My Money, My Choices
Gail Vaz-Oxlade is a personal finance writer, television host and radio broadcaster. Every Wednesday, she arms Metro readers with tips to keep spending in check.
Gail Vaz-Oxlade on how to choose the right credit card
Stay on the right side of the rules. Just missing a payment by one day could end your “special offer” and take you into deadly interest territory.
|Report an Error|
Share via Email
Have you noticed how many websites are popping up that are designed to help you decide which credit card is right for you? With hundreds of different credit cards available, it’s a little like looking at the screwdriver aisle in the hardware store.
Here are three things you should think about as you shop for your credit card:
1. The annual fee. Lots of credit cards have annual fees. Many don’t. Typically, the more bells and whistles on a card, the higher the fee. Are you prepared to pay an annual fee for those points you’re earning towards flights or whatever else is being offered? How many points will you have to earn (how much will you actually have to spend) to make up for the fee?
2. The interest rate. If you never carry a balance on your credit card (yes!) then you don’t give two hoots what interest rate your card is charging. But if you’re one of those dopes that’s still using your credit cards as extra disposable income, you better be darn sure you’ve got the lowest possible interest rate going.
Beware of low introductory rates and how they may change. An enticingly low interest rate may skyrocket as soon as the introductory period ends. Introductory rates work best if you plan to be paid off in full by the end of the term of the special offer.
And for heaven’s sake, stay on the right side of the rules. Just missing a payment by one day could end your “special offer” and take you into deadly interest territory.
3. The provider. If you’re a debtor, do NOT have your credit card with the same financial institution that you do your banking with.
Most people don’t realize that if you have money on deposit at a bank and also have your credit card at the same bank, the bank can tap your deposit account if you’re delinquent on your credit card.
That’s right, the bank has the right to go into your account and take their money if you are falling behind on payments. That could mean you have no money for food or your mortgage/rent payment will bounce. Ouch! So do NOT have your credit card at the same financial institution where you have your savings and chequing accounts.
A good place to start your comparison shopping is at the Financial Consumer Agency of Canada’s website. But don’t stop there. Do your own legwork and make sure you’re getting the card that’s going to work hardest for you.
Credit cards can be wonderful tools for managing your cash flow. I put all my purchases on my credit card, earn cash back and pay my balance off in full at the end of every month. Not only does that get me free money, but it reduces the number of transactions on my bank account, minimizing my bank fees. Two birds, one stone.
Here’s another tip: If you like to shop online, get yourself a separate (no-fee) credit card with a low balance for your online shopping. I find the peace of mind of knowing I’m not putting my primary card into all those cyber-storage devices priceless.