credit score.
Grace Period: A set time (usually between 21 to 55 days) from the statement date when you can pay off your balance without being charged interest.
Interest Rate (APR): If you don’t pay off your balance in full each month, you will be charged interest on the remaining balance. Interest rates are typically between 18% to 24%, calculated yearly. For example, if you don’t pay off a credit card bill of $3,000 and you are charged 20% interest, you will need to pay $3,050.10 the next month.
Secured vs Unsecured Credit Cards
You have two options when it comes to applying for a credit card: secured or unsecured.
Secured credit cards
A secured credit card is designed to rebuild or establish your credit history, perfect for newcomers to Canada and those who don’t qualify for a “regular,” unsecured card.
To use a secured credit card, you make a cash deposit, which serves as collateral. This is your credit limit, and you cannot spend more than that. For example, if you put a deposit of $1,000, your credit limit is $1,000.
Most secured credit cards don’t have many perks or allow you to earn rewards, but they report your on-time payments to the credit bureaus, helping you build a positive credit history.
Unsecured credit cards
Unsecured credit cards do not require a security deposit, but you’ll likely need a fair to good credit score to be approved. Most unsecured cards allow you to earn rewards, points, or cashback, and come with perks such as insurance and travel benefits.
They usually have lower interest rates and higher credit limits but can come with higher annual fees and a minimum income requirement.
If you are established in Canada and have a good credit score, you should have no problem being approved for an unsecured credit card.
Click here for a deep dive into secured vs unsecured credit cards.
Types of Credit Cards
Credit cards fall under two main categories: cashback and rewards credit cards. Unless you have a free, low-tier credit card, almost all cards will earn you some type of rewards. It’s important to consider the benefits, drawbacks, and which credit card works best for your lifestyle.
Cashback Credit Cards
Cashback cards give back a small percentage of what you spend as cash. For example, if you have a credit card that gives you 1% cashback and spend $100, you’ll get $1 back. This cashback usually shows up as a credit on your statement once a year, but some credit cards give it to you instantly.
Many cashback credit cards, like the Scotia Momentum Visa Infinite Card, give you a higher amount of cashback in certain categories. This card gives you 4% back on groceries and recurring payments (including rent!), 2% back on gas and transit, and 1% back on everything else.
Rewards Credit Cards
Rewards credit cards give you points or miles for every dollar you spend. These points can be redeemed for travel, statement credits, gift cards, and discounts. They are pretty versatile, but in most cases, we recommend using them for travel.
One of our favourites is the American Express Cobalt card, which earns you up to 5x MR Points for every dollar you spend. With the American Express rewards program, the best way to use your points is for travel, but you can also redeem them for other things.
Credit Card Tips for Newcomers
Here are some tips on using your credit card responsibly so you don’t incur interest or other fees. This way, you can start building your credit:
Use your credit card regularly: Using your card for regular expenses, like groceries, recurring bills, or rent, helps build your credit history. However, only spend what you can afford to pay off in full each month.
Stay under 30% of your credit limit: Aim to spend less than 30% of your credit limit. For example, if your credit limit is $2,000, aim to spend under $600 monthly. Staying under this threshold improves your credit utilization ratio, an important factor in calculating your credit score.
Use your credit card to pay rent: Use Chexy to pay your rent with your credit card. You can earn rewards on your biggest monthly expense and build your credit as timely rent payments are sent to Equifax, one of Canada’s credit bureaus.
Pay your bill in full and on time each month: Paying your balance in full avoids interest charges and keeps you debt-free, along with maintaining a good credit score. Set reminders or automatic payments from your bank account to ensure you never miss a payment.
Don’t apply for more than one or two credit cards at a time: Applying for multiple credit cards in a short period can hurt your credit score, as each application is a “hard inquiry” on your credit report. Too many of these can look like a red flag to lenders.
Ask for a credit limit increase: Once every six months or so, ask for a credit limit increase. This raises your credit utilization ratio and the amount you can spend.
How to Choose Your First Newcomer Credit Card
There are many types of credit cards, and it can be difficult to choose just one. However, the best way to decide is to consider your lifestyle and several key factors, like:
Annual fees: Some credit cards charge annual fees, while others don’t. For your first card, it’s best to go with a no or low-fee credit card, especially if you’re still learning how to manage credit and don’t plan to use it for big rewards.
Income requirements: Some higher-tier credit cards require a minimum personal or household income, so ensure you fit that requirement.
Credit building options: If you want to fast-track building your credit, a secured credit card or one offered as part of a newcomer banking package can be a good option.
Reward type: Decide whether you prefer cashback or earning points. If you tend to spend a lot in certain categories, like groceries or eating out, look for a card that rewards you for those spending categories.
Foreign transaction fees: If you plan to travel outside of Canada, consider applying for a no-FX fee credit card, which doesn’t charge you the 2.5% to 3% fee most cards will when using it abroad.
Some new to Canada bank accounts also allow you to apply for a credit card with almost guaranteed approval. For example, if you open a bank account through the TD New to Canada Banking Package, you can apply for one of three credit cards with up to a $15,000 credit limit.
Best Credit Cards for Newcomers to Canada
As we discussed above, there are many things to consider when choosing a credit card. However, these are our three top picks as the best credit cards for newcomers to Canada:
Scotiabank Scene+ Visa Card
Best for: Earning Scene+ points with no annual fee
The Scotiabank Scene+ Visa Card is a great first credit card for newcomers and students alike. There are no annual fees or minimum income requirements, and it is a great starter card for earning points.
You can earn up to 2x the points per dollar spent with the Scene+ program.
Scotiabank Passport Visa Infinite Card
Best for: Newcomers with permanent resident or foreign worker status who like to travel
Another great newcomer credit card, the Scotiabank Passport Visa Infinite Card is perfect for permanent residents who like to travel. It comes with travel insurance coverage, six free airport lounge passes, and no foreign exchange fees.
You can earn up to 3x the points per dollar spent.
Secured Neo Mastercard
Best for: Secured card for cash-back rewards
You can apply for a secured credit card if you don’t qualify for a bank’s newcomer program. Neo Financial’s Secured Mastercard is one of the best in Canada. It offers guaranteed approval, and you can start with as little as a $50 deposit and raise it over time.
You can earn up to 4% cash back, depending on how much you put as your credit limit.
If you’re a renter in Canada, consider using Chexy to pay your rent with your new credit card. You can earn rewards and build credit on your monthly rental payments. If your credit card doesn’t earn many rewards, you can use your debit card instead. Click here for more info on why and how you can pay your rent with a debit card.
Subscribe to our newsletter below for up-to-date credit card, travel, and rental content.
FAQs
What are some financial benefits for newcomers to Canada?
Some of the most common newcomer to Canada benefits include:
Read more about eligibility and how to apply by clicking on each link.
What is the credit limit for a newcomer in Canada?
Most bank accounts for newcomers offer credit cards with a limit of up to $15,000. If you get a secured credit card instead, the security deposit determines your credit limit. For example, if you put a deposit of $500, your credit limit is $500.
What is the credit score of a newcomer in Canada?
Newcomers start with no credit score or zero, meaning they haven’t built a financial history in Canada. By getting a credit card and using the tips above to build your credit score, you can go from zero to a fair or good credit score in about six months or more.