Most people focus on how credit cards work and how to use them responsibly but overlook the process of credit card application. In Canada, credit cards are applied on a daily basis and the application process may seem just like a form of information exchange. However, credit card issuers have to look keenly at your current financial status to approve your application. They have to check your credit report. If your application is declined, it may be a hit to your credit score. In this guide, we explore in-depth the real credit card application process.
What Are The Requirements For Credit Card Application?
The main task when applying for a credit card is to demonstrate to the lender that you are a responsible borrower with the capabilities of paying back in time. Remember the lender/ card issuer is at risk of lending money that won’t be paid back. Apart from the basic information which includes your official name, age (must be 18 or over), your SIN (Social Insurance Number) and your physical address, you may be required to provide the following;
- Monthly income and sources.
- Your employment status – State your current job(s) and the duration you have worked there.
- List and details of your other credit cards if any.
- Other Debts – Give details of all your current debts like personal loans or a mortgage.
- Your authorization to run a background check on your credit history with a credit reporting agency in Canada. The agency will provide your credit report which shows your credit score (reflects your payment history with other lenders).
Minimum Income Requirements
The credit card issuer will use the information you have provided to assess whether you deserve access to credit or not, and determine how much credit they should offer. Your annual income is key in determining your qualification for a credit card and how much credit you should get. If you have low income, you will only qualify for a small amount of credit to ensure that you will be able to pay off your minimum monthly payment. On the other hand, if you have a high income, you qualify for rewards credit cards with annual fees and large credit limits.
What You Should Know During Credit Card Application
The credit card issuer must provide all details about the credit card they will issue. In Canada, it is mandatory to have this information with clarity in the ‘Information Box’. These details include:
- The annual interest rates.
- Duration of the interest-free grace period.
- The foreign currency conversion fees.
- Credit card annual fee (if any).
- Detail minimum payment calculations.
- Extra transaction and account charges.
Credit Card Application Approval Period
This may vary from one issuer to another, depending on your card type or other factors. For most card issuers, it takes 7 to 10 days but in some cases, it can take as long as 30 days. Some online applications can be approved instantly (instant approval cards) but still you have to wait for 7 to 10 days to receive your card. All approvals are conditional to a review of your credit report.
Credit Card Activation
Upon approval, the card will be sent to you via email. Once you receive the card you will need to call a toll-free number written at the back of your new card for activation.
Different Credit Card Companies (Associations) in Canada
Credit card companies/ associations refer to the financial institution that licenses credit card programs to lenders. Their logos are on every card. The associations provide the issuer with credit cards branded products, also approve accounts, extend credit limits and charge a fee to both users and the merchants accepting the cards.
The 3 Major Credit Card Companies Operating In Canada
This is the largest credit card company in the world with headquarters in Foster City, California. Research (2013) showed that Visa held over 60% market share of purchase transactions worldwide. Visa, formerly BankAmericard was established in 1958 and became an independent entity in the 1970s. It grew and operated as a series of regional entities by banks across the globe. In 2007, the regions merged to form Visa, Inc and started trading on NYSE (New York Stock Exchange). Currently, it operates in more than 200 countries and is popular for both Visa credit card and Visa debit card.
This is the 2nd biggest credit card company and has it’s headquartered in O’Fallon, Missouri. In the 2013 research, MasterCard commanded over 26% market share of the purchase transactions worldwide. Several banks in California joined forces to form Interbank and launched its 1st credit card in 1966 called Master Charge, which was later renamed to MasterCard. It is popular for its “Priceless” marketing campaign that ran in 1997
With its headquarters in New York City, American Express is a multinational financial institution that provides charge cards, credit cards, and traveller’s cheque services. America Express held a 3.8% market share purchase transactions worldwide as documented in the Nilson 2003 Report. The company was started in 1850 as an express mail service provider and started its financial services in 1882 by offering money orders. It then launched the traveller’s cheque in 1891. It became public in 1997 and trades on NYSE under the symbol AXP. Currently, it operates in over 140 countries.
Comparing the Three Credit Companies
All the 3 companies are similar in rewards offered, fees charged and interest rates. The difference comes in the vendors accepting which cards. Different stores accept some credit cards and reject others. Rumour has it that most vendors reject American Express as their charges are the highest of the three, a valid reason for the differences of which vendor accepts which card. For this reason, a good number of Canadians have reported having each card from the three for convenience.