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Your Credit Card

How to use your credit card the right way

It’s rare that a day goes by where we aren’t exposed to some sort of credit card advertisement. One financial institution or another is typically promoting their low-interest rates or great rewards programs, but are credit cards actually worth it?

They can be!

If you’re able to use your credit card responsibly, credit cards can be a great tool.

Here are some tips to make the most of your credit card.

Be diligent with your payments

Unlike a debit card or cash, when you buy something with your credit card, the funds are not automatically deducted from your account. Instead, each month you will make a lump-sum payment covering the balance of what you spent in the month prior. This delay in payment is advantageous as it allows you to keep funds in your account for longer. Therefore, if you’re using an interest-bearing account this money will *slowly* accumulate, and every little bit counts!

The downside to this delay in payment, however, is that there can be some serious consequences if you miss a payment date. Your institution will begin charging you interest once you miss a payment, making your final balance more and more expensive.

Missed payments also negatively impact your credit history. This can be problematic the next time you’re looking to get a loan or qualify for a large purchase. If you’re unable to pay your balance in full, you should aim to pay the minimum balance to maintain good standing. Setting-up automatic direct-payments can be a useful tool to help you keep your payments on track and make the process seamless!

Avoid overspending

Are you keeping track of every time you tap your credit card? Although credit cards provide convenience, it can be easy to lose sight of how much you’re spending. To avoid spending beyond your means, it’s wise to check your credit card statement frequently. This will keep you conscious of your balance and allow you to regulate your spending behaviour if needed.

Beyond keeping your budget in-line, frequently checking your statement also allows you to screen for any fraudulent transactions. This way, you can report any inconsistencies to your financial institutions as they occur and ensure your money stays where it belongs.

Optimize reward opportunities

Almost every credit card comes with some reward perks. Whether it’s cashback, Airmiles, or gift cards, most credit cards come with their own advantages. When choosing which credit card to go with, you should look at all your rewards opportunities and find the card that will provide rewards that best match your lifestyle.

This means looking for perks you’ll actually use. In addition, determining how these perks are obtained and if this matches your spending behaviours.

Using a credit card that gives you points every time you purchase gasoline is useless if you don’t have a car! Once you find the best credit card for you, you can then begin collecting points and reaping the benefits!

Build your credit history

Consistent, responsible use of your credit card will build your credit history and provide a great credit score. This will help set you up for a bright financial future by helping you secure a mortgage, get lucrative insurance premiums, and be offered more credit perks from your financial institution.

Beyond staying on top of your credit payments, other best practices to build your credit history and score is to avoid holding many credit cards at once and avoid over-leveraging your line of credit. Holding multiple credit cards reduces your borrowing power and is not often perceived favourably. Additionally, it’s recommended to avoid carrying a balance that goes beyond 30% of your credit line.

At the end of the day, holding a credit card is like most other things. Use it responsibly and the advantages are great! Use it poorly and you may wish you never got a credit card in the first place. Fortunately, by following the tips above you should be set up for success and able to maximize your credit card. Happy spending!

Be sure to tune back in throughout the month of November for more from all of us at Clinton Wilkins Mortgage Team. We are always willing to help answer your questions directly. You can get in touch with us here!

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The entire guide is available online to view or download, and to make sure you’re staying safe at home, you can now request a print copy by mail, free of charge, anywhere in Nova Scotia!