Healthy Credit Card Spending Habits

^{Photo Credit: Håkan Dahlström}

It’s no secret that many Canadians have an unhealthy relationship with their credit cards. According to BMO’s 2015 Credit Card Report, nearly half of Canadians carry credit card debt, and one in three don’t pay off their credit card bill every month.

But it doesn’t have to be that way. There are plenty of Canadians who have healthy credit card spending habits, and I’m proud to count myself amongst them. Over the years I’ve developed a positive relationship with my credit cards that have allowed me to reap travel rewards and bonuses without paying high-interest credit card debt. Here’s what I’ve learned about healthy credit card spending habits:

Choose Your Credit Card Carefully

A positive relationship with your credit card starts with choosing the right card. There are many different types of credit cards available to Canadians, from balance transfer credit cards, secured credit cards, low-interest credit cards, to travel and rewards credit cards.

Each type of credit card is best suited to a unique situation, so ask yourself what you’ll be using your credit card for, and that will help you determine which one is right for you. Here are a few examples:

If you want to use a credit card to rebuild your credit after declaring bankruptcy, a secured credit card would be a good choice.

If you plan only to use your credit card occasionally to purchase items like plane tickets, choose a credit card with no monthly fee. Monthly fees are most commonly associated with rewards credit cards. If you don’t plan to use your credit card often, you’ll never earn enough rewards to offset the monthly fee.

If you want a credit card to charge everyday purchases, you should choose a rewards or cash-back credit card that will help you capitalize on those daily purchases.

Pay Off Your Credit Card Debt

You won’t ever be able to develop healthy credit card spending habits until you pay off your credit card debt. Being credit card debt free is a cornerstone of a healthy relationship with your credit cards and will set you up for success in the future. You can use this credit card payment tool from the Financial Consumer Agency of Canada to determine how much you need to pay towards your debt every month to become debt free.

If you have a lot of credit card debt, you can pay it off quicker by transferring the balance to a new credit card that is offering a 0% balance transfer promotion. These promotional credit cards allow you to transfer your debt balance to a credit card charging 0% interest for a limited time. If you pay off your credit card debt before the promotional period ends, you won’t incur any interest charges.

Just be sure to pay your credit card debt off before the promotional offer ends. Otherwise, you will be charged hefty interest fees.

Pay Off Your Credit Cards Every Single Month

Once you have the right credit card for your spending habits, and you’ve paid off your outstanding credit card debt, it’s important to get in the habit of paying off your credit card every single month. By bringing your credit card to a zero balance every month, you will not be charged any interest on your purchases.

If you can’t get on board with the habit of paying your credit card off every single month, or if you find yourself regularly overspending on your credit cards, the healthiest choice would be to stop using your credit card for everyday purchases.

Personally, I use my credit card for online shopping and purchases that don’t fall within regular weekly spending like Christmas presents, flights, and furniture. I do not use my credit card for everyday spending because I could not get into the habit of staying on budget with my credit card. I would often overspend by $15 or $20 per week, which made it difficult to pay my credit card off every month. That was not healthy, so I switched to using cash for my daily spending and left my credit card alone. I now have much healthier habits related to my credit cards and have even been able to use a travel rewards credit card without incurring any interest charges.

If you follow these tips for healthier credit card spending, you’ll be sure to reap the rewards of having a credit card without incurring hefty interest charges or carrying credit card debt.