Personal Finance

Winnipeg Free Press - PRINT EDITION

Don't give yourself too much credit

Carrying a lot of plastic can jinx getting a loan

By: Ellen Van Wageningen

Posted: 03/13/2010 1:00 AM | Comments: 0 (including replies)

HERE'S how not to find the right credit card.

Go shopping after work on a Friday night. Spend a frantic hour buying gifts at the last minute. As you're headed for an exit, notice the coat you've been wanting is on sale. Trudge to the only customer service desk that is still open, where the clerk tells you can get another 10 per cent off if you use your store credit card. You don't have one. No worries, says the clerk as she pulls out an application form.

This is how I acquired my latest credit card. It's No. 3 in the collection.

Later, I remembered Credit Canada executive director Laurie Campbell telling me that the majority of impulse shopping is done with credit cards and most folks really only need one.

The average Canadian over the age of 18 has three which is "way too high," says Campbell, who points out the interest on credit cards is higher than on any other traditional kind of debt.

When I got my latest card the limit was $4,000. (I have since lowered it.) The interest rate is 28.8 per cent and the minimum monthly payment is the greater of $5 or 3.33 per cent of the balance. If I spent $4,000 with the card and then made the minimum payments without adding any new debt, it would take almost 34 years to pay it off.

I use my credit cards to buy things I know I have money in the bank to cover. Still, was it a mistake to sign up for another card just to get a 10 per cent discount and some future deals at the same store?

Maybe not, says Wendy Dupuis, executive director of Windsor, Ont.'s Financial Fitness Centre, but even those who are disciplined in their spending need to be careful.

She notes that if you have a lot of credit cards with high limits, some creditors may be reluctant to extend you a loan for a vehicle or home because of the risk you could have too much debt.

"Take time to decide which card is right for you and make sure that the limit isn't too high," Dupuis advises.

A good place to do some quick comparison shopping is the Financial Consumer Agency of Canada website, www.fcac-acfc.gc.ca.

It has a credit card selector tool that helps you do quick comparisons based on the features and rewards you want.

It also has a payment calculator and other helpful information.

Dupuis said that carrying more than 30 per cent of your total limit on your credit cards could negatively affect the credit score lenders use when determining whether to give you money.

If you think you have too many cards, try to pay them all off and do a little research before cancelling any of them to make sure you don't inadvertently blemish your credit score, Dupuis says.

And, finally, "use them with caution and as part of your overall (financial) plan."

-- Canwest News Service

Republished from the Winnipeg Free Press print edition March 13, 2010 B11

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