Our Disclosure

The content on this website includes links to our partners and we may receive compensation when you sign up, at no cost to you. This may impact which products or services we write about and where and how they appear on the site. It does not affect the objectivity of our evaluations or reviews. Read our disclosure.

How to Use a Credit Card Responsibly: Tips, Tricks, and Things to Know

Published:

Fact Checked

A credit card can be a convenient way to make purchases. As well as getting access to credit when you need it, you can also build your credit score and earn excellent rewards.

But you should always be responsible with your credit card use and use it wisely to maximize the benefits your credit card provides.

Here’s what you need to know about using a credit card responsibly.

How to Use a Credit Card for the First Time

Choosing and applying for your first credit card is a fairly easy process, but there are a few key things to remember.

Choosing a Credit Card

There are so many credit cards in Canada to choose from, so think carefully about what you need when choosing a credit card.

For example, consider the rewards and benefits, interest rate, annual fees, and credit limit. If you have a low credit score, secured credit cards may be an option.

Applying for a Credit Card

When you find a credit card you like, find out about the application requirements. For example, some cards have minimum income requirements.

Also, you will usually need a good credit score of 660 or over when you apply for a credit card.

Applying online is the easiest option, but you may be able to apply over the phone or in person at your local bank branch. You must provide a form of ID and personal information like your name, address, and income.

Using Your Credit Card

The bank will send your card to your address, and you can then start using it. You will normally need to activate it, and then you can use it to shop in stores or purchase online.

Keep an eye on your spending, and check your monthly statement when it arrives so you know the minimum payment, total balance, and payment date.

Credit Card Tips You Need to Know

Read on for a few general tips to get the most out of using a credit card in Canada.

1. Pay Off Your Balance in Full

Always try to pay off your balance in full each month. This way, you can avoid paying interest on your purchases because of the grace period. If you don’t pay off the balance in full, you’ll start paying interest from the purchase date.

2. Never Miss a Payment

Even if you don’t pay off your balance in full, always make the minimum payment on time. Otherwise, you could face late payment fees, and it could also hurt your credit score.

3. Always Check Your Statements

Keep a close eye on your statements and check the transactions each month to ensure everything is correct. Make a note of the payment date when you receive your statement.

4. Pay Regular Bills

You could use your credit card to set up regular bill payments. Charge your recurring expenses like utility bills to your credit card and then pay off the balance at the end of the month. This saves you from having to make lots of separate payments.

5. Don’t Overspend

When it comes to how to use credit responsibly, always avoid overspending and only use your credit card for what you need.

If you overspend, you can get into debt, and credit card debt is expensive because interest rates are usually high.

6. Use Balance Alerts

You may be able to set up balance alerts to keep a close eye on what you’re spending, which can help you to avoid spending too much.

7. Monitor Your Credit Score

Keep a close eye on your credit score and get into the habit of checking it every month. You can use a free service like Borrowell to do this.

Knowing your score can help you prepare if you want to apply for other forms of credit like a mortgage.

8. Maximize Available Rewards

If you get reward points for shopping at certain stores or purchasing in specific categories like groceries or gas, choose where you shop carefully. By shopping at the right places, you can maximize your rewards without spending any extra.

9. Don’t Pay More for a Card You Don’t Need

A premium credit card may tempt you but may come with a high annual fee. Do you really need it?

Sometimes it can be an excellent choice, especially if you make full use of the rewards and perks. If not, you might want a no-fee credit card instead.

How to Use a Credit Card for the Maximum Benefit

Using a credit card isn’t just convenient; it can also help you to earn rewards and benefits. Here are a few ways to maximize the benefits available.

Earn Rewards

Choose a credit card that allows you to earn rewards points where you normally shop. For example, if you mainly spend on groceries, some credit cards allow you to earn points for grocery purchases.

There are many reward schemes, including travel rewards where you can earn air miles. Remember your rewards whenever you make a purchase, and you can benefit from your daily spending.

Earn Cash Back

Choose a cash back credit card if you prefer earning cash rewards for your purchases.

There are many of these available, and some allow you to earn more cash back for purchases in specific categories like transport or in partner stores.

By spending on your card in the right places, you can earn more cash back for every purchase you make.

Enjoy Insurance Benefits

Many credit cards in Canada include insurance benefits, especially premium credit cards. These include travel insurance, mobile device insurance, rental car insurance, and more.

Check the benefits available when choosing your credit card and make full use of them.

Choose a Lower Interest Rate

If you don’t think you will pay off your balance in full, choose a low-interest credit card.

While most credit cards have interest rates of around 20%, some have far lower rates, reducing the amount you spend on interest payments.

Transfer a Balance

If you have a balance that is costing you a lot of money in interest payments, you might want to apply for a balance transfer credit card.

These allow you to transfer your balance without paying any interest or a very low rate for a specific amount of time.

How to Properly Use a Credit Card to Build Credit

Using a credit card wisely can help you to build your credit. Here are some of the key things to keep in mind.

Stay Below Your Credit Limit

You will be given a credit limit when you receive your credit card. Always stay below this and avoid going over it, which could lead to over-limit fees.

Reduce Your Credit Utilization Ratio

The credit utilization ratio is the amount of your total credit available (including credit cards, personal loans, etc.) that you use, and it can affect your credit score.

If you have a total credit limit of $10,000 and use $2,000 of it, your credit utilization ratio is 20%. Ideally, you should keep the ratio to 30% or below.

Make Payments On Time Each Month

Missing a payment can lead to late payment fees. However, it could also hurt your credit score in some cases, especially if you miss payments regularly. Always make your payments on time to avoid any potential problems.

Use Your Card Regularly

Get into the habit of using your card regularly, even if you only make a few monthly purchases. Using your credit card and paying it off on time can help improve your credit score.

Monitor Your Transactions

Keep a close eye on your transactions to understand how much you are spending and how much of your available credit you use.

This can also help you to spot any potentially fraudulent transactions so you can take swift action and prevent unauthorized spending.

Keep Old Credit Cards

It may help your credit record to keep older credit cards open, even if you don’t use them, because closing a credit card can increase your utilization ratio.

Of course, if you are paying an annual fee for a card you don’t use, you may still want to close it.

FAQs

What are 3 safety tips when using a credit card?

Always keep your PIN code private, avoid using it to make purchases on suspicious websites, and never let your card out of your sight when you make a purchase.

Is it safer to tap or insert a credit card?

Tapping is considered a more secure way to make a payment using your credit card.

How many times can you use a contactless card in a day?

While there is no set number of times you can use a contactless card in a day, there is a $250 limit per transaction.

Why should credit be used responsibly?

If you do not use credit responsibly, you could find yourself getting into debt that you cannot afford, and it can also have a negative impact on your credit score.

Related:

Best Credit Offers in May 2024

Get the top savings and spending account and stop paying costly bank fees ($20 Bonus)

Save on fees and access unlimited transactions, eTransfers & bill payments.

Get a $20 instant bonus after completing your first purchase.

Earn up to 5% unlimited cash back and up to 5% interest on your balance.

Guaranteed instant approval with any credit score + free budgeting app.

Get this guaranteed approval credit card for any credit score ($25 bonus)

Get an instant $25 welcome bonus.

Earn 5% unlimited average cash back at thousands of locations.

Guaranteed approval for poor and bad credit scores. Takes 3 minutes.

No monthly fees and up to 15% cashback on your first-time purchases.

Stop paying monthly fees with a free chequing account + $400 bonus

Get a $400 cash bonus when you set up a qualifying direct deposit.

Unlimited debits, online bill payments and Interac e-Transfer transactions.

No monthly or annual account fees.

Earn a high interest rate on your savings (6.00% interest rate offer).

Author

Gravatar for Enoch Omololu, MSc (Econ)
Enoch Omololu, MSc (Econ)

Enoch Omololu, personal finance expert, author, and founder of Savvy New Canadians, has written about money matters for over 10 years. Enoch has an MSc (Econ) degree in Finance and Investment Management from the University of Aberdeen Business School and has completed the Canadian Securities Course. His expertise has been highlighted in major publications like Forbes, Globe and Mail, Business Insider, CBC News, Toronto Star, Financial Post, CTV News, TD Direct Investing, Canadian Securities Exchange, and many others. Enoch is passionate about helping others win with their finances and recently created a practical investing course for beginners. You can read his full author bio.

About Savvy New Canadians

Savvy New Canadians is one of Canada's top personal finance platforms. Millions of Canadians use our site each year to learn how to save for retirement, invest smartly, maximize rewards, and earn extra cash. We have been featured in prominent finance media, including Forbes, Globe and Mail, Business Insider, CBC, MSN, Wealthsimple, and TD Direct Investing. Learn more about Savvy New Canadians.

Free financial education

Expert advice

Free resources

Detailed guides

Leave a comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.