Business Basics: Credit Cards

Getting the most out of your plastic

via JPhoto

Who doesn’t feel like a high roller with their own plastic? 

Credit cards are convenient and have many uses, like online purchasing and establishing a reliable credit history. However, like Uncle Ben said to Peter Parker, “with great power, comes great responsibility,” and while a credit card might not give you web-slinging powers, it can ruin your personal finances if you’re not careful. 

Whether you’re a new cardholder or a veteran shopaholic, here are some tips to help you get smart with your credit card. 

 Choosing the right card

 Before you choose a credit card, talk to someone at your bank branch. Sometimes it pays to “shop around” and check out the different options that are curren available to you. Banks love students and usually they offer a credit card designed for our benefit. 

The most popular incentives include:

• No annual fees 

• Low/no income requirements: typically, the fancier your credit card, the higher your required income level. Most students are only able to obtain the most basic cards for this reason. 

• Reward points: often, you can earn points for a number of reward programs by making purchases using the card, from Aeroplan Miles to SCENE points to redeemable merchandise. 

• No-fee cash back: typically, interest is incurred as soon as you use the cash back feature of your credit card, although some credit cards will waive this fee up to a limit. 

• Rebates: rebates provide a percentage — usually around one per cent — of your purchase amount back as a credit.

Studying your monthly statement

You just got your first credit card statement. Your palms are sweaty as you open the statement and the first number you see is your balance: the amount you owe. 

Keep your balance at a comfortable position. Always ensure you can pay for what you purchase, so that your balance is paid off entirely with each statement. Ideally, you haven’t hit your credit limit, because it’s always a good idea to save some credit for rainy days. 

Sometimes, your balance may become negative if money is refunded to your card. This isn’t a bad thing! Negative balances count as existing credit to automatically pay off future purchases. 

Assuming you haven’t fainted yet at the balance line, the next thing you should review are the statement amounts. 

Keep the receipts you get when you use your card! Make sure your purchases are listed correctly by comparing the listed amounts to your receipts. That night out couldn’t have possibly cost that much! Wait, never mind. It did. 

So far so good, your finances are not yet aflame. Next, take a look at the minimum payment. This is the bare-minimum amount you must pay each month toward the outstanding balance.

Uh-oh, you didn’t take our advice and pay off every purchase. Now, you’ll be looking at interest, calculated based on your outstanding balance. If you remember anything from math class, it should be that compound interest builds up FAST! Don’t let interest consume you.  

Clearly, you’re going to need a better understanding of the payment date. This is the date you must pay your entire balance by to avoid interest. Paying bills on time is critical to maintaining a good credit record, which you’ll definitely need in the future for larger purchases like a car or mortgage. 

Try to pay well in advance, as it often takes a few business days for payments to process. 

Proper credit card usage will help pave the way to a solid credit history. Remember — credit cards aren’t meant to finance a life you can’t afford, but help you afford a life you want.

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