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Types of Credit Cards

There are three types of credit card accounts: bank-issued credit cards (such as Visa and MasterCard), store/priority cards (such as the Bay and Sears) and travel/entertainment cards, also called charge cards (such as American Express or Diner's Club).

  • Bank-issued Credit Cards These types of cards offer consumers a wide range of choice in terms of the annual fee associated with the card, reward and rebate programs, extra benefits such as travel insurance, as well as the interest rate charged on outstanding balances. Credit cards issued by Canadian financial institutions carry interest rates that can range from as low as 9% to more than 20% with annual fees from $0 to $150 or more.

    Some credit cards feature rewards programs that allow you to earn points with your purchases to be spent on goods and services, particularly travel. However, they usually come with higher interest rates. Similarly, affinity cards allocate a specified percentage of revenues the card earns to a favourite charity or other association, like a beloved alma mater.
  • Store Cards These types of cards are usually only accepted at outlets run by the associated retailer or service company, and often have interest rates on unpaid balances from 24 to almost 30 %. Store cards don't typically have any annual fee. The benefit of this type of card is that they are often associated with discounts or reward programs offered by a specific store or retailer.
  • Travel/Entertainment (charge) Cards These cards offer unlimited credit limits, which means that cardholders must pay the entire balance off each month. Charge cards typically have high annual fees, and a high penalty interest rate for late payments (usually around 30%). These cards however, often have longer grace periods than other cards and have reward programs associated with them.

The Financial Consumer Agency of Canada's website is a great resource and includes interactive tools designed to help answer questions about credit cards.