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Understanding Credit and Credit Cards as an International Student

Credit, credit cards, and even the notion of credit histories are foreign to many overseas students in Canada. Knowing how credit works may help you pay for day-to-day expenditures while also helping you develop your financial future.

Here's a brief rundown of the benefits of credit cards, as well as how to use them safely, if you've never used one before.

How do credit cards work?

A credit card differs from a standard debit card in one crucial way: you pay with cash already in your account when you use a debit card. You borrow money from the credit card lender when you use a credit card. A lender will allow you to use your credit card to make purchases up to the amount of your authorized credit limit.

You may receive cash from an ATM using your credit card, but there is usually a cash advance fee and interest is levied from the moment you accept the cash advance.

How old do I have to be to get a student credit card?

The minimum age to apply for a student credit card in Canada varies by province:

  • The minimum age is 18 in Alberta, Manitoba, Ontario, Quebec, Saskatchewan, and Prince Edward Island.
  • The minimum age in all other provinces and territories is 19.

What are some benefits of credit cards for international students?

Here are seven compelling reasons to obtain a student credit card in addition to a debit card.

  1. It helps you start building a credit history in Canada. Your credit history is essentially a record of how you've handled credit in the past. When you borrow money from a bank, a merchant, or a lender, the information stays on your credit history for seven years.
  2. Certain credit cards are accepted worldwide. Credit cards are accepted across the country and around the world. That can be helpful when you’re travelling.
  3. It’s an alternative payment method to cash. This is especially useful in the event of a pandemic.
  4. Some cards offer insurance and other special offers. If your credit card comes with extended warranties, incentives, and discounts, you might want to take advantage of them.
  5. It can help you to manage cash flow. In most cases, you have around 23 days to pay off your credit card debt.
  6. It makes it easy to pay bills. You're all set with pre-authorized payments for regular expenses like gym subscriptions and mobile phone bills.
  7. You can use it to make online purchases. You can't always use a debit card to make online purchases in Canada.

Why is credit history important for international students?

Credit history is crucial information that lenders — and even employers — consider. If you use your credit card on a regular basis and are careful to pay off your obligation, your credit history will reflect this.

A strong credit score can help you when applying for a new credit card, signing up for a cell phone plan, or even signing up for a gym membership as a student.

If you want to stay in Canada after finishing your education, it's a good idea to start building a credit history and a solid credit score immediately. If you apply for a vehicle loan or a mortgage in the future, they can help you receive better conditions, such as a lower interest rate.

To apply for a credit card, you usually need to have a credit history.

What are ways to be responsible with a credit card?

First and foremost, you should review all of the numerous student credit cards available and choose which one best suits your needs: Perhaps you value rewards points the most, or a card with cashback or no annual fee appeals to you the most.

As an international student in Canada, managing money may be difficult, therefore while using a credit card:

  • Understand the costs associated with the credit card you've chosen, as well as how interest is calculated.
  • To prevent paying interest, attempt to pay off the entire balance each month. If you can't afford to pay the entire amount, make the minimum payment before the due date to avoid penalties and to reduce the negative impact on your credit score.
  • Set a monthly reminder on your phone for the due date of your payment. Late payments may result in late payment fines, as well as a mark on your credit report.
  • If you know you'll be getting a high charge one month, put off adding any more big-ticket purchases to your credit card until the next billing cycle.
  • To keep track of your payments and avoid fraud, set up alerts on your phone.

What to look for when applying for a Canadian credit card

Many credit cards provide perks and have low or no annual fees. When selecting which card is best for you, consider the following questions:

  • Is there an annual charge for the card?
  • Is there an annual charge, and if so, how much is it?
  • What is the purchase interest rate?
  • Does the card provide purchase incentives or cash back? Is there anything you buy every day (like groceries) that earns you extra money?
  • Does the card provide you with discounts on a wide range of items, travel, and events?
  • Do you have any insurance choices with the card for purchases or rental cars?
  • Is there a sign-up bonus offered by the issuer?

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