This holiday, don’t put anything you can't afford on your credit card
The holidays are coming, and chances are most Canadians are going to use a credit card to finance some of our purchases. In this article, finance blogger Kyle Prevost shares some advice to keep holiday credit use under wraps.
Many of today's credit cards offer rewards like travel points or cash back to their users. This, combined with the convenience of "paying for it later" is part of the reason credit cards are heavily used to finance purchases. However, with interest rates nearing 20% for some cards, the interest cost can outweigh the benefits. A recent survey revealed that a quarter of Canadians stated they don't expect to pay off their credit card balances this year. 1 in 20 are wondering if they will ever be able to pay it off.
Another recent survey found that the average Canadian intends to spend over $1800 this holiday season, including travel and gifts. Making only the minimum payments on a debt that large will result in much higher interest costs down the line than are taken into account when these purchases are being made. And, as Prevost points out, paying large amounts to your credit card every month is taking away a chunk of your budget that could potentially go towards saving for retirement, a trip, or paying off your mortgage faster.