Using Credit Cards Wisely
A recent credit card marketing campaign is promoting the use of credit cards for small purchases.
The benefits to the credit card company are obvious:
- Increased interest revenue from the approximate 30% of Canadians (according to the Canadian Bankers Association) – who do not routinely pay their credit cards off in-full, every month.
- Increased income from processing charges to vendors.
- Increased usage and acceptance of credit card products at the small/micro purchase level.
The benefits to the credit card user are not that compelling:
- Ability to track small purchases on credit card statement.
- Earn ‘rewards’ on small purchases – of course this is only good if it is a rewards no-fee card and you never – ever – fail to pay off the entire balance every month.
- Keep up with the Joneses – or so at least one of their ads would have you believe.
The negatives for the credit card user making small purchases are powerful:
- Increased exposure to the risk of debt (small purchases add up fast)
- Increased prices for small goods (small vendors will have to recover the additional costs of taking credit cards for small purchases)
- PLUS: If you do not pay off your cards in-full every month – there will be an additional cost to those small purchases – as you will also be paying interest on them.
- Increased likelihood of going over budget as opposed to just paying with cash
- Increased dependency on credit
Avoid the stress and pain of unwise credit card use:
At David Sklar & Associates, we have helped thousands of people in the Toronto area, who have ended up in serious debt crisis (much of that with credit cards) – find their way back to financial stability.
We understand the importance of using credit wisely.
Whether is it running up your debt load with small purchases, missing payments, only paying the minimum balance, or using your credit cards as a source of income rather than a convenience – avoid unwise credit card use.
Spot the Warning Signs
Perhaps credit card advertising should come with the type of warnings that gaming and alcohol ads contain.
Refrain from credit card use if you notice any of these warning signs:
- If you are unable to pay your credit card debt in-full every month
- If you are receiving collection calls from unpaid creditors
- If you do not know the current rate of interest being charged on your credit car
- If you are spending more with credit cards than you would paying cash
- If you are using your credit card in hopes of keeping up with the Joneses