Credit cards can be a costly way to borrow. Interest piled on top of interest, month after month, adds up quickly. Here are seven tips to lower your cost of borrowing:
1. Try to get a low, fixed-rate card
Cards with a changing interest rate can go up any time and charge you more interest. Look for a card with a low introductory rate that will last at least six months. If you have a high interest card, try to transfer your balance to a lower one.
2. Watch out for penalties
Some cards charge high late fees, and other penalties. For example, if you miss a payment or go over your limit, you may be charged a penalty, or your interest rate may go up. If you know you're likely to be late a few times with your payment, a card with lower penalties and a slightly higher interest rate may be a better deal.
3. Pay on time
Even if you have a card with a great interest rate, you may find the rate triples the first time you're late with a payment. Even if you only pay the minimum, it's always good to pay on time. You'll also keep a better credit rating.
4. Ask for a lower rate
It never hurts to pick up the phone and talk to your credit card company. If you're a good customer, they may give you a break to keep your business.
5. Make sure you know what you're getting
Always read the fine print. If you have a great introductory rate, make sure you know what happens when it ends. For example, what will the new rate be? Does anything else change when the interest rate changes?
6. Avoid cards with annual fees
You'll get a lower interest rate, but ask yourself if it's worth what you pay each year. If you are going to pay your balance off in full each month, you may want to choose a different card.
7. Look for special rewards that you can use
Some cards offer air miles and other benefits, but they may charge a higher interest rate. Choose these cards only if you know you'll pay your balance off on time each month. Don't accept special offers you can't use. You have to be honest with yourself about your spending habits to choose the right credit card.
Remember: Credit cards don't all work the same
Make sure you get the best deal you can and always try to repay what you borrow quickly.
Content in this section is provided in partnership with the Investor Education Fund, a non-profit organization promoting financial literacy to Canadians. To find out more go to GetSmarterAboutMoney.ca.