How to use your credit card wisely

Credit cards offer users more than a convenient way to make purchases. They can be a powerful financial tool.

Whether you’re new to credit cards or you’ve used them for years, now’s a good time to brush up on your credit card knowledge. Learn the basics of how to use a credit card to build credit, how credit cards impact your credit history and credit scores, and how to be responsible with credit cards.

Credit card applications

A credit card allows you to make purchases today and pay for them in the future. However, credit card companies want to ensure their customers will make payments on the cards.

The basic eligibility requirements for credit cards include:

  • Minimum age of majority of 18 or 19, depending on your home province
  • Be a permanent resident or citizen of Canada
  • No undischarged bankruptcy for unsecured credit card applications
  • An acceptable credit score
  • A social insurance number

Each card has its own application process. Once you know which card you want to apply for, prepare to share your full name and address, social insurance number, and income information.

It could take a few days to a week to get approval. So if your credit card application gets declined, don’t panic. Instead, review the common reasons banks reject credit card applications, so you can see what to work on:

  • Poor credit score
  • Bad track record of repaying loans or other bills
  • Low income/too much other debt
  • Short employment history

How to understand your credit card terms

When you choose a credit card and apply for a new account, it’s essential to understand your credit card terms to understand your rights and obligations as a credit card user.

Know your due date, pay your balance on time and in full, or to at least make the required minimum payment. Also, monitor your credit card account activity to ensure your balance doesn’t exceed your credit limit.

Failing to adhere to your credit card agreement can hurt your credit score and negatively impact your interest rates.

Use your credit card to build and maintain your credit score

In addition to convenience, rewards, etc., using a credit card is a simple, practical way to build your credit score.

Your credit score is a number that represents the risk to a lender when you borrow money. Your credit score impacts the likelihood that your credit card application gets approved. If your credit score is below the credit card company’s required score, they could decline your application.

Take the opportunity to strengthen your financial situation and increase the likelihood of approval the next time you apply.

Order your credit report for free to verify your information, then start building or improving your credit score. Look for ways to boost your income and lower other debt. Avoid re-applying until some time has passed and you have a more substantial employment history.

Some companies might offer a secured credit card option for low-scoring customers.

Simply put, a higher credit score indicates a lower risk to lenders.

Create and stick to a budget

If you’re striving to become more financially responsible, creating a household budget is the best place to start. Know how much money you have to allocate to your monthly expenses can help you avoid overspending.

Use your credit card as a tool to stick to your budget. If you prefer to use your card for expenses such as groceries, gas, entertainment, and other costs, look for a card that offers a phone app where you can track your spending by category. Some credit card apps today let users set up alerts, so they’ll get notified when spending reaches a certain level.

Even if you don’t use a phone app for credit cards, make sure to include your monthly minimum credit card payment to your budget to make sure your finances stay on track.

Spend within your means

When it comes to budgeting and credit cards, don’t get tempted by a credit limit that could entice you to overspend. Instead, choose a credit limit that accurately reflects your spending habits.

Be realistic about how you'll pay it back. If you know that you occasionally carry a credit card balance and incur interest charges, choose a smaller credit limit and a low-interest card to minimize your monthly interest. Use an app to set spending limits and alerts on your cards and keep a low utilization ratio (more on that below.)

Keep an eye on your credit card usage to ensure the balance doesn’t creep up over your card limit, as this can also impact your credit and result in additional charges. Remember to make your minimum payment on time and in full. To avoid interest charges, avoid carrying a balance on your card -- pay the total off each month.

Manage your credit utilization ratio

Your credit card's limit is the maximum amount of debt you can carry at one time. You shouldn't spend right up to your credit card's limit, though. Getting too close to the limit will negatively affect your credit score due to a calculation called your credit utilization ratio.

Your credit utilization ratio is a measure of your credit card balance against your total credit limit. To maximize your credit score, keep your credit utilization ratio below 35%. For example, if you have a credit card with a $10,000 limit, try not to carry a balance higher than $3,500.

Check your monthly statement

When you make purchases with your credit card, you're responsible for paying it off. You’ll receive monthly statements outlining your spending and noting your required payment.

Whether you prefer online, a phone app, or tracking due dates in a paper planner, monitor your credit card balances and automatic bill payments from your card. Regular monitoring can also quickly alert you to suspicious transactions.

Use cashback rewards that match your spending habits

Paying with plastic has its benefits. The wide variety of credit card categories for Canadians today include different types of bonuses, perks, and fee structures, including:

To choose the right credit card, consider what you plan to use it for, as well as your financial situation. If you’re looking for your first credit card or to simplify your credit situation, consider a no-fee cashback credit card with rewards that match your spending habits.

No-fee credit cards

no-fee credit card is a good choice for first-time credit card applicants looking to build or improve their credit history or people who don’t use their credit cards often.

Cashback credit cards

If you use a credit card for most of your day-to-day spending, consider a card with cashback rewards. You’ll earn cash back rewards in specific spending categories, like grocery stores, travel, or gas stations.

Elite credit cards

Elite credit cards usually come with an annual fee and income requirements. However, they also offer enhanced rewards and perks. For example, our Visa Infinite Card is considered an elite credit card, because of its high cash back rewards and comprehensive travel benefits.

Secured credit cards

A secured credit card requires you to offer “security” or something of value to the card company, such as a guaranteed investment certificate (GIC) they can cash in if you default on your credit card payments.

Low-interest credit cards

If you carry a credit card balance and make minimum monthly payments, choose a low-interest rate credit card.


A credit card can be a convenient financial tool as long as you understand the terms of use. However, used irresponsibly, credit cards can lead to increased debt, high payments, and a poor credit score.

Think carefully about how you expect to use your credit card and your spending habits. Then select the card that best matches your financial situation and goals.