CREDIT LIBRARY
Frequently Asked Questions About Credit Cards and
Debit Cards
Credit Cards
- What are the advantages of having a
credit card, and how do I
get one?
- I've just started working and I don't
have a credit history;
can I still qualify for a credit card?
- How secure are credit cards?
- Is there an advantage to a bank card
versus a department store
card or a gasoline card?
- Do all bank credit cards offer the same
features and
benefits?
- What are the benefits of having a gold
card?
- How do the bank cards that are
associated with sponsoring organizations
work?
- What are the benefits of a credit card
that's tied in with a car
manufacturer or other types of co-branded cards?
- What is a shopping club?
- What are cheque cashing privileges?
What are special cheques?
- Do all cards offer travel rewards?
- Do all cards charge an annual fee?
- What happens if I try to make a
purchase with my credit card
and I exceed my limit?
- How is my credit limit determined, and
how can I increase my
limit?
- What should I do if my credit card is
lost or stolen?
- What is my liability if my credit card
is stolen?
- Do all credit cards offer emergency
card replacement?
- Can I use my credit card at an ABM to
get cash or access my
bank accounts?
- Can I get travel insurance and purchase
security and extended warranty insurance on my credit
card?
- Can I get supplementary cards for
members of my family?
- How are credit card interest rates
determined, and how can I
find out the interest rate currently being charged on a
particular card??
- What is a grace period?
- Do I pay interest as soon as I make a
purchase, or do I get a
grace period?
- Why is interest charged immediately on
cash advances but not
on purchases?
- When I use my credit card in a foreign
country, how is the
currency exchange rate calculated, and can I use my credit
card to a get a cash
advance?
- Is it safe to give out my credit card
number when purchasing
goods or services by phone?
Debit Cards
- What is a debit card?
- How is a debit card different from a
credit card and how do I
use it?
- How do I apply for a debit card?
- Do all stores accept debit cards?
- Do I pay an annual fee to have a debit
card, and will I be
charged a fee each time I make a purchase?
- Can I get a cash advance with a debit
card?
- What happens if I use my debit card and
I don't have sufficient
funds in my account to cover the purchase?
- What should I do if my debit card is
lost or stolen?
Credit Cards
Credit cards are a very convenient and secure way of
paying for goods and
services without the need to carry large amounts of cash.
And, of course, you
don't have to repay the cost of your purchases right away.
Bank credit cards
are accepted at most retail outlets, restaurants, and gas
stations. They
can also be used to obtain cash advances, access a variety
of personal accounts through ABMs, or to
perform other banking tasks.
To apply for a bank credit card, just drop into any
branch of a bank that's
associated with the card you want and ask for an
application. Simply fill it out and return it to the
branch and, if you qualify,
you'll receive your card in the mail. Applications for
gasoline and
department store cards are available at the point of
purchase.
Yes. Many banks and other issuers of credit cards are
willing to provide young
people, including students, with a basic credit card set
to a low limit such as
$500. Check with your local bank branch.
Incidentally, responsible use of your first credit card
can be a good way to
start building a positive credit record.
Credit cards are a very secure way of purchasing goods
and services. With the use of holograms and other
technical devices, forgery is
becoming increasingly difficult. And if your card is lost
or stolen, a phone call
is all it takes to stop unauthorized use of your card and
to get it replaced.
Definitely. Most bank credit cards charge a lower
interest rate on outstanding balances than gasoline
companies or retailers. Just as important, bank credit
cards are accepted all over the world and can also be used
for everyday
banking through an ABM.
No. Banks compete for your business, and some of the
ways they do that is by charging different fees and
offering different features and benefits with their credit
cards. Some have lower interest
rates than while others have a wider range of features.
Gold cards offer you more features than regular bank
cards. The
features offered on any individual gold card will vary in
accordance with
the bank who offers it. Gold Visa cards have a minimum
$5,000 credit
limit. They also include various standard features, such
as car rental
collision insurance, travel accident insurance protection,
purchase
security and extended warranty insurance.
A bank card that is associated with a sponsoring
organization, such as a
professional association, a club, or an alumni
association, is usually
referred to as an "Affinity Card". When you use an
affinity card, a part
of the merchant fee goes toward the support of the
organization. With most
affinity cards, you pay the same fees and charges as you
would normally pay
with a regular bank card. Some affinity cards have other
benefits, such as
a points scheme for purchasing goods or services related
to the sponsoring
organization.
Co-branded cards let you accumulate earnings to a
specified limit based on the amount of money
you spend using your credit card and then apply those
earnings towards the
purchase of items offered by an affiliated company. For
instance, a tie-in between a credit
card and automobile manufacturer would provide you with a
way to translate the value of the purchases made with your
card into
earnings that could be put toward the purchase price or
lease downpayment of a new automobile
offered by the affiliated automobile company.
A number of credit cards offer at-home shopping
benefits. From time to time
you may receive inserts or a catalogue of products, or a
promotion for an individual product,
which you can purchase using your credit card. The product
is usually sent to you
via mail or by a parcel delivery service. Some of the
products available are
exclusive to the credit card provider and cannot be
purchased at a retail outlet.
Certain credit cards allow you to cash personal
cheques, or cheques made
out to you, at any branch of the bank that issued the
card. In addition,
some bank cards issue special cheques that enable you to
make purchases
from a merchant who doesn't accept credit cards. These
cheques are treated
as cash advances. As an extra feature, special cheques
are also offered by
some banks as a way for you to consolidate your
outstanding balances if you
have more than one credit card.
No, certain cards are affiliated with travel agency or
airline frequent flyer programs through which you can
accumulate points based on the value of the purchases you
make with your card. If
you want to take advantage of this feature, make sure you
have a card that is
associated with the airline or program you're interested
in.
Not all credit cards charge an annual fee. Some basic
bank cards charge no annual fee.
Gold cards have higher annual fees with benefits which
can add up to substantial savings and, in some cases, can
more than
offset the annual fee.
When the sales clerk runs your credit card through the
point-of-sale terminal or requests authorization, an
electronic link is made with your credit card account to
gain authorization for
the purchase. If the amount of your intended purchase
exceeds your available credit, the digital display on the
terminal will read "authorization declined."
Your credit limit is partly a function of the type of
card you have. For
example, some basic credit cards have a standard credit
limit of $2,000,
but gold cards can extend your credit limit to more than
$5,000.
The determination of your credit limit can also be a
function of your
financial history and asset record.
Bank cards, such as Visa, have an international network
for handling these
situations. As soon as you discover that your card is
missing, call the
customer service number provided with your card. Your
card will
immediately be cancelled to prevent its fraudulent use.
Some cards also offer a card registry service to
assist you in the event that your cards are lost or
stolen.
With most cards, if a fraudulent purchase is made after
you have reported
the card stolen, you will not be held liable for any of
the costs.
In most cases, you can get your card replaced in an
emergency, usually within a
couple of days. If this feature is important to you, make
sure your card has it;
if not, apply for one that does.
Most bank credit cards can be coded for use at bank
machines. You can arrange this through the card issuer.
You simply insert
the card so the machine can read the magnetic strip, then
key in your personal
identification number (PIN).
More and more credit cards are offering various
insurance features. These might
include several forms of travel-related insurance, such as
accident and health
coverage while travelling outside Canada, delayed baggage
insurance, and car rental insurance.
Purchase security insurance is a standard Visa gold
card feature. It
usually covers theft and damage related to products you
purchased using your
credit card, up to a limited period of time.
Most banks and other credit card providers will give
you additional cards on
request. There may be a fee for supplementary cards.
The interest rates charged by different credit cards
reflect several factors,
including the bank's cost of funds and administrative
costs. Changes in
the interest rate charged by the Bank of Canada can affect
credit card interest
rates, but not as frequently as these changes affect
personal loan rates.
To find out the interest rate currently being charged
on your credit card, just
call the customer service
department of the card issuer. Your monthly statement will
also
show the applicable interest rate for the billing period.
Many credit cards give you a grace period, which is the
length of time from the date your monthly statement is
issued to the date you have to make a payment.
Interest begins to accrue on your purchases on the payment
date. Grace periods can vary
from two weeks to a month.
When you buy goods and services, you will not be
charged interest on the purchase
price until the payment date on your next monthly
statement. Depending on when you
made the purchase, you may not have to pay for it (or make
a partial payment) for
several weeks.
With most bank credit cards, when you buy goods and
services, you will not be charged
interest on the purchase price until the due date or
payment date on your next monthly statement. If
your due date is the 15th of the month, for example, and
you purchase an item on,
say, the 20th, then you'll have a grace period of about 25
days before interest
is charged. Of course, if you pay in full by the due date,
no interest on purchases is charged.
Cash advances, unlike purchases, are treated as a loan,
and similar to other types of loans,
the interest begins to accrue as soon as the cash is
advanced.
Bank credit cards can be used in most countries around
the world to purchase
goods and services, just like in Canada. Most bank cards
can also be used
to access your accounts through the many thousands of ABMs
that display the
Interac and Plus System logos. You can get cash, in local
currency, in the
same way that you would in Canada.
The exchange rate of the local currency against the
Canadian dollar is calculated
on the date the purchase or cash advance is posted to your
account. The rate is calculated on the basis of the spot
exchange rate in effect at that
time.
It is best to initiate the phone connection yourself
and to be confident that you are dealing with a legitimate
organization.
Debit Cards
A debit card is your Automated Banking Machine (ABM)
card.
A credit card allows you to purchase goods and services
and to pay for them
at a later date; hence credit. And you can have a credit
card without necessarily having a
bank account. A debit card, on the other hand, is a means
for authorizing an
electronic transfer of funds from your bank account to the
account of the
merchant where you are making the purchase. You pay for
your purchase
immediately, but you don't need to carry cash with you.
Usually, to use your debit card, simply hand it to the
sales clerk who will swipe it
through the electronic reader. The clerk will give you a
key pad in which you
enter your personal identification number (PIN). When the
transaction is completed
you will be given a paper record, just as you would when
you make a purchase with
a credit card.
Making purchases with a debit card is as fast and
convenient as using cash and a
lot more secure.
Applying for a debit card is as easy as applying for a
chequing account. Just complete
an application form - available at any bank branch - and
return it postage paid, or drop it off at your nearest
branch. Your PIN number will arrive with the card but you
are
free to change it at any bank branch that offers this
service.
Many, but not all stores in Canada are now on-line with
Interac, the debit card network,
especially grocery stores which traditionally have not
accepted credit cards.
With a debit card there is no annual fee to pay, but
depending on your bank account, you may be charged a small
service fee every time you make a purchase - similar to
the service fee you pay when you make an ABM withdrawal.
No. Only credit cards provide cash advances. However,
because your debit card is also your ABM card, you
can use it to withdraw cash from your chequing or savings
account.
When you make a purchase using your debit card, an
electronic link is made
with your bank account. If there are funds in your account
to cover the
cost of the purchase, the transaction will be authorized.
But if the
purchase price is more than the balance in your account,
the point-of-sale
terminal will read "authorization declined." If you
qualify, some financial institutions
will provide overdraft protection on certain kinds of
chequing
accounts, in which case your purchase may be authorized
but it will cause
your account to be overdrawn (interest will also be
payable).
As soon as you discover that your card is missing, call
the customer service
number provided to you with your card and arrangements
will be made to issue a new one.
Remember, your card is of no use to a thief without your
secret PIN
number.
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