STOP Using Your Credit Cards For This!! (Canada)

Credit cards are typically around 20%. So one strategy that you can use is to think, would I still want this if it cost me 20% more to buy it? So is that good value for me and is that something that I really want?

All of us like you and me, I'm sure, have used our credit card at times where we probably didn't make the best financial decision. And so today we're going to talk about when you should stop and why you should stop using your credit card for certain things like this. My name's Dan and I'm here with my colleague Liz, and we both work at Ascendant Financial. And you wouldn't maybe be that surprised about how many times we come across people who are using their credit cards probably in a way that didn't set them up very well for financial success. So we thought we just cover about three things today. First two are going to be about things you probably stop doing, and the third one is where you could probably continue to use your credit card in a way that's okay. So let's jump into that, Liz, and I'll just start off with the first one was things that you can't afford. And that's kind of a simple no brainer. But how many times do you get caught that way where it's really something you can't afford, but it's something you think you need, so you go ahead and purchase it and then you realize, okay, that's probably not the best financial decision I made. What other thoughts you have along that line, Liz?

Often thinking about purchases and whether or not you can afford them, not just in the short term, but over the longer term, what other stress is that going to cause on your life trying to make those payments? And credit cards are typically around 20%. So one strategy that you can use is to think, would I still want this if it cost me 20% more to buy it? Is that good value for me and is that something that I really want? Because if you're buying it when you don't have the money to fund it and all you're going to be paying back is that minimum payment to the credit card, you actually are going to be paying 20% more for it. And so just that awareness of, is this a purchase that I really want right now or is this something that I can work towards getting in the future when I can afford it?

You know, one of the things that I always notice when I get my credit card statement, it always says, you know, this is how little you could pay. And I just look at that number. And I go, really? I could only pay that much. Although there's a cost if you only pay that much. So be aware of that. And it's really always think about it when you go to use your credit card, can I afford this? And it's buying something I really don't need, or I can't afford, really the thing that I should be doing, because I can. So the second one, and it kind of fits somewhat with the first one, was just impulse buying, Human nature being what it is, because you see something, it's shiny. Oh, man, what I couldn't do with this thing, it'd be just great if I could get my hands on this thing. And hey, I've got a credit card and I can just put it on there. And, you know, you really haven't thought it through. I always tell myself is like, because I get excited about stuff that I could use, probably don't need, but I could definitely use. Especially when it comes to something I want to do. It's like, you know, I'm going fishing and man, I could just, you know, I could. If I just had that new depth finder, boy, I'd probably be better. It'd be just like, I could actually probably catch more fish. Maybe, maybe not. But those kind of things really interest us. And if I just made that decision based on that impulse, then what is it going to cost me? And I really encourage people to be cautious when it comes to buying on impulse.

Something that speaks to mindset around that is some of the bigger online retailers have set it up so that it's just one click and something is purchased. Now, the reason behind that is the psychology of it is understanding that if we take time to think about it, if we have to get up to go and get our credit card, we may change our mind about whether or not that impulse buy is a good idea. So. So in terms of increasing sales, then the best thing for that company to do is to make it as easy as possible for you to purchase that product. Now, that's super convenient. When it's a product that you've planned out and have actually decided that you need and want to use and it's something that is worth purchasing, it's just being cautious about that strategy. When there are things. If you find that you are someone who will buy things on impulse, then you can actually remove your credit card from the account and then have to add it each time that you make a purchase. So that extra step may assist you with resisting those impulse buys. Let's talk about how credit cards can be used really well, we're not here saying that credit cards are a terrible thing. Credit cards can actually be super effective if they're used in a way that's going to give you the advantage. And that's our goal here, is for you to have the advantages of using your credit card in a way that's going to actually give you more ability to be a little bit more flexible around your funding. So one of the ways that I get some benefits is I have a credit card that gives me cash back. I'm actually using it for things that in places where I was going to spend money anyway, like the grocery store and getting cash back for what the purchases that I was already going to do. And so because I'm paying off my credit card balance, it really is money that's coming back into my financial system because I'm making the most of using that credit card in a way where I'm not being charged the 20%.

My family, we put as much as we can on our credit card and we base it on our budget. What do we got budgeted for that month? And then we go and utilize that credit card as much as we can. Because we have a multitude of cards we use. One is for air miles. So we like to travel. And so we try to use that process to help us with cost of travel. So it really, you know, it's not like we're spending any more than we're going to spend. We just utilize that card for the convenience. The fact that we're able to get either cash back or points that way just makes good sense for our family. And that's just something that we've learned to manage over time. We control it, show that we're still spending within our budget, and it works extremely well so that we get to enjoy other things in life. And if you, you know, even if you have the money and you're sitting in some savings account, why not use your credit card for convenience? Because you get those number of days where there's no cost for you to utilize that card. And you can actually practice velocity banking to a degree by using credit cards and then paying them off. And the key thing is, is paying them off. And if you pay them off when your statement comes due, then you've gained the convenience and whatever else you had for points or cash back, whatever it is that's on your credit card, just be aware of what it costs to do those things and make sure that you're able to utilize that card in a way that's a benefit for you and your family and not just a cost that you're putting out of pocket and not really using the benefits. If you're interested in getting more information about, you know, good behaviors that will help you in your financial life, you know, just watch some of our other videos. That's what why we do what we do is we just try to help people make good decisions and understand how to use their money and how it would set them up best for their life. So this is just a little conversation about credit cards, and if you find yourself in one of those situations where you've been using it in a way that's not really beneficial for you, then change that behavior. Yeah, behaviors aren't easy, but if you look long range, it can make a huge difference for you.