Borrowing Money - Credit Cards
These pages provide information on borrowing money. The information provided is not legal advice. If you need legal advice or assistance, contact a lawyer. Use this banner to exit this site quickly.
What is a Credit Card?
A credit card, available through most banks and credit unions, is a card with a limit (e.g., $1,000), letting you make purchases up to that limit. Many credit cards will also let you withdraw cash advances within your limit. When you take out a cash advance on a credit card, interest will start accumulating immediately.
Like a line of credit, a credit card is a type of “revolving credit”, meaning that you can spend the amount you’ve borrowed, repay it, and borrow it again. For example, if you have a credit card limit of $2,000 and you spend $1,000 on your credit card, you will have $1,000 left to borrow.
Purchases and cash advances made with a credit card will gather interest – the higher the amount you owe and the longer it remains unpaid, the more interest you will owe. If you go over your limit or make a late payment, you may be charged fees, and/or assessed a higher rate of interest for up to a year. When added over a year, though, the interest charged on a credit card is usually lower than the interest charged on a payday loan.
Some credit cards charge an annual fee, though there are many that do not.
Which Credit Card is Right for Me?
If you are thinking of getting a credit card, shop around for one that best meets your needs. Pay attention to:
- The interest rate (the lower, the better)
- Any fees, including annual fees and fees for going over the limit or for making a late payment
The Financial Consumer Agency of Canada provides a tool to compare credit cards.