Using credit wisely

It's sometimes easy to forget that you have to pay for your purchases. Here are some guidelines for maintaining control of your financial affairs and making credit work for you, not against you.

  • Make a personal budget and stick to it. Make sure that you know what's coming in and what's going out. This will help you avoid nasty surprises.
  • It is important to always make at least your minimum payment on your credit card in order for the regular interest rate to apply.

  • Avoid impulse buying. If you had to pay cash, would you be making this purchase?

  • Always comparison shop. Never buy anything—and that includes any form of credit—without comparing cost and value.

  • Always read and understand application forms before you sign them.

  • Be careful when co-signing or guaranteeing a loan for another person. Know the risks involved so that you can make a sensible decision. Ask the borrower the same questions the lender will. Remember, you could end up paying off the loan if the borrower cannot handle it.

  • Be knowledgeable about the cost of credit. Are you using the right type of credit for your purposes? Are you using a more expensive form of credit than necessary?

  • Be sensible about the number of credit cards you use. How many do you really need? Are you using them simply because you have them?

  • Keep track of all your credit purchases. Save the receipts to keep a running total of your obligations and to check against your monthly statements. One way to keep track is to get an extra cheque register (the part of the cheque book on which you keep track of deposits and withdrawals). Use the "cheques" column for noting credit purchases and the "deposits" column for noting credit payments. The "balance" column can be used to note down how much you owe in total.

  • Remember, whether you use cash, a cheque, a credit card or a loan to pay for your purchases, check out the merchant's reputation, the store's return policy, the quality of the goods and the product warranty. Using credit to pay for something does not absolve you of your consumer responsibilities.


(Source: ©2001 Canadian Bankers Association )