The truth about credit cards

Low-interest cards
These are the best bets for people who are not able to pay off their monthly balance and have to carry it forward, according to Keeley and Woolsey.
You won't be collecting travel miles or other rewards, but you'll be paying a lot less interest.
“If you can't pay off your balance each month, a reward card is not right for you. Get a low-interest card instead,”. “You want to avoid having a lot of high-interest debt.”
The annual fee is usually minimal, because there is a lot of competition between banks and other issuers. Annual interest rates can be as low as 6 per cent (or as high as 10 to 12 per cent) and are guaranteed for a period (usually three years) as long as you pay your bills on time.

Reward cards
Caution, reward cards are not recommended for people who can't pay off their credit card balances in full each month, because of the substantially higher interest rates (typically just under 20 per cent).
You'll also be paying an annual fee, from $120 to $180.
“For the average consumer, they are not a good choice. They are good if someone is traveling a lot,”
Even so, they outnumber low-interest cards two-to-one.
“A lot of cards have a reward component, whether it's cash back, points or air miles,”
“But by the time you redeem the free airline ticket or merchandise, it may not be to your advantage because you are paying higher interest rates. Merchants also pay more to accept rewards cards, and they pass their higher costs on to their customers.”
Consumers have to decide what kind of rewards are best for them,  “Is it discounts on everyday living items like gas or groceries or aspirational goals like a vacation or a new TV or a cheque for $100?”
If you travel a lot, a travel rewards card might be for you: certain airline cards provide substantial sign-up bonuses and often have partnerships with car rental agencies and hotels.
You have to use reward cards wisely, “Reward cards tend to make people spend more and cause them to shift away from paying by cash or cheque,” he explains. “They tend to spend more in general and justify it because they are earning points or another reward.”
“If you have to carry a balance on a card, reward cards aren't right for you.”

Cash-back cards
These cards are a type of reward card, where you receive a percentage of cash back for what you spend on purchases.
Typically, it's one per cent, although some cards offer teaser rates, like 5 per cent for a limited time.
If you use your card to buy things like gas and groceries, it may not be a bad idea “as it's really a way to increase your bottom line.”
The downside is that like other types of reward cards, there is a higher interest rate attached (about 20 per cent).

Secured or instant approval cards
These function like a regular credit card, but are collateralized and require a security deposit. If you don't pay your monthly bill, your cash deposit can be seized.
These typically are for people who can't get approval for other types of credit cards or have a limited credit history in Canada.
“Depends on how the banks rate each individual, some security deposits could be $75 or $300 or more,”.
“These are a good option for someone who wants to build or repair their credit history,”. “This can potentially be the only avenue for them and are a better option certainly than a prepaid card (see below).”
The credit limit will generally be low but these cards offer an opportunity to use a credit card responsibly which may help strengthen your credit history.

Charge cards
These cards are not technically credit cards, though consumers may perceive them as such. The most widely recognized charge card is American Express, which has no pre-set spending limit and offers complimentary insurance program, travel benefits, a loyalty program and hotel and airline discounts.
There is an annual fee attached and the catch is you must pay off your balance in full each month.

Pre-paid cards
These aren't credit cards per se, but operate in a similar fashion and are quite prevalent.
“They make sense for teens or post-secondary students, or immigrants who are working,” he notes. “You can load cash onto the card and use it anywhere you might use a Visa or MasterCard, you can buy items online or send cards to relatives in other countries. Or you can load up your child's card if they are attending school out of town. ”
The cardholder can't spend more than the amount loaded onto the card and it's not a borrowing vehicle, so it won't build a credit history.
“It's safer than carrying cash,” he adds. “It's like a portable chequing account but it's fairly fee intensive ($5 to $10 per month or fees are charged per transaction) because there is no interest charged.”