A newcomer's first credit card: secured card or a newcomer program card?

If you qualify for a newcomer program at one of the big banks, you can usually get a regular card with no deposit and no Canadian credit history, and in three of the programs we reviewed the limit can go up to $15,000 depending on your income. If you don't qualify or your application is declined, a secured card backed by a deposit is an option the regulator explicitly suggests for newcomers without a history. Either way, purchase interest on the cards we reviewed ranges from 19.99% to 21.99%, and you won't pay any of it if you pay your balance in full by the due date.

The two types in brief: what's the real difference?

With a secured card, you place a deposit with the bank, and your credit limit is usually set at an amount equal to or higher than the deposit. The Financial Consumer Agency of Canada (FCAC) says the deposit can range from a few hundred to a few thousand dollars, and that you get it back when you close the account after paying your balance in full. If you don't pay, the bank can recover what you owe from it.

A newcomer program card is an unsecured card the bank grants based on your status as a newcomer, your immigration documents and your income, without requiring a Canadian history. It is an entirely regular card, but eligibility depends on how long you've been in Canada.

Newcomer programs at the big banks: what we verified

This is descriptive information from the banks' own pages as of the last verification date, not a ranking. Conditions and offers change, so read the official page before you apply.

• RBC Newcomer Advantage: a card with no credit history required for permanent residents and international students who arrived within the last 12 months, and for temporary foreign workers who arrived within the last 48 months, provided they meet the bank's criteria.
• Scotiabank StartRight: for permanent residents in their first 5 years in Canada, and for international students and foreign workers. The bank says a Canadian history is not required, and that approval and the limit depend on your verifiable income and your history, if any.
• CIBC newcomer cards: the bank says you need neither a deposit nor a credit history, and that applications are open to permanent residents and foreign workers, with a dedicated offer for each group.
• TD New to Canada Banking Package: a package that includes credit cards for newcomers, with the bank defining a newcomer as someone who immigrated to Canada within the last 5 years.

Note that "no credit history required" does not mean "guaranteed approval". Every bank requires you to meet its criteria, and you may be given a lower limit than you expect.

Interest and fees: the figures we reviewed

We collected the purchase interest rates and annual fees listed on the newcomer program pages for some cards, to show you the realistic range, not so you can pick from them:

The practical conclusion: interest rates are close across cards, and the annual fee is the biggest difference. For your first card, a no-fee card is usually enough; the goal is to build your history, not collect rewards. Keep in mind that the example the FCAC itself uses to explain credit cards is 19% on purchases and 22% on cash advances, and that specialty and store cards can be higher.

The grace period: how to use the card without paying interest

Federally regulated financial institutions must give you an interest-free grace period of at least 21 days on new purchases. It starts on the last day of the billing cycle, and if you pay the balance in full before the due date, you pay no interest.

But the grace period does not cover:

• Cash advances: interest starts on the day you withdraw and runs until you pay in full.
• Cash-like transactions and balance transfers.

If you don't pay the balance in full, you pay interest and keep paying it until the whole balance is cleared. How interest is calculated on a partial payment is set out in your cardholder agreement and its information box, so read it rather than assuming.

The FCAC's example shows the timing: purchases made on 15 January appear on the 1 February statement, and the 21-day grace period ends on 21 February. Pay the full balance before then and you pay no interest.

How to build your history with this card

1. Make sure the issuer reports to Equifax and TransUnion. Equifax points out that a card that isn't reported won't build your history.
2. Use it for a small, regular expense you already pay.
3. Keep your balance under 30% of the limit, as the FCAC recommends. With a $1,000 limit, that means a balance under $300.
4. Pay the balance in full every month by automatic payment.
5. Don't close it when you get a better card; the age of your accounts is part of your score.

The full details of the factors that count toward your score, with a month-by-month plan, are in the guide to building a credit score from scratch.

What happens if you miss the minimum payment?

Your minimum monthly payment and its due date appear on every statement. Missing it doesn't just mean a late payment on your credit report: the FCAC warns that not making the required minimum payment can lead to a higher interest rate on your card, so read what your agreement says about this.

So protect yourself with two simple steps from day one:

• Set up automatic payment of the full balance, or at least the minimum if your income is irregular, and then pay the rest manually.
• Turn on your bank's mobile alerts for the due date and for when your balance approaches 30% of the limit.

If you do run into trouble, contact the bank before the due date, not after. Ignoring a debt until it is sent to a collection agency leaves a mark on your report that can stay for up to 6 years.

Documents to prepare before you apply

Requirements vary from bank to bank, but these came up repeatedly on the pages we reviewed:

• Your Social Insurance Number (SIN) and valid ID.
• Your immigration document: CIBC, for example, says newcomers can apply in a branch with their immigration documents, naming forms IMM5292 and IMM5688 among them.
• Proof of income: an employment contract or pay stubs, because the limit on newcomer program cards is tied to verifiable income.
• A chequing account at the same bank, since some programs link the card to opening an account with them.

What to compare before you apply, and your rights afterwards

• The annual fee, and whether it is only rebated temporarily.
• Purchase interest and cash advance interest. If you'll pay in full every month, the interest rate matters less than the fee.
• The time-in-Canada condition and the type of status accepted.
• Reporting to both credit bureaus.
• For a secured card: the deposit amount, any set-up fee, and the conditions for getting the deposit back or converting to a regular card.

You can also use the FCAC's government credit card comparison tool to filter cards yourself.

Once you have the card, a federally regulated institution must get your express consent before increasing your credit limit, and must notify you of any change to your agreement at least 30 days before it takes effect.

When a credit card isn't a good idea right now

A credit card is a tool for building history, not an extra source of income. If your essential expenses currently exceed your income, a card will turn that shortfall into debt at interest of around 20%. First sort out your monthly budget, know your actual net pay, and read the first three months budget guide.

And don't rely on a prepaid card as a substitute: it is loaded with your own money in advance and involves no borrowing, so ask the issuer before assuming it builds a history. If you're building your history with a mortgage in mind, or wondering where to save any surplus, read the TFSA, RRSP and FHSA guide. If you have income from abroad or a complicated tax situation, you'll find accountants in the business directory. The rest of your first-month steps are in My Canada journey.

Frequently asked questions

I arrived more than a year ago. Have I missed the newcomer programs?

That depends on the bank and your type of status. Some programs set 12 months for certain groups, others 5 years. Read each bank's conditions; if you don't qualify, a secured card is still an option.

Does a secured card build history like a regular one?

If the issuer reports to Equifax and TransUnion, it is used and paid like any other card. Ask about reporting before you apply.

When do I get my secured card deposit back?

According to the FCAC, you get it back when you close the account after paying your balance in full. Ask your bank whether it lets you convert the card to a regular card later, and on what conditions.

Do I pay interest if I only pay the minimum?

Yes. Paying the minimum keeps your payment history free of late payments, but you pay interest on the remaining balance until you pay it in full.

Should I apply for several cards to improve my chances of approval?

One well-considered application is better. Many applications in a short time can be read by lenders as an urgent need to borrow.

This guide is general information from official sources, not financial advice or a recommendation of any particular product.

Sources and next step