Give me some credit

Michael Chu takes a look at how students can get a credit card into their wallet while staying out of debt

Consider the following

There are many things to consider for your first credit card: interest rates, type (VISA or Mastercard), and which card benefits are best for you.

Most major financial institutions charge similar interest rates (currently 19.50%), with little difference between them – whether they are catered to students or not.

“Interest rates are billed at the same rate,” says Justin (last-name withheld), customer service agent for the Bank of Montreal – the largest credit card issuer in Canada.

“We offer a card with a low interest rate, 11.9%,” says Justin, but notes there is a $20 yearly fee.

Most student credit cards do not charge annual fees.

According to Euromonitor Canada, 59% of credit cards in circulation in Canada are Mastercards, however VISA is more widely accepted.

But thanks to changes made by the Competition Bureau in 2008, banks such as CIBC and RBC have started to offer Mastercard, traditionally only offering VISA, making it easier for card holders to have both cards without having to go to different banks.

Getting carded

Banks have made it very easy for you to apply online for cards, but they suggest you going in person to the bank, to apply.

“The best way is to go directly to a branch and speak to an account manager,” says Justin. “It’s best to discuss your current situation and the responsibility of holding a credit card.”

Don’t use your cootie catcher

With over 200 cards to choose from, details like rewards, loyalty points, cashback incentives and product warranties can become the icebreaker in deciding which card you want.

“It’s always nice to be rewarded as a customer with small incentives,” says Michelle Bucek, a recent Ryerson graduate who has accumulated points on her TD Rewards VISA.

“I know that points are more valuable when you do the math,” said Angelo Pirosz, third year accounting student. “But nothing really beats getting cashback.”

But rewards and cash back are not the only benefits.

BMO offers a Student Price Card discount with Air Miles, Desjardins offers cell phone insurance, and CIBC offers limited insurance and warranty on purchases made, and free extended warranties on original manufacturer warranties.

Keep it clean

“Ensure you fully understand the services [the card] provides before going crazy spending,” says Bucek.

“Remember to spend within your means and pay your bills monthly.”

Pirosz, also a customer service representative for Scotiabank, has this word of advice for students.

“Use the card when you are certain you have the money at the end of the grace period. You build your credit and don’t end up in debt.”

Credit card debt is very manageable, but users get into the bad habit of charging more on their card than what they can pay off.

“Debt consolidation is also good if you have too much debt. Move all your debt over to a line of credit or a low-interest card.”

Photo illustration: Marta Iwanek