One major milestone in any young person’s life is obtaining their first credit card. There are many different types of credit cards on the market today that allow you to easily qualify while offering a wide range of benefits and rewards. Not only this, but your credit card is a great tool for making large purchases more affordable, by allowing you to pay it back in smaller monthly repayments. But with credit cards, comes big responsibility. It’s important to make your credit card payments on time to avoid racking up debt.
The Benefits of Using a Credit Card
Whereas credit cards can be worrying and can sometimes cause financial stress if used correctly and to your advantage, they can be a powerful tool to boost your buying power and open up your world for an exciting financial future. Let’s learn about the benefits of using a credit card in Canada.
They Help Build Your Credit Score
Did you know that in order to have a credit score you must have credit? And with a credit card, you can safely build your credit score. A credit score is used to indicate how financially responsible you are to your lenders or creditors. Your credit card use is reported to the bureaus TransUnion and Equifax.
If you have a great track record of paying your credit card balance on time, this will help you have an excellent credit score. And the longer you use credit cards, the more you’ll build your credit history, boosting your score even more.
They Boost Your Buying Power
If you’re looking to make a large purchase, your credit card allows you to make smaller monthly repayments on this transaction. This helps you feel peace of mind in the case of a medical or family emergency, knowing you have your credit card as a back-up.
Helps Protect Against Fraud
One of the credit cards’ biggest is the level of fraud protection they offer you. Let’s say your credit card is stolen or someone finds your card information online. Even if the thief starts making purchases on your card right away, you won’t lose much money since charges to credit cards aren’t withdrawn immediately.
Once your credit card company is notified of these fraudulent transactions, they can freeze your card and ensure that the transactions made by the fraudster are also cancelled. This makes sure you’re not out of pocket.
Allows You to Earn Rewards as You Spend
Many credit card companies allow you to earn points or rewards as you spend. This can include frequent flyer points, a point system with cashback or other prizes and more.
The Importance of Paying Your Credit Card On Time
So, we know that there are many benefits to using a credit card. But why is it important to make your credit card payments on time? Let’s learn five reasons why you should keep up with your payments.
Avoid Your Account Going Into Collections
In recent years, credit card companies have been using debt collection agencies if they aren’t receiving a payment from their customer. Even if you think “that payment is so small, the credit card company won’t notice”, then chances are they will. And if your account goes into collections, you won’t be applicable to pay a minimum payment anymore, making your credit card a lot more expensive.
The collections agency will demand a full payment by law, and they may even charge you some extra fees. So, to avoid this, ensure your payments are on-time.
Get Lower Interest Rates
We all want to avoid high-interest rates and paying your credit card on-time will help this. In the case that you’re more than 60 days late for your payments, your credit card company can increase your interest rate. The standard penalty you may be charged on top of your interest is 30%.
It’s important to note, that your interest rate may expire in the case that you pay off your balance within six months. But missing payments on one of your credit cards may incur high interest on other credit cards you have with the same company.
Ditch Those Late Fees
Ever snooze that essential bill reminder by mistake? Well, your credit card company can charge you a late fee if you miss a credit card payment, even if it’s only a few minutes late. To save money on these unnecessary charges, make sure you’re making you’re payments early or at least, on-time.
Boost Your Credit Score
Your credit score is important, and so is making your credit card payments on-time. Your credit score is calculated from a variety of different factors, including your credit card payments. This makes up 35% of your score. So, missing credit card payments will have a significant impact on your financial life, often damaging your credit score.
If you’re searching for other ways to build your credit score, check out Score-Up, our proprietary credit boosting technology that’s sure to boost your score in as little as three months.
Have Low Monthly Payments
If you miss a payment, your next payment will be double. But in the case you make your credit card payments on time each month, your balance will stay the same and sometimes, will be lower. Having low monthly payments will help you budget for your debts effectively and ease financial stress you may have.
Marble Financial (CSE: MRBL; OTCQB: MRBLF). We are a group of forward-thinking financial technology experts that understand Canadian’s occasionally need help in achieving longer-term credit health. Through our industry-leading proprietary technology solutions Fast Track Loan, Score Up, and Credit Meds. We guide our customers back to mainstream credit 50% quicker than traditional methods. Since 2016, We are proud to have empowered thousands of Canadians to a positive financial future. With this, we continue to establish ourselves as a leader in financial wellness