FCAA is Saskatchewan’s financial and consumer marketplace regulator.
Many people get their first credit card during their post-secondary education. When used correctly, credit cards can be very useful for students. They can help build a credit rating, allow you to buy necessary supplies online and can be used in emergencies.
However, when used improperly, credit cards can create large amounts of debt that can take years to pay off. If you want to make your credit card work for you and not the other way around, keep the tips below in mind.
One of the best habits is to make your minimum payment on time and, if possible, pay in full. If you are always able to pay off the full balance and haven’t taken any cash advances, you can actually avoid interest charges entirely. If the amount on the card is too much to pay off all at once you may want to consider creating a monthly payment plan for yourself to follow until the entire balance is paid off. At the very least, always make the minimum payment by the due date.
It's important to know that being late or skipping payments will seriously harm your credit rating.
Do not share your PIN with anyone. If you tell someone your PIN or give someone your credit card and something happens to your credit card account, you are on the hook. You can be held responsible for any charges that are incurred and your credit card issuer could close your account.
Take time to consider which credit card you want. Different cards have different interest rates, fees and penalties for not making the minimum payment. If you expect to be carrying a balance, it may be worth paying an annual fee for a lower interest rate. Keep an eye out for cards specifically designed for students and compare details like interest rates, annual fees, interest free grace periods and potential bonuses like loyalty programs.
When you have chosen your preferred credit card, make sure you read and understand the terms and conditions of your credit card agreement. It’s important you read the fine print so there aren’t any surprises.
Avoid using your credit card to take cash out at the ATM or transfer money to your chequing account. Although this may be helpful in emergency situations, remember there is often a cash advance fee, and interest on cash advances is charged immediately.
Some cards offer add-ons such as balance protection insurance. Make sure you understand the costs and benefits of them.
It’s important to remember that having a credit card doesn’t mean you have more money. Purchases need to fit within your budget. If your credit card balance keeps growing month-to-month, you’re likely overspending.
One of the most common mistakes people make with their credit card is using it to buy “wish list” items. If you find yourself at a checkout counter with your card getting ready to refresh your wardrobe with the latest fashions or to upgrade to a monstrous TV, take a moment to consider whether you’d be able to buy those things without the card. Though big-ticket purchases might make you happy in the short term, using a credit card to buy items you can’t afford is a slippery slope that often leads to large amounts of long-term debt.
Watch where you are spending money and carefully read through your recent transactions to make sure they are accurate and check for any fraudulent and unauthorized charges. Fraudsters can sometimes gain access to your card without you noticing it.
With mobile payment services being available through smart phones and watches, it’s easy to pay for items without physically using your credit card. However, being easy to use means it’s also easy to rack up charges. Make sure to monitor your spending so it doesn’t get out of control.