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A credit card is a great tool for making purchases and establishing a credit history, but if used unwisely, it can easily become a gateway to excessive debt problems. Gaining a strong understanding about credit cards is key to using them productively. Here are five key points to consider before applying for a credit card.
How credit cards work
A credit card is issued by a bank or credit card company, and allows you to make purchases now that you pay for later. Interest rates on credit cards average between 13% and 23% annually depending on the type of card. As long as you pay back the money you borrowed on the card at the end of each month, you won’t be charged interest on it. You are not required to pay off the full balance every month, but the credit card company does define a minimum payment each month you are expected to pay. However, for cash advances, where you withdraw cash from your credit card either at your bank, or from an ATM, you are immediately charged a fee that is deducted from your card. If you don’t pay the minimum payment on your credit balance, your card may be suspended.
Unlike an installment loan, where you get a loan then pay it back through monthly payments over a fixed period with a clear start and end date, a credit card can be used over and over again, and does not have an end date when the full balance must be paid off, this is known as revolving debt. People tend to get into more debt problems using credit cards than with installment loans, which require you to completely pay off the loan in a specific period of time.
Credit card repayment determines your credit history
It’s critical to note the effect credit card repayment has on your credit history. Credit history is a record of your debt repayment behaviour. Do you pay on time? Do you pay the balance in full? Are you only making minimum payments? All of this is reported in your credit history. Companies considering giving you credit, or services that involve you receiving something before you pay for it, like phone service or a rental apartment, will want to see your credit history report first.
Credit history determines your credit score
Your credit score is a three-digit number that is calculated based on your credit history. The numbers go from 300 to 900. Lenders use this number to decide whether or not to lend to you - the higher the number, the better. Credit Bureaus, such as TransUnion and Equifax, are companies that collect information about your credit history for credit card companies and banks, and use it to determine your overall credit score.
Building a good credit score is essential to being able to borrow in the future. Some key ways to build a great credit score is to keep your balance at or below 30% of your card limit; pay off your balance every month before or on the payment due date; and always pay more than the minimum payment.
Stick to a manageable credit limit
Potential lenders may view a high credit limit as potential debt, which can count against you if you are trying to get a mortgage or car loan. Best to keep limits to the amount you actually expect to use.
Whatever your limit, keep your debt-to-limit ratio as low as possible. This is the amount you still owe on your credit card versus the maximum you’re allowed to spend on the card. The lower your debt-to-limit ratio, the better your credit score will be. Say your card allows you to spend a maximum of $1,000, it is best to keep a balance of no more than 30%, or in this example, $300.
Compare different credit cards
As you should before any financial decision, be sure to do your due diligence and compare different cards, and pick a credit card that suits your particular needs and lifestyle.
People without credit history generally start with a secured card. These cards are backed by a cash deposit generally equal to the card’s limit, so even though you made a cash deposit to secure any money you borrow, you still pay interest every time you don’t pay off your balance in full. Alternatively, unsecured credit cards, which are not backed by a cash deposit or any other collateral, have a credit limit based on your income and credit history, and tend to have lower credit limits, especially if it is your first card. Those without a credit history can apply for an unsecured card if they have an authorized co-signer—which is someone would be responsible to make payments every month or pay off the balance if you are unable to do so.
Compare interest rates and fees of multiple credit cards before making your choice. Fees could include: annual fee, balance transfer fees, foreign transaction fees, late fees, and overlimit fees. Also, many cards have different rewards and perks associated with them, such as cash back options, or points towards purchases at particular stores and vendors. Pick a credit card that appeals to your lifestyle, interests, and hobbies.
Those having trouble getting approved for a credit card due to bad credit or prior debt problems should apply for an installment loan from alternative financial lenders such as easyfinancial. With installment loans, you make monthly payments in order to pay down the loan, and since there is a fixed start and an end date in place, you are less likely to get into further debt problems and can slowly start to rebuild your credit.
Responsible use and repayment of a credit card is an important part of being financially successful. Being fully informed about your options enables you to make the best decision for a credit card that suits your needs and lifestyle.
We know the fine print can be painful, but we believe it's important you have all the facts!
easyfinancial offers a variety of financial services including personal loans, and mortgages. easyfinancial is a division of goeasy Ltd., the leading full service provider of goods and alternative financial services that improve the lives of everyday Canadians. goeasy Ltd. is listed on the TSE under the symbol 'GSY'.
* Approval measured against all lenders providing unsecured credit and lease-to-own products, excluding payday lenders, and based on a random sample of applications before verification.
** Based on the maximum total cost of borrowing under applicable provincial payday loan legislation.
*** Loans amortization between 9-60 months
APR between 29.99% and 46.96%
Example: $1000 borrowed for 12 months at 29.99%: Monthly payment: $97.51; Total repayment with interest: $1170.06
CREDIT SCORE IMPACT
While having a loan and honouring its obligations can help build credit, too many loans may be seen by potential creditors as an increased risk, and failure to meet repayment obligations will result in a negative report to the credit bureaus, which would reduce your credit score. Please borrow responsibly.
Loans from easyfinancial do not automatically renew. Customers have the option to request an increase to their loan after paying down a percentage of their current loan amount and maintaining good payment history. Such a request would be subject to the company's standard underwriting rules.
easyfinancial offers personal loans from $500 to $10,000 with terms from 9 to 48 months. The APR is 46.96%, and there are no additional fees for the loan. easyfinancial does not charge a late fee, but payments returned NSF (non-sufficient funds) will be assessed a $50 fee in addition to fees charged by the customer's financial institution.
easyfinancial contacts customers in arrears as soon as possible through various means including, but not limited to telephone, email, postal mail and SMS. easyfinancial may work with third parties to assist in collections activities.
1 Loan Protection Plan is underwritten by American Bankers Insurance Company of Florida (ABIC) and American Bankers Life Assurance Company of Florida (ABLAC) under Group Master Policy Number EF012017 and EFL012017.
ABIC and ABLAC carry on business in Canada under the trade name of Assurant (R).
(R) Assurant is a registered trademark of Assurant, Inc.
The complete terms, eligibility, benefits, limitations an exclusions are contained in the Certificate of Insurance
Purposes for which goeasy Handles Personal Information
goeasy collects and uses personal information for purposes limited to those which are related to its businesses, which include providing household furnishings, appliances, and home electronic products to its customers under lease agreements, staging services, mortgage brokerage services and financial services. We collect personal information primarily from you, for instance through applications and supporting documentation you provide. We may also collect personal information about you through your ongoing interactions with us, from references, employers and other financial institutions you have identified in your application as well as credit bureaus and other third party sources. For example, we may collect personal information from credit bureaus for the purpose of locating you to collect outstanding debts. In connection with loan agreements, we may also collect personal information from credit bureaus in order to verify your current and ongoing creditworthiness and other information you may provide to us.
We may collect and use personal information for purposes such as, but not limited to, the following:
Personal Information goeasy Collects
goeasy limits the amount and type of personal information collected to that which is necessary for our identified purposes, and we collect personal information by fair and lawful means.
Personal information that we collect includes:
Transfers and Disclosures of Personal Information
goeasy may disclose personal information in a number of circumstances, including:
In addition to the above, personal information may be shared between our affiliates or subsidiaries (including those located in the United States) for internal audit, management, billing or administrative purposes including defending and bringing legal actions.
In the course of fulfilling the purposes described above, goeasy may transfer your personal information to service providers, including affiliates or other third party organizations or individuals retained by goeasy to perform functions on its behalf, such as marketing, data processing, customer service, office, security, collections, insurance, financial and taxation services. When personal information is transferred to service providers, we use contractual or other means to ensure that a comparable level of protection is provided. Some of our service providers may be located outside Canada and will be subject to applicable legal requirements in that country including lawful requirements to disclose personal information to government authorities in certain circumstances.
If you are a resident of the Province of Quebec, you understand that we may transfer your personal information to a third party based outside of the Province of Quebec, or store it outside of the Province of Quebec, the handling (including the disclosure to third parties) of that personal information will be subject to the laws and regulations applicable in that jurisdiction and you consent thereto.
goeasy may also use and disclose personal information in connection with the proposed or actual financing, securitization, insuring, sale, assignment or other disposal of all or part of our business or assets (including your loan or lease and any agreement to which it relates), for the purposes of evaluating and/or performing the proposed transaction. Assignees or successors of our business or assets may use and disclose your personal information for similar purposes as those described in this Policy.
goeasy may disclose your personal information as necessary to meet legal, regulatory, insurance, audit, and security requirements, and as otherwise with your consent or as permitted or required by law.
goeasy uses reasonable safeguards and other security standards to protect all personal information in its custody and control against loss or theft, as well as unauthorized access, disclosure, copying, use or modification, regardless of the format in which the information is held. Safeguards will vary depending on the sensitivity, format, location, and storage of the personal information. Only authorized employees, agents, partners and third parties who require access to personal information to fulfill their job requirements will have access to personal information.
Access and Accuracy
goeasy may establish and maintain a file containing an individual's personal information for the purposes described above, which will be accessible at our offices. Individuals have the right to request access to or correction of their personal information that is held by goeasy. Requests must be made in writing, addressed to goeasy's Privacy Officer as per the contact information set out at the end of this Policy. We will respond to written requests within a reasonable time. Copies of records containing personal information may be subject to a fee. If this is the case, goeasy will inform the individual of the amount of the fee in advance. We will use our best efforts to ensure that personal information is as accurate, complete and up-to-date as necessary for the identified purposes. If an individual successfully demonstrates the inaccuracy or incompleteness of personal information, we will amend the information as required. If we refuse access to personal information or disagree with an assertion that information held by us is incorrect, we will provide a written explanation for such refusal and a description of our complaints procedure should an individual decide to challenge such written explanation. An individual's right to access or correct personal information is subject to applicable legal restrictions. To prevent fraudulent access to the personal information stored by goeasy, we may take reasonable steps to verify an individual's identity before granting access or making corrections.
goeasy's Websites and E-Mail Communication
goeasy does not guarantee the confidentiality of any communications made by you via e-mail or otherwise through our websites. If you wish to provide information of a confidential or sensitive nature to easyhome, please contact us directly by telephone at 1-866-823-3279 or easyfinancial at 1-888-502-3279 to arrange for delivery/transmission of such information by secure means.
In compliance with Google's advertising policies, we use Google Adwords Search Engine Marketing (Pay Per Click) and Display Advertising (Remarketing and Google Display Network). We use Google AdWords Remarketing in compliance with the Google AdWords Interest-Based Advertising Policy, which means that you may see our advertisements on Google and other third party websites on the internet after visiting our website.
We use Google Analytics for Display Advertising, including Remarketing, Google Analytics Demographics and Interest Reporting, Google Display Network Impression Reporting and the DoubleClick Campaign Manager integration. You have the option to opt out of Google Analytics for Display Advertising and customize Google Display Network ads. For all the currently available opt-outs, please visit https://tools.google.com/dlpage/gaoptout
We use the data collected through Google Analytics Demographics and Interest Reporting to better understand our website visitors in terms of demographics and interests, to improve our website content in order to cater to our audience, and to customize advertisements based on our audience's interests and demographics.
In certain circumstances, as permitted or required by law, we may collect, use or disclose personal information without the knowledge or consent of the individual. These circumstances include but are not limited to: personal information that is publicly available as defined by regulation; where collection is clearly in the interests of the individual and consent cannot be obtained in a timely way; where disclosure is made for the purposes of collecting a debt owed to us; or to comply with a subpoena, warrant or court order.
Inquiries or Further Information
Privacy Officer, goeasy Ltd.,
33 City Centre Drive, Suite 510
Mississauga, Ontario, L5B 2N5, Canada
If you are not satisfied with our response to a privacy-related matter, you may contact the Office of the Privacy Commissioner of Canada at 1-800-282-1376 or at www.privcom.gc.ca. or in Alberta or British Columbia, your provincial privacy regulator, as applicable.