Cyndy Batchelor, Financial Advisor, BCom, FMA
O’Farrell Wealth & Estate Planning | Assante Capital Management Ltd.
The cost of daily living is getting more expensive, and many use their Credit Cards to carry these increased costs. Carrying a balance on a credit card will incur interest charges that can take years to pay off. As credit card debt can hold an interest rate of up to 24%, the only way you will ever get ahead is to commit to never carrying a balance. That does not mean that you need to give up using your credit card, it simply means you should be paying off your full balance by the due date each month. Credit Cards can help you build up good credit and give you rewards like dividend dollars, travel miles, or points to redeem for free items. This can help you save money in the long run. If they are used responsibly, credit cards can come with many incentives.
Here are some tips for using your Credit Cards to their best advantage:
Set a credit limit that you can pay off
Make sure you can pay off your credit card each month by the due date. Whatever you are charging to the card needs to be within the budget so that you can afford to make your payment ON TIME. If you go beyond your limit, stop using the credit card.
Track your spending
Tracking your spending is so important. You can do this by reviewing your credit card
balance regularly, setting up a spreadsheet, utilizing an app, or through an alert on your
phone. You may even want to make additional payments against the card to ensure the
balance does not get out of hand.
Live on a Budget
Now that you have set a limit and are tracking your spending, ensure you are living up
to your budget. Make sure your income is more than your expenses. Allocate your income to 50% needs, 30% wants and 20% savings. If you need to revise your budget and drop some of the wants or sundries, as I like to call them, then revise as needed until your numbers are in line.
Make your payment Automatic
You can set up your bill payments, including your credit card, to be paid automatically.
This will help you to keep to your monthly budget. It will also help you to ensure you
are always paying off your credit card.
Build yourself an Emergency Fund
To avoid a sticky situation, start building an emergency fund. Emergencies like car
repairs, a job loss, or a leaky roof can max out your credit card if you do not have
emergency funds set aside. This can increase your overall debt. Ideally, your emergency
fund will cover four to six months of living expenses. If you do have to use your
emergency fund, make sure you plan to build it back up again.
A credit card can be a great financial asset as a tool to build credit and earn rewards.
We welcome questions so please reach out! See our ad in this week’s North Dundas Times and follow us on Facebook @OFarrellFinancialServicesInc.
Cyndy Batchelor is a Financial Advisor with Assante Capital Management Ltd. The opinions expressed are those of the author and not necessarily those of Assante Capital Management Ltd. Please contact her at 613.258.1997 or visit ofarrellwealth.com to discuss your circumstances prior to acting on the information above. Assante Capital Management Ltd. is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada.