Credit, Debit, Gift and Prepaid Cards
A credit card is issued by a bank or financial company. The user can pay for a good or service with the card, but then must pay back the original purchase amount to the credit card company. If the full amount is not paid back within a set period of time, often one month after the purchase is made, the user may have to pay a high rate of interest on any remaining balance.
A credit card is different from a charge card: a charge card requires the balance to be paid in full each month. In contrast, credit cards allow consumers to carry a balance of debt, subject to interest being charged.
Smart Tips for Choosing and Using a Credit Card
- Choose your credit card wisely – compare rates, annual fees and reward features. Check out the Financial Consumer Agency of Canada’s Credit Card Selector tool. This tool can help you make an informed decision about which card best suits your needs.
- Understand how the power of time and compounding interest can work against you when you owe money. Check out the Financial Consumer Agency of Canada’s Credit Card Payment Calculator. The calculator demonstrates payment options when carrying a credit card balance from month-to-month and the total cost of making payments.
- In order to establish a good credit rating, you need to make payments according to the terms of the credit card. Paying the balance in full each month is ideal.
- Read the fine print on your credit card agreement. It will have the terms and conditions of using the card, the fees that are imposed if you miss a minimum payment and the “grace periods” (the number of days you have to make your payment before interest is charged) if allowed.
- Be cautious about introductory credit card offers. Often they carry a lower interest rate for the initial period followed by a much higher rate at the end of the period.
- Having too many credit cards may hurt your credit rating. Financial institutions take the credit available to you into account when assessing your credit worthiness, even if you don’t use them.
- Monitor your accounts for any unusual activity: new charges, forgotten charges or fraudulent charges.
For more on gift cards, see the frequently asked questions (FAQ) page.
A debit card is issued by a bank or financial institution and allows the user to make payments using funds that the user already has in his or her account. In contrast to credit cards, which allows consumers to make purchases with borrowed money, purchases using a debit card are immediately transferred from the cardholder's designated bank account. That is, you are spending money that you already have.
Debit cards also allow consumers to use ATM machines and withdraw cash from their bank accounts. Some merchants may also offer a “cash back” option to customers, where a customer can withdraw cash while also paying for their purchase.
Smart Tips for Using a Debit Card
- Choose a Personal Identification Number (PIN) wisely. Don’t make it easy for someone to guess or figure out.
- Keep your debit card in a safe place.
- Remember your PIN and don’t write it down
- Change your PIN periodically
- Keep you PIN code to yourself, don’t tell anyone, and shield the keypad when entering your PIN.
- Never lend your card and PIN to anyone. It is your legal responsibility and if it is compromised you may not be eligible for compensation
- If you suspect that someone knows your PIN, change it immediately and/or contact your financial institution to cancel the card
- If your card is lost, stolen, retained by an ATM, or you find that there has been an unauthorized transaction, notify your financial institution immediately.
- If you have made a purchase which does not appear on your monthly statement, change your PIN immediately and notify your financial institution. Always check with your financial institution to determine if any additional action is required to protect your card.
- Review your bank statement frequently to ensure your account has not been compromised.
- Know your daily cash withdrawals and daily purchase limits. If they exceed your needs, you may want to ask your financial institution to reduce those limits.
- Check your authorized daily limits regularly. Financial institutions reserve the right to change withdrawal limits and thus you may not have noticed that your limits have increased.
- Check which accounts your debit card currently accesses, e.g. lines of credit, chequing accounts, savings accounts, etc., and contact your financial institution if you want to change this arrangement.
- If you feel that a family member or dependent may be vulnerable to fraud, encourage them to talk with their financial institution about lowering their daily withdrawal limits. They could also ask their institution to hold the funds deposited by cheque until such cheques are verified. This helps in avoiding the possibility of withdrawals being made against fraudulent deposits.
A gift card is a type of payment card that is issued by a specific retailer (or bank) to be used as an alternative to a non-monetary gift. Unlike a debit or credit card, a gift card has a monetary value associated with the card itself.
Expiry dates are not allowed except:
- if the card is issued or sold for a specific good or service (ex: a manicure)
- if nothing of value is exchanged for the card at the time of issue (ex: cards issued for promotional or charitable purposes, or as part of a reward or loyalty program)
Fees are not allowed except:
- a fee to replace a lost or stolen card
- a fee to customize a card (ex: a personal photograph on the card)
The following information must be provided when a prepaid purchase card is issued or sold:
- all restrictions, limitations and conditions on the use of the card
- a description of how the holder can obtain information about the card
What happens if there is a problem?
- If a card has an expiry date not allowed by legislation, the card will be considered to have no expiry date.
- If a fee not allowed by legislation is charged to a cardholder, the cardholder is entitled to a refund of that fee.
- If any business fails to comply with legislated requirements on expiry dates, disclosure of information or limits on fees, that business may be required to pay an administrative penalty ranging from $1,000 to $5,000.
Smart Tips for Purchasing and/or Using a Gift Card
- Read the terms and conditions before buying a gift card.
- When you buy or receive a gift card, keep it in a safe place, but also somewhere you won’t forget about it!
- If you have a gift card for a business that has closed, your options may be limited.
- If a retail business is closed because of financial difficulties or bankruptcy, you may have some options. Find out more at the Office of the Superintendent of Bankruptcy Canada.
- Remember, a shopping mall gift card can be used at any store in the mall. If a store in the mall goes out of business, the card is still valid at other stores in the mall.
For more on gift cards, see the frequently asked questions (FAQ) page.
Reloadable prepaid cards are offered by banks and branded by credit card networks such as Visa and MasterCard. Such cards have no value until purchased and activated.
For more on prepaid cards, see the frequently asked questions (FAQ) page.
Smart Tips for Purchasing and/or Using a Prepaid Card
- Funds loaded onto the card may not be insured by the Canada Deposit Insurance Corporation (CDIC). Check the cardholder agreement on the card.
- Pay attention to the fine print. There may be fees and charges that may be applicable to your prepaid card, including:
- Purchase Fees – collected at the time the consumer purchases the card.
- Annual Service Fees – deducted from the card balance on an annual basis.
- Monthly Service Fees – deducted from the card balance on a monthly basis.
- Replacement Fees – charged for replacing a card (including lost, stolen or damaged cards.)
- Inactivity Fees – charged after a period of inactivity on the card, and may be charged to the card each month until the balance is reduced to $0.
- Foreign Currency Conversion Fees – charged for purchases made in a foreign currency.
- Card Closure Fees – charged for closing the card and returning the remaining card balance to the cardholder.
- Cardholder Services Fees – charged for calling an Interactive Voice Response system and/or a live agent. Some issuers allow cardholders to speak to a Customer Service Agent only so many times a month for free. Cardholders might be charged for each additional call that month. Some issuers provide access to their automated service for free.
- Some prepaid card issuers charge fees for being declined due to insufficient funds, ATM balance inquiries, ATM cash withdrawals, direct deposit reloading, change of PIN and negative balance charges when an active card balance is less than zero due to service fees.
What are Mobile Payments?
Also called mobile money, mobile money transfer, or mobile wallet, “mobile payments” refer to payment services performed using a mobile device such as a smartphone or an iPod.
Examples include: Apple Pay, Google Wallet, PayPal Here, or other applications that are issued directly by your bank or credit union.
Paying with a Smartphone?
See Payments on the Go: Mobile Payments for more information on mobile payments.
- Financial Consumer Agency of Canada:
- Debit card fraud
- Protect yourself from debit card fraud
- Credit card fraud
- Protect yourself from credit card fraud
- Prepaid cards
- Prepaid cards: 10 things to consider
- Prepaid cards: Your rights and responsibilities
- What if my prepaid card is lost or stolen?
- Prepaid Payment Products Regulations
- How can I protect myself from prepaid card fraud?