Few Tips to Make Better Use of Your Credit Card

A credit card can be a valuable ally or a formidable enemy, depending on how you use it.

Used wisely, the credit card is useful in more ways than one. If you exercise caution and foresight with credit, you behave appropriately.

In order to stay in control of the situation, it is often enough not to let yourself go to all your buying impulses of the moment.

First and foremost, opt for a credit card that perfectly meets your needs... and not to your credit limit aspirations. This greatly reduces the risk of being in debt beyond your ability to repay.

Many financial institutions and countless businesses offer credit cards. It's about making a wise choice based on your income, the number of your dependants, your consumption habits, etc.

Also, be sure about interest rates and the terms of use imposed by different cards.

In this regard, avoid being seduced by gifts or promotions from various businesses with their credit card membership. The latter generally have much higher interest rates than financial institutions.

Finally, keeping only 2 credit cards at most will help you build a good credit record.

When you pay for your purchases with a credit card, the good habit of repaying the entire amount borrowed at each maturity will allow you to build a good credit record by ensuring an excellent credit rating. This is a significant advantage when it comes to borrowing more substantial amounts, such as buying a home.

Indeed, the credit rating is the equivalent of the rating given to you by credit bureaus based on your repayment habits. The more you pay off your loans on time and under the conditions, the better your credit rating.

It goes without saying that a good credit rating gives you a good reputation in the eyes of financial institutions, while a bad rating could seriously harm you in many ways. For example, a financial institution may deny you a large loan you need.

Of course, no one can predict everything; there are always unforeseen expenses in life. The credit card is a good way to deal with these small emergencies immediately, provided you pay the balance in full on or before the due date.

In this way, you minimize the interest costs inherent in your transactions and you realize great savings at the same time.

That said, saving and building a personal emergency fund is still a much better tool than a credit card to pay for unexpected expenses.

In addition to being a good tool to build your financial reputation, the credit card is convenient, if not essential, when it comes to renting a car or booking a hotel room and show tickets.

However, you should not use it to regularly pay for impulse purchases, just to protect yourself from your own emotions. When you feel like doing so, ask yourself, "Would I buy this item if I had to pay cash for it?"

Also, remember that the same rule applies when it comes to paying the card balance: pay it in full at the end of your statement.

As long as you get into good habits, why not combine the pleasant with the useful?

Some credit cards offer reward points that can be used to purchase products or services, or even to contribute to an RRSP.