Credit Cards: What You Need to Know

The good, the bad and the ugly – how to practice safe plastic

When you think about it, credit can be a double-edged sword. On the one side, credit can help you make large purchases, take a family vacation and even make holidays more extravagant. However, without a solid plan to repay your debts, credit can cause serious financial hardship.

The information below can help you practice safe plastic and keep credit card debt at a minimum. If your cards are already causing you financial trouble, Consolidated Credit can help. Call us today at to speak with a trained credit counsellor or request a Free Debt & Budget Analysis.

The pros and cons of credit cards

With so many Canadians relying on credit to live beyond their means, it can be difficult to remember that credit cards can be a positive part of a healthy financial plan. In fact, with the right budget strategy and a solid understanding of how credit works, you can effectively use credit cards without causing financial hardship.

Pros Cons
Allows you to buy needed items & manage emergency expenses Interest charges mean you pay more for purchases
You don’t need to carry cash or write cheques Purchases and cash advances can mean added fees
You have a record of your purchases Losing track of your spending & impulse purchases can cause financial difficulties
Reward cards can offer great credit incentives “Purchase acceleration” can cause you to spend more to earn more rewards

Choosing the Right Credit Card

Practicing safe plastic starts with choosing the right credit card for your individual financial situation. Understanding the various types of credit cards and how the individual terms and fees will work within your budget can help you maintain a healthy financial outlook.

When choosing a new credit card, it’s important to do your research and consider the following factors:

Your Credit Worthiness

When it comes to credit, lenders use the three C’s of credit worthiness to decide if you qualify for a credit card and what interest rates you’ll pay. Understanding what creditors look at will help you improve your financial outlook and get the best interest rates possible.

The following provides details on the three C’s:

Character Capital Capacity
Do you repay your debts?

Have you used credit before?

Do you pay your bills on time?

Do you willingly repay your debts?

How long have you lived at your current address?

What assets do you have in case you don’t repay your debts?

Do you own a home or other property that can secure the debt?

Do you have a savings account?

Do you have any investments?

Do you have the means to repay your debts?

How long have you been at your current job?

Is your job in a stable field?

What is your salary?

How much debt do you currently owe?

What is your debt to income ratio?

What are your current living expenses?

As a general rule, you should always look at your credit report before applying for credit. This will give you an accurate picture of what your creditors will see when assessing your credit worthiness. It will also give you time to fix any errors before applying for a new card.

The following is a list of common errors to look for:

Using Credit the Right Way

Once you’ve been approved for your card, you need to make sure you use your credit in a responsible way that fits within the boundaries of your budget. In order to use your credit card the right way you need to understand how much credit really costs.

Let’s say you make a $1,000 purchase on a credit card with an 18 per cent APR:

Of course, if you factor your credit card purchases into your monthly budget, you can determine the best way to pay back your debts without piling on the interest charges.

Your Rights and Responsibilities

The final piece of the credit card puzzle comes in knowing your rights and responsibilities as a consumer. This includes understanding the terms and conditions of your credit agreement.

Under current consumer protection laws, your creditors must provide you with 30 days’ notice prior to making:

Knowing your rights as a consumer is also important when it comes to ensuring credit card companies deal with you fairly and according to the law. These rights vary from province to province, in Ontario most of these rights are outlined by the Collection Agencies Act.

You can find more information about the consumer rights in your region by visiting

Additional Resources

If you would like more information download our self help guide, All About Credit. If you still need help eliminating your credit card debt, Consolidated Credit is here to help. Call us at or request a Free Debt Analysis.

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AFCC (Accredited Financial Counsellor Canada) is a distinguished professional designation, indicating that a counsellor has successfully completed the program and has specialized knowledge, unique skills and expertise as a qualified Credit Counsellor.

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