I still remember my first credit card. I had just started my first co-op position in university, and I wanted to start building my credit. My first credit card was a student card and had a limit of $500. As soon as it arrived in the mail, I went out and bought a pair of rubber boots. It was January on the east coast, and waterproof footwear was a must.
I paid off that purchase, and every other purchase I made, which is good because that credit card came with a very high interest rate. I hadn’t considered the interest rate when I applied, in fact, I hadn’t considered much of anything about the credit card before I applied. This lack of research was a mistake.
Applying for your first credit card is a big deal. Your first credit card is often the first credit-building tool you’ll obtain, and how you treat that credit card will set the tone for how you use credit for your entire life.
Choosing the right credit card is important, and there are many factors to consider. Here are the four most important things to think about when applying for your first credit card.
What to look for in your first card?
1. Interest rate
As I mentioned above, the interest rate on my first student credit card was quite high. I hadn’t considered this when I first applied, but I should have. As a student, my expenses regularly exceeded my income. This imbalance meant that while I made my minimum payments every month, I often carried a balance for several months before my next co-op job started and I was able to pay the balance down to zero.
If this is your first time applying for a credit card, and there is a chance you might carry a balance from month to month, then the interest rate is the most important factor to consider when choosing a credit card. Just a few months of carrying a balance can cost you hundreds in interest charges, so the lower the interest rate on the credit card, the better.
As a side note, if you do need to carry a balance on your credit card, make sure you make your minimum monthly payment. Failure to make your monthly payment will result in a decreased credit score and in most cases an increase in your interest rate.
2. Annual fee
Some credit cards require you to pay an annual fee, which usually ranges between $99 to $150. Often, these credit cards are rewards credit cards (which we’ll go into in the next section) and the rewards you’ll earn outweigh the cost of the annual fee. To determine if this is the case, you’ll need to review the purpose of this credit card. Are you going to use this credit card for your everyday spending, and in that case, how much are you planning to spend per month?
If you are only using this credit card as a backup or to make occasional online purchases or booking travel, a credit card with no annual fee may be more worthwhile for you.
Travel rewards credit cards and cash back credit cards are a popular way to earn rewards for spending money on a credit card. Travel rewards credit cards allow you to earn a certain volume of points per dollar spent, often with tiers of rewards for different categories. You can redeem these points for travel-related expenses including flights, hotels, and car rentals.
Cash back credit cards operate on the same principle, except cash back credit cards give you a percentage of your spending back, usually between 1% – 4%. There are often categories of spending that allow you to earn higher cash back, and your rewards are typically rewarded to you once per year or quarterly.
If you plan to use your first credit card for your everyday spending, then choosing a credit card with some rewards earning capability is a good way to maximize your spending. Just remember that the interest charged on your credit card for carrying a balance will wipe out any benefit from earning rewards, so never make purchases you can’t afford to pay off in the name of earning rewards or cash back – the math doesn’t work.
4. Income requirement
Finally, if this is your first credit card, the most limiting factor with regard to the credit cards you can apply for is most likely your income, as was the case for my first credit card. As a co-op student who only worked full-time four months out of the year, my small income relegated me to student credit cards only.
Most credit cards with robust rewards schemes and higher annual fees have a high minimum income requirement. When you start researching potential credit cards, stick to the credit cards that fall within your income range. To verify your income, most lenders will require two recent pay stubs, and possibly a letter from your employer.
Our top beginner credit cards picks
The American Express Cobalt Card has been named the best overall rewards credit card in Canada by Ratehub for three years in a row, and it should be at the top of your list to consider. This card offers great rewards and lots of perks like mobile device insurance, travel insurance coverage, and extras like American Express Front of the Line for advance access to the biggest shows.
Best for Groceries & dining
based on spending $2,200/mo after $156 annual fee
- Earn rewards
1pt – 5pts / dollar earn rate
- Welcome bonus
15,000 bonus points (a $150 value)
- Ratehub.ca’s 2023 Award Winner – Best Rewards Credit Card
- In your first year as a new Cobalt Cardmember, you can earn 1,250 Membership Rewards® points for each monthly billing period in which you spend $750 in net purchases on your Card. This could add up to 15,000 points in a year. That’s up to $150 towards a weekend getaway or concert tickets
- Earn 5x the points on eligible eats and drinks in Canada, including groceries and food delivery. Spend cap applies.
- Earn 3X the points on eligible streaming subscriptions in Canada
- Earn 2X the points on eligible ride shares, transit & gas in Canada
- Earn 1 additional point on eligible hotel and car rental bookings via American Express Travel Online
- Earn 1X point for every $1 in Card purchases everywhere else
- Enjoy access to hotel bookings, and up to $100 USD hotel credit to use on amenities when charged to the room for a stay of 2 or more consecutive nights through The Hotel Collection from American Express Travel
- Transfer points 1:1 to several frequent flyer and other loyalty programs
- Cobalt Cardmembers receive regular Perks such as bonus reward offers and access to great events
- Access Front Of The Line® Presale & Reserved Tickets to some of your favourite concerts and theatre performances and special offers and events curated for Cardmembers with American Express® Experiences
- American Express is not responsible for maintaining or monitoring the accuracy of information on this website. For full details and current product information, click the Apply Now link. If you apply and get approved for an American Express Card, (I/we) may receive compensation from American Express, which can be in the form of monetary payment
The American Express Cobalt is one of Canada’s best travel credit cards. If you’re looking for a versatile credit card that rewards both everyday spending and travel, the American Express Cobalt is an ideal choice. Cardholders can enjoy strong travel insurance, a generous welcome offer, and flexible point redemption options.
- Exceptional point earning: 5x the points on eligible restaurant and food delivery, 3x the points on eligible streaming services, 2x the points on travel and daily transit. The earning potential for restaurants and takeout is significantly higher than most other cards
- Flexible point redemption:Travelers can choose from three ways to use their points: points 1:1 to several valuable loyalty programs including Aeroplan, use the Fixed Points Program to simplify redemptions regardless of travel dates, or use points for statement credits at a rate of 1 point = 1 cent. Or, redeem Membership Rewards for travel, gift cards, merchandise, or purchases
- Exclusive access: Enjoy privileges such as Front of the Line Presale and Reserved tickets to concerts, theatre performances, movie screenings, culinary events, and other special offers
- Comprehensive travel insurance: Benefit from a strong travel insurance package, including up to $5,000,000 in travel emergency medical
- No additional fee for authorized users: Add authorized users for no extra cost (an average fee of $30 – 50 on other comparable cards)
- Monthly fee: A monthly fee of $12.99 (totalling an annual fee of $156, which is higher than most other rewards cards)
- Limited acceptance: American Express isn’t as widely accepted in Canada compared to Visa and Mastercard
- Travel insurance age limitations: The travel insurance package does not cover trip cancellation or medical coverage for cardholders over the age of 65
- Lack of airport lounge access: Frequent travellers may be disappointed as this card does not offer access to airport lounges
If you’re looking for a credit card that has no annual fee and offers flexible cash back rewards, a moderate interest rate, and no income requirement, the Tangerine Money-Back Credit Card is a great choice.
Best for Flexible spending
based on spending $2,200/mo after $0 annual fee
- Earn rewards
2pts – 10pts / dollar earn rate
- Welcome bonus
100 bonus points (a $100 value)
- Ratehub.ca’s 2023 Award Winner – Best No Fee Cash Back Credit Card
- Life’s back in session. Enjoy it with an extra 10% back.*
- Apply for a Tangerine Money-Back Credit Card by April 30, 2024 and earn an extra 10% back (up to $100) when you spend up to $1,000 in everyday purchases within your first 2 months.*
- Earn 2% Money-Back Rewards on purchases in two 2% Money-Back Categories of your choice, and 0.50% Money-Back Rewards on all other purchases.
- Earn extra rewards – have your Money-Back Rewards deposited into a Tangerine Savings Account, and get a 3rd 2% Money-Back Category.
- No limit on the amount of Money-Back Rewards you can earn.
- Change your 2% Money-Back Categories to suit your spending.
While the fact that the Tangerine Money-Back Credit Card is a no annual fee card, what really sets this card apart is the customizability. With this card, you can choose your own bonus categories (which will earn you a strong cash back rate of 2% per dollar spent). This is rare in the credit card market and means you can avoid being locked into a bonus category that you can’t take full advantage of or that doesn’t align with your spending habits.
- Customizable bonus categories: Flexibility to pick up to three bonus categories to earn 2% cash back on (out of a total of 10 options), which is in sharp contrast to most other cards where you have fixed bonus categories that you have no control over. Users are also given the freedom to change the bonus categories at any time (changes will take up to 90 days to come into effect)
- High cash back earning rate: 2% cash back per dollar on bonus categories is one of the richest earn rates for a no-fee card
- Wide acceptance: Widely accepted almost everywhere including No Frills and Costco
- Additional cards at no cost: Free supplementary cards for authorized users
- Frequent cash back reimbursement: Cash back is refunded on a monthly basis, instead of the standard annual reimbursement
- Limited cash back for non-bonus categories: For all purchases that aren’t categorized under one of your chosen bonus categories, you’ll earn just 0.5% cash back
- Limited travel insurance and perks: No travel medical insurance or any substantial side perks
The Bottom Line
Credit cards can be an excellent way to establish a credit history and build a positive credit score – but they must be treated with respect. While choosing the right credit card is important, paying off the balance every month is crucial. Interest rates on credit cards are high, and interest charges can quickly wipe out any benefit from travel or cash back rewards. So choose your credit card wisely, and pay off your balance every month. If you follow these two rules, you’ll be well on your way to a great credit score and hundreds of dollars in rewards.