Learning to be Picky

Did you know, recent statistics show that Canadians own an average of three credit cards each*. If used wisely, multiple credit cards can be a good idea. But if you have too many or run up a balance on one card only to move to the next and the next and the next, it’s time to get picky.

Why do you need a credit card in the first place?

Credit cards have become part of Canadian lifestyle. Not surprisingly, people find it more useful than ever to have a card or two at their disposal. Plastic has been popular for many years and for many reasons, namely simplicity, safety, and financial strategy.

Simplicity:
Credit cards can help you manage finances, control expenses, and purchase goods without having to carry a lot of cash. And, with the prevalence of mail, phone, and online purchasing, credit cards have made the entire process safer, easier and quicker. Read Self–Defence 101.

Credit cards are also a good source of identification and can be used for reservations, out-of-town purchases, or rentals. And, when traveling, credit cards often yield a better rate of exchange than buying local currency.

Safety:
Unlike cash, if your credit card is lost or stolen, you’re usually protected from unauthorized purchases. Some cards also allow you to dispute purchases that don’t meet the terms of sale. Read about MasterCard’s Zero Liability protection.

Strategy:
Credit cards offer a great way to build your personal credit history. Generally they are the first source of credit you receive and, many years down the road, your responsible use of a credit card might be the deciding factor in a mortgage or personal loan application.

With a little diligence, it’s easy to keep one or more credit cards in good standing. If you can do it, you’re on the road to establishing a good credit history that you’ll never regret.

Review Before Making Your Choice

Currently more than 600 institutions issue credit cards in Canada. Given the variety of choices, you might feel a little overwhelmed.

Instead of randomly choosing a card, take a minute to train your eye. It’s easy to find the credit card features that you need and want, while also weeding out those you don’t. Simply have an idea of what you’re looking for, and grab a pen.

Write down all of the features you need (perhaps a low annual fee), followed by all of the features you want (grocery or travel “points”, for example). Then, with all of the options in front of you, match each card against your list. Hold on to those that meet your needs and discard the rest.

Use this list of credit card terms to help you write your list:

• Annual fees are charged by card issuers to cover various administrative fees and customer services. Though no-fee cards do exist, most cards have fees ranging from $15 to $150. They are generally billed in one lump sum on one bill.
  TIP: A rule of thumb is the more features you receive the higher your annual fees.
• Ongoing Interest rates can be fixed or variable. With a fixed rate you’ll pay a set amount of interest each year — a percentage of your purchase charges, stated up front with no surprises. A variable or “floating” interest rate mirrors the prime rate plus a stated percentage (e.g. prime + 3%).
  TIP: If you plan to carry a balance from month to month, a low APR should be high on your "needs" list.
• Introductory rates, a ’thank you’ of sorts for picking a specific card, gives new cardholders a preferable APR for a short period.
  TIP: Introductory rates don’t last forever, so make sure you know what your actual APR will be once the introductory period is over.
• Grace period is the time between your purchase date and the day interest charges begin to accumulate.
  TIP: Some cards offer grace periods of 25 days, others have none.
• Other fees may be charged for late payments, cash advances, or administrative transactions.
  TIP: Most fees should be outlined on your application, make certain you read it.
• Perks and benefits have become very popular with cardholders and usually offer "points", awarded for using your card toward travel, groceries, and other rewards.
  TIP: Weigh the benefits against the cost of the card and decide what’s right for you.

Your list of surviving cards should be small. Once you make your final choice, be confident that you will face fewer hassles and enjoy your card more. Congratulations, you’ve made a wise choice.