Newcomers in Canada are often confused if to get their own credit card and use it for their day-to-day spending. Today, we will discuss its benefits and also look at its downsides when used irresponsibly.
Do I need a credit card?
If you ever asked your family before leaving your country if it was a good idea to get your own credit card in Canada immediately after landing, the first thing they would say is “No Way, it’s a bad idea”.
That’s not because it is a bad financial tool to possess but the parental fear of their kid spending irresponsibly in a foreign country generally tends to overshadow the perks of responsible spending. Yes, there are perks. If you use the credit card responsibly, you end up building a good credit history from a young age which helps big time in achieving both, short-term and long-term financial goals. Basically, the onus is on YOU.
Why get a credit card?
Be it on a student visa or a permanent resident visa, having a credit card always helps you in achieving the long-term goals by building a good credit history. Canada’s big banks and several other financial institutions offer lucrative student and newcomer packages that allow the newcomers to have their credit card approved at the time of account opening. The credit cards generally give you reward points or a certain amount of cash-back on every dollar spent.
Also, if you use it wisely and consistently pay off your entire balance before the due date, you get into the process of building your credit history. Good credit history will lead to a good credit score which will be reflected in your credit report.
What is a credit score? What are the benefits of a good credit score?
A credit score is a number that indicates a customer’s ability or the inability to repay debts on time and is based on credit history. It also tells the lenders about the risk factor while lending you money. Lenders want to know your past record of handling credit in order to predict how you are going to handle the credit in the future.
Understanding your credit report is absolutely necessary if you are to make good financial decisions.
With time, the finances get more and more challenging and if you are off the pace when it comes to repaying the existing credit, you might struggle with your financial wellness.
Benefits of a good credit score
If you are wanting to rent a house, your landlord will ask for your credit history before agreeing on a contract. Similarly, banks or financial institutions will ask for your credit report before determining the amount they want to lend you and the interest rate. Even the insurance companies may want to look at your credit report before issuing an insurance policy. There have been cases where the employers have asked for a candidate’s credit report before giving a job offer.
If you are a student wanting to settle down in Canada or a permanent resident wanting to enjoy a better standard of living, it’s advisable that you start working on your credit history by doing the needful.
Getting a credit card right from the start is a win-win, isn’t it? Well, only if you pay off your credit regularly and maintain a good credit score. If not, there are several downsides to it as well.
What if you don’t maintain a good credit history?
Well, you are playing with fire. If you overspend using your credit card and fail to pay off your credit on time, you may be denied credit in the future and are taking a speedy highway to be in the bad books of all the financial institutions. Not only will you be denied credit, but you might lose out on an apartment that you wanted to rent.
It can also have a significant effect on your job search and career advancements. You will struggle to take a mortgage or car loan and will also find it hard to get the right insurance policies.
By now, it’s quite clear what you need to do if you get a credit card as a new immigrant in Canada.
Stay well within the credit limit, pay off your credit on time consistently and keep improving your credit scores. There are several applications that help you know your credit score and it’s very important you keep checking your scores from time to time.
How to get a credit card as a New Immigrant to Canada
To get a credit card while opening a bank account, provide your Social Insurance Number (SIN), Photo ID (Passport, Permanent Resident (PR) card or student ID) along with address proof and landing document if asked for. It’s that easy. Your chequing account will be opened and you will get your client card immediately while your credit card will be sent on your mailing address within 8-10 working days.