Cause for concern
Hesitation around opening and using a credit card is completely justifiable—it invites thepossibility of overspending, missing payments, racking up fees, paying high interestrates and dealing with the resulting financial stress. Despite millennials carrying fewercards, credit card debt is on the rise, with Canadians carrying an average balance of$4,094 in 2017. Credit cards can be seen as a gateway to spiralling debt—and forsome, that’s enough to justify reaching for a debit card or for cash instead.Being debt-conscious isn’t inherently bad—in fact, being able to see past theconvenience of credit cards to their potential pitfalls is a responsible perspective tohave. Credit card transactions are essentially mini-loans that can lead to serious debtwhen used carelessly, but avoiding them altogether is also problematic—and not just forthe credit card companies who issue them. An aversion to credit cards can negativelyimpact future financial and lifestyle decisions.

The consequences of being credit card-shy
Credit card use plays a huge role in contributing to your credit history, which in turn is animportant part of your financial footprint. Credit scores are a key component in many ofthe major purchases you will make in your lifetime, such as vehicles or homes. A goodcredit score may also affect your ability to secure a loan for a small business or a futureentrepreneurial venture. Some employers and landlords perform credit checks as part oftheir application process. Your credit history can therefore have an impact on yourlifestyle, on your livelihood and even on where you live.Avoiding credit cards won’t actively damage your credit rating, but it can hold you backfrom achieving the types of scores needed for the best interest rates on auto loans andmortgages. While it’s possible to build your credit score with other borrowing productssuch as student loans or personal lines of credit, credit cards are the easiest way to boost your credit score because of their accessibility. When used responsibly, creditcards can build a positive credit history with little or no cost to you.

Using credit responsibly
The only way to sidestep any and all credit card-related fears is to follow this strategy:pay it in full and on time. This means that you treat your credit card as you would cash:use it to make regular purchases within your budget that you know you can afford. Youdon’t treat it as additional available income. You don’t use it to fill the gaps when yourpaycheque isn’t quite covering everything you want it to. You only use it to pay bills andmake purchases that you can cover with money that you already have in your bankaccount.Paying your credit card bill in full means you’re not carrying a balance and thereforecannot be charged interest. Paying your bill on time protects you from being chargedlate fees and other penalties. By paying in full and on time, the only cost to using acredit card (depending on the issuer and the type of card) is the annual fee. Paying infull and on time also allows you worry-free enjoyment of the perks and rewards that yourparticular credit card may have—and in many cases, the monetary value of these perksis greater than the annual fee.

Your guide to paying in full and on time
Paying in full and on time is a simple rule to remember, but there are a couple of thingsyou need to be aware of in order to follow it successfully. Use the following questions asa guide to using your credit card with confidence.

1. Do you currently have credit card debt?If the answer is no, carry on to the next question! If the answer is yes, you must developa debt repayment strategy right away. If you need help devising a plan, reach out toyour credit union for available resources.
2. Do you know when your billing cycle opens and closes?It’s important that you understand the billing cycle for each credit card you own. It’s easyto assume that billing cycles are monthly, but in fact they vary depending on the cardissuer and can range between 20 and 45 days. Your credit card statement will disclosewhen your billing cycle opens and closes—take a minute to look at your last fewstatements and determine where your billing cycle starts and ends. Does it start on thefirst day of each month? Does it start mid-month? Does it close on the same date eachmonth, or does it vary?
3. Do you know your personal payment due date?Your credit card statement will clearly list your payment due date, but in order to dodgeany late fees, you also need to allow time for your payment to process. For each creditcard that you use, figure out what your personal payment due date is—that is, the dayby which you must pay your bill in order for your funds to transfer in time. It’s smart toleave a buffer of a week or more before the due date printed on your statement.
4. Do you have an emergency fund? When an emergency expense suddenly pops up, it’s easy to reach for your credit cardin response. A large emergency expense can prevent you from paying your balance in full and on time and derail your good credit habits. The best defence is to have savings set aside to minimize your reliance on your credit card. The regular recommendation is six months’ worth of expenses, but if you’re just starting out, set smaller $500 milestone goals.

A little bit of knowledge and self-discipline is all it takes to successfully use the “pay it infull and on time” strategy. This approach allows you to fully enjoy the convenience andrewards of your credit card while contributing to a positive credit history that will serveyou well when it comes time to make a large purchase. There’s no need to be shy whenusing your credit card responsibly.

​Other financial topics covered by 'It's a Money Thing'