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February 27, 2022

Credit cards: the good, the bad and the ugly

206579_2170Credit cards can be your best friend or turn into your worst enemy if not used responsibly.

Getting your first credit card is a big deal when you're coming of age. But learning how to use them responsibly is something that requires a little bit of maturity and a little bit of credit card know-how.

"Credit cards are powerful tools to help build credit and financial skills," says Jeffrey Schwartz, executive director of Consolidated Credit Counseling Services of Canada, Inc. "Unfortunately, they can also be dangerous if not used responsibly."

For instance, when credit cards are used responsibly you can establish a good credit history that will benefit you long into the future. However, using credit cards as if they are free money and by ignoring limits and payments they can quickly spiral into your worst nightmare.

There are many major credit cards out there with various options, rewards, interest rates, fees, payment schedules and late payment penalties. You'll even find attractive cards featuring logos of your favourite sports teams in the CFL, NHL, MLB or NBA or even cards featuring celebrities like, shall I say for instance -- Justin Bieber or the pre-paid Kardashian Kard.

While these cards may seem aesthetically appealing they may also come with some not-so-appealing terms. So make sure you research the fine details and understand the terms and agreement including finding out if your credit card's annual percentage rate (APR) is fixed or variable and if there is an annual fee.

When you are approved for a credit card you will be given a spending limit which could range from a hundred dollars to thousands of dollars based on your credit score. Make sure you do not go over this limit.

And, make sure you don't miss a scheduled payment and that you pay your credit card balance in full each month. This helps you avoid unnecessary interest charges and helps build your credit rating.

Above all, think before you make that purchase on your credit card. Do you really need it? Can you afford to pay it off in full when the bill comes in?

Credit cards can certainly offer convenience for buying online, booking hotels or purchasing entertainment tickets. By sticking to some good financial tips, you can prevent yourself from falling into credit card debt.

By Donna Donaldson, MSN Money

Are you able to use your credit card responsibly or have you encountered difficulties?



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Gordon PowersGordon Powers

A long-time fund company executive, Gordon Powers now heads up the Affinity Group, a financial services consulting firm. Gordon was a personal finance columnist for the Globe & Mail for many years, has taught retirement planning...

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The modern-day MC Hammer of money, Jason can often be seen spending cash that isn’t his with the efficiency of a Wilt Chamberlain first date. After cutting his teeth as a reporter for the Toronto Sun, he joined the MSN Money team with...