Sure, you may use credit cards frequently for your purchases, but do you understand interest rates, annual fees, liability and everything else that comes with being a credit card user? Here are a few consumer tips when it comes to signing up for a credit card – I hope you find the information useful!
- Read the fine print. Before you sign up for any credit card, it’s important to know exactly what you’re getting into. Carefully read the terms and conditions of the contract before signing: do you know what happens and your liability if your card is lost or stolen? Are there limitations or restrictions of the rewards your card offers, such as expiry dates? Do you know how to cancel the card?
- Understand the fee structure. From annual fees to cash advance fees and inactive account fees, it’s easy to get confused when it comes to credit cards and their unique fee structures. To learn more about what all these fees mean (in plain English), visit the Financial Consumer Agency of Canada’s website and click on their article “understanding credit card fees.”
- Know your spending habits. Even though it seems obvious, it’s worthwhile to say: a credit card doesn’t increase the money you have available to spend. Before shopping around for a credit card, think about how you’re planning on using it and set some personal guidelines. If you tend to overspend, you may consider going for a card with a relatively low limit. If you feel like you may spend more just to earn points or rewards, you may want to opt for an incentive-free card.
- Be aware of the risks. Unless you pay off your balance in full each month, the interest you pay may cost you more than the value of any reward, benefit or lower interest rate and will increase the cost of everything you buy with your card. Similarly, if you’re signing up for a joint card with someone, understand the risk to your credit score if they fail to pay the balance.
- Limit the number of credit cards you apply for. Credit reporting agencies record each time you apply for a credit card. Applying for too much credit can damage your credit rating by creating the impression that you may be relying too heavily on credit.
There’s more to learn about credit cards! Check out our blog post for some general tips or learn how to request a refund from your credit card provider.
Were you signed up for a credit card without being fully aware of it? Here are your rights
How to request a refund from your credit card provider
Are you liable for charges on a lost or stolen credit card?