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5 Things You May Not Know About Credit Cards

Judging by the substantial use of credit cards in Canada, you’d think we’d know everything there is to know about this kind of plastic. Then again, we also hold more in credit card debt than the GDP of Cuba  - so maybe we don’t know as much as we should. Check out these facts about credit cards that just might surprise you.

Interest Rates Are High

It’s relatively known that most basic credit cards have an annual interest rate of right under 20 per cent. That may feel normal, but did you know that the average interest rate in the States is under 14 per cent? On the high end, Americans enjoy interest rates in the 20s while we Canadians experience interest rates as high as 30 per cent. In effect, if you pay the minimum monthly payment instead of the full balance quickly, you could pay up to $300 for borrowing $1,000. This is especially true if you have a lower credit score.

You Could Borrow Money Interest Free

There is a way to borrow money from a credit card and not pay a penny of interest. With most credit cards, there’s a minimum 21-day grace period after a purchase, meaning you run your credit card at a store or buy an item online. You have those three weeks to pay back the total cost of the item without being charged interest. This is very beneficial if you know you will have the funds to cover the cost of your purchase. The catch? This grace period does not apply to balance transfers (unless your credit card has a balance transfer special) or cash advances.

For those looking to improve their credit score, the 21-day grace period is the perfect way to do it; just make small purchases and pay them off immediately. Not only will you be paying above the “minimum payment” but you will also carry a zero balance month to month - both very good tactics to increasing your credit score.

Annual Fees Are Common

Annual fees are charges credit card companies make to your credit card once a year that can range from $25 to $500. They’re intended to pay for the benefits that come with your card. You’ll be charged your annual fee on your first statement, and then once a year on your card anniversary after that. While 75 per cent of Canadians have a card with no annual fees, almost 50 per cent still carry a card that has an annual fee. How does that work out? Well, the average Canadian has 2.2 credit cards; one with a fee, and one without.

Although annual fees are typically more common to rewards cards, even local bank cards carry annual fees without even offering a rewards program. The fee your credit card charges each year can be found in your credit card introduction packet you received when you were approved. It may be worth shopping around for a credit card with no fee to save the money each year.

Other Common Fees

Sometimes, it can be tough to keep up with all the fees associated with having and using a credit card. Here’s a list of common fees and what each mean:

  • Balance transfer fee: This fee is charged for moving money between credit cards and is usually a percentage of the dollar amount transferred.
  • Exceeding credit limit: If you make a charge to your card that puts you over the limit of your credit, you will be charged a fee for the bank or credit card company allowing the charge to go through.
  • Copies of your statement: Many of us receive our statements electronically these days. If you do request a print copy, check to see if there are costs associated with it.
  • Cash advances and cash-like transactions: To request a cash advance from your credit card or make a cash-like transaction could end up costing you a whopping 30 per cent of your advance. A cash-like transaction includes purchases on wire transfers, lottery tickets, casino chips, traveller’s cheques, and money orders.
  • Inactivity fee: If you don’t use your credit card during a certain time frame, any rewards earned may go away. You may also be charged an actual fee for non-use of your card.

On the flip side, 310-LOAN payday loans have one fee for the cost of borrowing money. It’s clearly stated before you apply for the loan. While non-payment of your payday loan can result in higher loan costs, the fee to borrow relies solely on the amount you are borrowing and does not change no matter the situation.

There’s Not Much Reward

Back in 2006, you’d be hard-pressed to find a credit card with a reward program. Today, that number has jumped to almost 80 per cent of Canadians carrying cards with rewards - a big improvement. Yet, according to recent stats, only 15 per cent of Canadians are actually happy with the way rewards or benefits can be earned and over a quarter of them have never even redeemed their points. Cash back-reward systems are still pretty scarce, which, given the amount of fees assessed against cardholders, is one of the best benefits of a credit card.

While credit cards can be great tools for improving your credit and making small purchases, they can also quickly get consumers in trouble. Plus, given that it’s required to have a minimum credit score to be approved for unsecured cards, they can be inaccessible for a large portion of the population.

Payday loans, on the other hand, are accessible to all. Payday loans require no credit check and not much more than a bank account and income to be approved. They’re less expensive when paid back on time, and allow you to borrow as little as $50 or as much as $1,500 depending on where you live in the country. At 310-LOAN, we even offer big rewards! When you refer a friend to us, not only do you get $50, but they also get 20 per cent off fees of their first payday loan with us. Before you pick up the plastic next time, check out what 310-LOAN can do to improve your borrowing experience!

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