Important Credit Card Alternatives in Canada

Because credit card alternatives are becoming much more popular, it can be simpler than you think to get one. You can also get ones that will increase your credit score, so you can choose to get a traditional credit card if you’d like one. 

Best Options for Alternatives

When it comes to credit card alternatives, you actually have quite a few options. Let’s take a look at how these options work and how they compare to a traditional credit card. 

Prepaid Credit Card

In Canada, prepaid cards allow you to load them in the amount you choose. Once the card is loaded, it can be used like a traditional credit card. Usually, these are gift cards with the company's logo on them. Credit card companies sell these as an alternative to credit cards. 

While these types of cards don’t charge any interest, they also don’t help you build up your credit score. However, there is a limit as to how much you can spend, so it can help you set a budget. The great thing about these cards is that they’re able to be used in the same places as traditional credit cards. 

Secured Credit Card

Secured credit cards are different from prepaid credit cards because you pay interest and they can increase your credit score. The main difference between secured credit cards and traditional credit cards is that you need to put a security deposit down. This deposit isn’t returned until you pay off and cancel the card.

With most secured credit cards, the deposit is anywhere between 100 and 200% of the overall credit limit. If you miss any payments, then the credit card company can pull the payment from this deposit. However, you don’t want to miss any payments because all of these positive payments are reported to the credit bureaus. There are many options in Canada to choose from with one of the popular being Neo financial. 

Chequing Account

Chequing accounts are just daily bank accounts where all of your bank transactions are performed. Only the funds that are available in the account can be used. That said, many financial institutions offer Visa debit or MasterCard debit cards. This means that these cards can be used exactly the same as credit cards without the interest and fees. These are commonly used for subscription services and online purchases. 

Line of Credit/Personal Loan

For those looking to make large purchases without a credit card, then the best alternative is either a personal loan or a line of credit. These options have a much lower interest rate than credit cards and are able to be paid back faster.

Line of credit allows you to pay them back and use them again, just like a credit card. They also affect your credit score in the same way as a credit card because they’re also a form of revolving credit. Personal loans have to be paid back on a schedule and can’t be reused. All positive payments are reported and will be used to increase your credit score. 

Best No Fee Credit Card

If you still want to have a credit card, even with these alternative options, there are lots to choose from. A popular choice is a no-fee credit card. While your options are pretty much endless, one of the best is the Simplii Financial Cash Back Visa Card. 

With this card, you can use it anywhere that Visa is accepted, and you can avoid any interest charges by paying it off within the 21-day grace period. There’s no annual fee on this card, and you only need a minimum household income of $15,000 to qualify. The purchase interest rate is 20.99%, and the cash advance rate is 22.99%. These are pretty standard numbers for credit card interest rates. 

Another great thing about this card is that as you spend, you can earn cashback. In fact, in your first 3 months, you can earn a welcome bonus of $100 with 10% cashback. From there, you can continue to earn as you spend, and there is no limit as to how much cashback you can earn. In terms of insurance coverage, you can purchase the optional CIBC Travel Medical Insurance. Included with the card is the Purchase Security and Extended Protection Insurance. 

Best Credit Card for Young Adults

If you’re new to credit, then getting a credit card can be difficult. The best way to start building your credit is with a secured credit card. However, there are credit cards out there that are meant for young adults. One of the best credit cards for young adults is the Tangerine Money-Back Credit Card. 

In order to qualify for the Tangerine Money-Back Credit Card, you only need a minimum gross income of $12,000. There’s no annual fee, and the purchase interest rate is 20.95%. The cash advance rate is 22.95%. Some cool perks include the ability to track and categorize spending and the ability to have 5 authorized users. Purchase Assurance and Extended Warranty coverage is also included. 

One of the best things about this card is that it’s a one of many types of rewards credit cards known as cashback cards. You earn 2% back on two categories of your choice, and then you can earn 0.5% back on everything else. 

Prepaid Credit Card Choices

While most prepaid credit cards are gift cards, there is an option that isn’t. This is the KOHO account. KOHO is essentially a bank account that has 3 different plans. Which plan you choose affects the cost of credit building as well as how much interest you can incur with your account. The great thing about this account is that you can use the card just like a credit card. Here are the 3 different options you can choose from: Essential, Extra and Everything. They each have monthly fees or annual fees. It’s also important to note that the credit building services are optional.

With the essential plan, the cost can start with low fees as low as $0 per month. It includes 1% back on groceries, 2.5% interest on your balance, and unlimited transactions. With the Extra plan, you can get 1.5% cash back on groceries and 0.25% cash back on all other purchases. You can also earn 3% back on your entire balance. There are no foreign transaction fees, and the credit building fee is $7. The Everything plan gives you 2% cash back on groceries, 0.5% on all other purchases, and 4% on your entire balance. There are no foreign transaction fees, and credit building is only $5 per month. 

Living in Canada Without a Credit Card

While it is possible to live in Canada without a credit card, it is a lot more difficult. For many things, a credit card is required. It’s also the most effective way to increase your credit score as well as your credit history. 

Depending on which credit card you get in Canada, you can get different insurances including medical insurance, travel insurance, and mobile device insurance. You can also get travel perks. They can also be used with Google Pay and your PayPal account to send money. They can also be used for in-store purchases if you don’t have the funds on your bank card. However, they can also make saving money difficult.  

Building Your Credit Without a Credit Card

In Canada, there are many different ways to build credit without a credit card. Personal loans, line of credit and credit-building loans, can also build your credit score. That said, credit cards are powerful tools. Keeping your credit card at 30% of your total limit and making your monthly payments on time can make all the difference. For some, it can be difficult to control how you spend money, though. While you can track it with online banking, spending money can just be too easy sometimes. 

International Transactions Without A Credit Card

While credit cards can make it a lot easier to send funds internationally, one way to get around this is with the Wise card. Even if you have a credit card, having multiple different credit cards for different purposes doesn’t make sense which is why other payment options like Wise are ideal. 

Whether you’re sending money for business purposes or not, Wise send funds in different currencies with low conversion fees. You have access to this low cost option online, It also offers competitive exchange rates. 

Instead of sending money, you can also use the physical card for Wise to make in-store purchases abroad. Both international transactions and wire transfers are reasonably priced with the Wise card. You don’t even need a credit card to put money on your Wise card, you can do so using Interac e-transfer or a paypal account. 

Final Thoughts

In Canada, Credit Cards are a powerful tool. That said, there are plenty of alternatives to credit cards that can give you the same result. In terms of using a credit card, you can use a Visa debit or Mastercard debit card. You can also get a secured card, which will have the same effect as a credit card. 

With many of these alternative cards, you can also earn rewards, which can help you save more money. Some even specialize in foreign currencies, which can help with your budget. All of these choices offer advanced security features. If you choose to go with a credit-building loan instead of another credit card alternative, then you can build your credit at a low cost. No matter your situation, though, there is a solution without having to get a regular credit card.