How to use your credit card responsibly

What is a credit score?

A credit score is a three-digit number, usually between 300 and 900, that banks and other lenders use to determine how likely you are to pay back your loans. The higher the number, the more credit-worthy you are to the banks.

Your score is based on information in your Canadian credit history, such as whether you pay for your phone bill and utilities on time and in full each month. The problem is, for newcomers and others without a Canadian credit history, lenders don’t have any information. This makes it hard for people to get credit.

Your first credit card in Canada

If you’re young, or a newcomer, or you haven’t used credit in Canada before, you’ll need to start simply. Credit cards themselves are forms of credit, so the first step is to get an entry-level credit card and prove your credit-worthiness by paying your bills on time. Then you can work your way up.

Entry-level credit cards usually have fewer perks than more premium cards, but they also typically have lower income requirements and a lower annual fee—in some cases, $0.

National Bank’s mycredit Mastercard is a great example. There’s no annual minimum income requirement to apply for this card and no annual fee, making it very accessible. And, while the mycredit Mastercard doesn’t come with a full suite of included benefits, it does allow you to earn 1% cash back on recurring bill payments and restaurant spends, and 0.5% back on everything else.

If you want more features and rewards, National Bank’s Platinum Mastercard is a good option that also has no minimum income requirement. National Bank’s World Elite Mastercard has an annual fee of $150 and comes with more perks—including an annual travel expense refund up to $150.

4 tips for credit card use

You already know you should use your credit card responsibly, but what, exactly, does that mean?

• Stick to your budget
  Most entry-level credit cards come with modest credit limits. Still, it’s important you don’t spend more than you can pay off, no matter your limit. This is sometimes tricky for new credit cardholders, but budgeting is an essential part of your financial health.
• Pay your card balance in full
  Best practice is to pay off your credit card, in full and on time, every month. Interest rates on credit cards are very high, so debt can balloon quickly if you carry a balance. Stick to your budget and don’t overspend.
• Pay the minimum amount
  If, for any reason, you can’t pay a bill in full, make sure you pay at least the minimum amount, which appears on your bill. Credit card companies report your payment history to the credit bureaus, and even one missed payment will lower your score. You can avoid that by making the minimum payment (or more) by the due date.
• Pay your bill on time
  Timeliness is as important as making minimum payments. It shows the credit bureaus that you can meet your financial obligations. If you need help remembering your due date, consider setting up an automatic payment through your online banking. 

When it comes to credit cards, you should work towards paying in full, on time, every month. Every payment helps you build your credit score buy showing you are responsible with credit, and over time, you can become eligible for upgraded financial products, with more features and perks.

Which credit card is right for you?

Below is a comparison of three National Bank credit cards. The first two have no minimum income requirement.

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National Bank World Elite Mastercard

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• Annual fee: $150
• Interest rates: 20.99% on purchases, 22.49% balance transfers and cash advances
• Earn rate: Up to 5 points per $1 on grocery and restaurant purchases; 2 points per $1 on gas, EV charges, recurring bill payments and travel booked through À La Carte Rewards; and 1 point per $1 on all other purchases.
• Welcome offer: In the first year, you can earn no welcome bonus at this time. Minimum purchase and insurance product required. Learn more about applicable terms and conditions.
• Annual income requirement: Personal income of $80,000 or household income of $150,000

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With a solid credit score, you’ll have access to better products like loans, mortgages and credit cards. Luckily, responsible credit card use can help you build up a score even if you’ve never had credit in Canada before. 

Read more about credit cards:

• Your new travel companion: A credit card with perks at home and abroad
• Is food inflation squeezing your budget? Credit card rewards can help manage costs
• Credit scores and credit reports: What newcomers to Canada need to know
• Want to raise your credit score in Canada? Avoid these 5 credit card mistakes

_{® Mastercard and World Elite are registered trademarks, and the circles design is a trademark of Mastercard International Incorporated. Authorized user: National Bank.
® National Bank and À la carte rewards are registered trademarks of National Bank of Canada.}

About Keph Senett

Keph Senett writes about personal finance through a community-building lens. She seeks to make clear and actionable knowledge available to everyone.