Nov 21, 2023
Credit cards in Canada offer you an efficient way of managing your finances. But only if you are using the right credit card. A wrong credit card can cost you to an extent that will eliminate the benefits of using a credit card in the first place.
Wondering what is meant by the wrong credit card? A wrong credit card can be defined as a card that does not give you substantial rewards and benefits, whereas another would have given you substantially better rewards and benefits if you were using that instead.
Ways to identify you are using the wrong credit card
There are three basic ways to identify that you are using the wrong credit card. If you are experiencing any of the below-mentioned issues with your credit card, then you are using the wrong credit card and need to apply for a new credit card that matches your needs well.
Credit cards don’t earn rewards as per your spending
If your credit card doesn’t earn rewards in correspondence to where you spend, then it means that your credit card is not right for you. There are plenty of credit cards that offer rewards on certain purchase categories such as food, transportation, travel, etc. You need to make sure that the credit card earns rewards for you on frequent purchases to earn a good amount of rewards and enjoy the benefits of your credit card in the true sense.
For instance, if you buy groceries from store A, whereas your credit card offers reward points on grocery shopping from store B, then you are using the wrong credit card. The key is to ensure that the rewards are offered on the things that you buy to make the most out of your credit card.
Credit card perks are not being used
If the perks that your credit cards offer are not advantageous for you, then it is a sign that the credit card is wrong for you. For instance, If your credit card offers you travel insurance, but you haven’t travell ed in years, then it means that the added perk is not useful for you. The credit card perk should match your lifestyle requirements otherwise. To know whether the perks are useful or not, it’s necessary to read the reviews of the credit cards you are applying for.
The credit card annual fee is more than the advantage you seek from it
Many credit cards in Canada have an annual fee. You need to make sure the rewards you are earning as a result of the annual fee are more than the annual fee itself!
For instance, if your credit card offers you travel insurance and car rental discounts, and you are a frequent traveler enjoying the benefits of these credit card perks, which would be valued at $500, then a credit card with a $250 Annual fee is justifiable.
On the contrary, if you don’t travel at all forgoing these perks, then the annual fee of $250 will be a liability in your pocket, offering you no advantage at all then the credit card is deemed to be wrong for you.
One way you can figure out whether a card has a net positive value is by using a rewards calculator.
Cost of using the wrong credit card
Using the wrong credit card not only deprives you of the intended perks and benefits but can incur additional costs for you. Here are some of the credit card costs that you will be liable to pay for using the wrong credit card.
Interest Rates
If you intend to carry the account balance from month to month as a revolving line of credit, then make sure that your credit card offers a minimal interest rate. Using a credit card with a high interest rate will result in excessive debt accumulation when you carry the balance to the next month. This will increase the interest charges even more than what you have spent on the purchase. Such an escalation in debt can lead to severe financial pressure on you, which is just the opposite of why you requested a credit card in the first place (to enjoy financial freedom). There are plenty of credit cards available in Canada. So, while applying for one you need to make sure that the interest rate matches you’re spending requirements. If your spending pattern includes carrying the amount to the next month and your interest rate is way too high, then it means that the credit card is wrong for your needs. You will be required to apply for the right credit card or else you will end up bearing the interest rate cost. You can read here to learn more about how interest rates are applied to your credit card balance.
Cash Advance Fee
Withdrawing cash from a credit card isn’t a rare phenomenon. If you are a credit card user who gets cash advances quite often but has a credit card that charges a very high cash advance fee, then you are surely using the wrong credit card. You need to find a credit card that charges a low cash advance fee so that you can frequently withdraw cash without having to bear the cost of a high cash advance fee. There are plenty of credit cards in Canada that charge very little cash advance fees. All you need to do is to find the credit card that offers the best cash advance fee.
Foreign Transaction Fee
If the credit card you are using for foreign transactions isn’t available in foreign currency, then you will have to bear the cost of a foreign transaction fee, which is quite substantial. If you frequently have to purchase from international merchants then it is better to have a credit card with which you can save the foreign transaction fee. You have to work out to find a credit card with no or minimal foreign transaction fee. If you keep on using a high foreign transaction fee card, then you will be using the wrong credit card, which will end up increasing your expenditure in terms of additional fees (that can be saved if you use the right credit card.
Unmatched Rewards and Perks
If your credit card offers great rewards and perks, but you still do not redeem those rewards because they do not match your needs or requirements, then it implies that the credit card is not right for you. The rewards of credit cards should align with your specific needs. While choosing a credit card, you must find the one that suits your lifestyle and spending pattern.
See: TransUnion Offers Credit Scores for DeFi Borrowers Utilizing Crypto Assets
In essence, the right credit card is what offers you the maximum benefits and minimal cost. All you need to do is to vigilantly search for the credit card features that suit your spending habits, payment needs, and requirements. Choosing such a credit card will save you from incurring unnecessary costs while enjoying the rewards and benefits of using a credit card.
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- Source: https://ncfacanada.org/how-much-is-using-the-wrong-credit-card-costing-you/
