Benefits of Using a Credit Card in Canada

by John Stevenson on October 25, 2010

Credit cards stand for convenient and flexible payment tools for retailers and consumers, offering interest-free credit from the time purchases are made to the end of the billing period. Given than over 70 percent of the Canadians pay their balance in full on a monthly basis, the interest rate for most card users is practically zero.

A variety of benefits for card holders

Among the many benefits that credit card customers enjoy are access to unsecured credit (the amounts charged are not typically secured with collateral), interest-free payments, fraud protection, instant payment for goods and services allowing for immediate receipt of the purchased item, and a 24/7 access to funding. Further benefits include bonus travel points, extended warranty, various insurance packages (Damage and Loss Insurance, Travel Accident Insurance, etc.), and many more.

Retailers get their share of benefits as well

Retailers that accept credit cards enjoy fast and guaranteed payments, together with reduced cash handling costs and time. By giving clients a wider selection of payment options, retailers increase their total volume of sales and profits.

Competition for clients and choice

In our age, the customer can choose from a large variety of payment methods, including debit cards, checks, cash, and electronic payment systems such as PayPal. To compete for a market share, banks and other credit card providers feature a large variety of financial products. In fact, hundreds of institutions and businesses in Canada, including trust companies, caisses populaires, credit unions, and retailers feature credit card offers. This tight competition is beneficial for clients who can choose from low interest credit cards, travel rewards credit cards, cash back cards, secured credit cards, and many other financial products.

Holders are protected under the Bank Act

Consumers who use credit cards issued by banking institutions are protected by the Bank Act. Under this piece of legislation, banks are required to disclose interest rates at the time of application or solicitation and on all monthly statements sent to customers. Second, statements should include information about the amount payable on or before the date due, together with itemized transactions. The disclosure of current monthly purchases, last month’s payments, non-interest and interest charges, and credit advances is also required. As an additional protection to customers, limits are set on the consumer liability in the event of fraudulent and unauthorized use of one’s account. The existing rules on advertising and the requirement for the use of plain language with customers aim to make sure that individuals will choose a card that suits them best, taking full advantage of the product’s benefits.

Poor and rich alike pay off their credit cards

Statistics Canada has found out that the percentage of high, middle, and low income families that pay off their cards in full is almost the same. Furthermore, the delinquency rate at home is roughly half of what it is in the United States. Canadian households dispose of 2 credit cards on average while their American counterparts have about six. Obviously, it is easier to accumulate more debt if holding that many credit cards, instead of using them to one’s benefit. In addition, credit cards account for a small portion of the household debt in Canada.

Finally, in order to enjoy the benefits of using a credit card, banks cooperate with customers who are worried about the amount of their debt. They help clients gain control over finances by choosing better suited credit cards or other financial products. Non-profit credit card services are also offered by banking institutions.

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