Why use a Canadian Credit Card?

There is an old saying that “cash is king” - while this may be true for some countries, in Canada using a credit card regularly instead of cash can be beneficial to your wallet. Modern credit cards in Canada provide a number of features cash can not; interest-free borrowing, rewards & points, purchase protection and insurance, as well as credit building. In this article, I will step through each of these features of canadian credit cards and explain why they are valuable. interest-free borrowing The “credit” part of the word “credit card” is in reference to the point that a credit card is a lending instrument – banks issues you a credit card as a means for them to lend you money. Although credit cards may have very high interest rates, these rates only kick-in if you do not pay your full monthly balance. Hence, credit cards actually allow you to borrow money interest fee for a period of up to a month, as you can purchase someone on your credit card on January 1st, and not pay the credit card company until January 31st without paying any interest or penalty.

Rewards & points One of the most popular reasons why people purchase Canadian credit cards is for “points” - a non-cash reward the credit card company gives to you in exchange for using their card. These “rewards credit cards” can come in many different forms – air miles, aeroplan, PC points, petro points, gas miles, etc... Although each card's points can be converted into different things (trips / gas / groceries / presents / etc...), the “pay-out percentage” usually remains similar. The pay-out percentage refers to the points-to-dollars ratio. It answer the question “how many air miles do I get for every $1 I spend with my credit card, and how many air miles do I need to collect to get the equivalent of $1 of free travel?

Purchase Protection and Insurance Probably one of the least publicized features of credit cards – purchase protection means that anything you buy using your credit card is insured against theft or damage for a period directly after the purchase. Sometimes referred to as “warranty extension”, purchase protection allows you to save money by not having to purchase extended warranties on things like electronics and computers. Many credit cards also include free forms of travel insurance, assuming you purchased the trip using the card.

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