Credit Cards.. a dreaded topic. Most of us have them but they are either maxed out from over-usage or at a zero balance because we are afraid to use it “just in case”. This doesn’t have to be the case. Credit Cards can be our friends and I’m going to share four tips with you on how to maximize your Credit Card usage!
Use it!
Using and paying off your Credit Cards is a quick, easy and effective way to build your credit. Think of your Credit Card as a Debit Card. When you go about your day, use your Credit Card to make all of your purchases (when available). Then at the end of the day, pay off all charges you accumulated. This can be done through online banking or telephone banking to make your life even more convenient. This type of activity registers with the Credit Bureau and will help increase your credit rating over time. Also, if you display good credit behaviour, many banks or credit card companies will be willing to adjust your interest rate or annual fee in your favour. It will also eliminate the need for a “just in case” card, as your cards should always be available.
Don’t Justify Large Purchases on Credit
This is a big one that many people get snagged in and in some cases (such as a car or a mortgage) it is necessary. But what I’m referring to are things like new furniture, electronics, jewellery etc. People get caught in this trap in a number of ways but it is usually avoidable.
One way this can happen is you have been doing really well using and paying off your credit card, or you are close to paying off the balance of a card and “something shiny” catches your eye. You feel like you deserve a reward for doing so well, and you do but not on credit. A reward on credit isn’t really a reward at all, because you are still going to wind up having to pay it down (plus interest) and you are now right back to where you started! If you see feel you deserve a reward for your new found financial freedom then do it. But find something that isn’t going to cost you your credit. Get a mani-pedi or a new shirt, just don’t break the bank!
If you’re thinking about charging furniture or new appliances you may also want to reconsider. Most of the time, we have fair warning when these things are going to need to be replaced. Use this time to save up for your big purchase. That new couch will be a whole lot more comfy if you know that you don’t owe a penny for it!
Avoid Store Specific Credit Cards
When I say Store Specific Cards I don’t mean cards associated with specific stores (SDM, Canadian Tire), I mean a Credit Card that is only accepted at that one store (Future Shop, Peoples).
If you are going to go ahead and charge your large purchase, avoid in-house credit at all costs! These are typically the highest interest credit cards you can get and will wind up costing you far more in the long run. Sales people are usually commissioned when you sign up and make a purchase using a store specific credit card.
Stores will also often offer promotions such as “No Interest, No Payments for 6 Months” to draw you in. This is a great idea IF you can be SURE you will pay off the entire balance in the time allotted. If you fail to pay off the purchase, when your promotional period is over you will get dinged with all of the accumulated past interest plus you will now be making payments on the principle plus the additional interest. So beware!
Bonuses Making Buying Better
I mentioned above about avoiding store specific credit cards. That’s true. But don’t take that to mean to not get a Credit Card with a company logo attached. These are often the BEST kind of credit card to have. Although the interest might be slightly higher than a base Visa or MasterCard, if you use it right, it can pay big! You get the opportunity to earn points towards every day items, groceries, trips and more while building your credit. It is important that if you plan to use a Credit Card to build points, that follow Tip #1 and always pay it off right away!
Many companies that offer Credit Cards through Visa or MasterCard also offer special rewards to go along with them. For example, for every dollar you spend on your credit card you earn 1 point. For every dollar that you spend at that particular store or chain of stores, you earn double the points. Save on Foods is currently offering this kind of promotion for their MORE Rewards MasterCard. If there are one or 2 stores that you shop at / redeem points at regularly, you should find out if they have a similar program.
