That’s double the Canadian population, which roughly stands at 38 million. A recent JD Power survey has discovered the average Canadian uses two credit cards for their everyday purchases—all of that ‘plastic’ spending power could lead to double trouble where your finances are concerned if you’re not careful.
Regardless of how many credit cards you have (or the balance they’re carrying), here are 3 ways to keep those cards from taking control of your finances.
Out of the 45% of Canadians carrying a balance on their credit cards, 41% are unaware of the rate of interest they are being charged. This ‘lack of interest’ in rates could leave you unaware of potential bait-and-switch tactics used by some credit card issuers.
For example, certain creditors choose to reserve the right to approve you at a higher rate of interest than what was advertised when you applied (the advertised rate being the ‘bait’ to get you to apply, with the ‘switch’ to a higher rate upon approval—or shortly thereafter if it’s a limited time ‘promo rate’ that wasn’t qualified up front). There are also credit card companies that inject clauses into their agreements to raise interest rates at their own discretion. So be sure to read all of the fine print before taking on any type of credit card and always pay close attention to your credit card statements. If there are details or sudden rate changes you don’t understand, call your creditor and ask questions—they are obligated by law to provide transparency.
Also, when it comes to interest, remember that everything is negotiable. If the rate you’re paying is too steep, don’t be afraid to call your credit card issuer and request a better one. If the provider is not willing to lower the interest rate consider turning to a trusted partner like Educators, to explore debt consolidation with better rate options.
The frequency in which you pay your bills on time is one of the main contributing factors to your credit score. While creditors provide payment information to the credit bureaus (TransUnion, Equifax) in order to determine that score, waiting until the final day to make those payments may not be doing your credit score any favours. If your payment is due no later than the first of the month, for example, and the creditor reports to the credit bureaus on the last business day of the month, this means your balance will be at its highest when your creditor submits their report. This may not be of significance if you’re always paying the balance off in full every month. However, if you are regularly keeping a balance on your credit cards, this could lower your credit score and affect your approval for other loans down the road.
To stay ahead of the curve when it comes to your monthly credit card statements, consider setting up pre-authorized payments, direct from your bank account.
This will mean payments get made as soon as statements go out, which ensures any balance will be at its lowest when your creditor relays their report to the credit bureaus. If you do have to maintain a balance on your credit card(s), try and keep it to no more than 35% of your total credit limit (anything over this limit tends to be seen as a red flag to credit bureaus and will weaken your credit score).
One of the biggest caveats to credit limits is that most creditors allow you to go over the limit, only to charge you a penalty for doing so. To prevent this from happening, ask your creditor to impose a spending block on your credit limit (if you don’t already have one in place). This way you won’t have to worry about accidentally spending over your limit and then being financially penalized for it.
Another way to keep credit spending in check is to simply lower your limit. Because the higher the credit limit, the greater the temptation it can be to put just ‘one more’ purchase on your card—until you’ve racked up a balance that can take years to pay off.
As you work your way up the pay grid and your monthly cash flow increases, you may also find yourself getting regular invitations to take advantage of credit limit increases.
Appealing as they may be, try and resist limit increases or at the very least, keep them to a minimum. Think of these increases as your creditor’s way of pulling out all the stops to keep you in debt. Instead, you could contact your creditor and let them know that you will contact them when you’re ready for a credit limit increase. At the end of the day, you will ultimately have to be the one to exercise responsible judgment when it comes to how much credit you take on (and eventually use up).
As an organization that’s been providing education members with exclusive financial solutions since 1975, Educators Financial Group truly has your back with time-tested borrowing alternatives to the banks. No matter where you are on the pay grid or what your pension income is in retirement, we can provide you with the right borrowing solutions to fit your specific needs, goals, and budget.