5 Terrifying Credit Card Mistakes That Can Leave You Broke

Advertiser Disclosure This article/post contains references to products or services from one or more of our advertisers or partners. We may receive compensation when you click on links to those products or services.
Last updated on February 18, 2021 Comments: 4

Credit cards can be your best friend, or your worst enemy. As satisfying as it is to get 5% off at the gas pump, it’s just as painful to pay $45 because you went over your credit limit. Here are 5 credit card mistakes the banks are counting on you making to prime their coffers. Avoid them and you’re ahead of the game. Fall victim to them, and you could find yourself in serious financial trouble. We’re here to help you beat the banks and keep more money in your wallet.

  1. Don’t be late. If you absolutely have to, at least pay the minimum. Canadian credit card issuers are become increasingly less lenient with late payers. In fact, if you’re 30 days late on your TD credit card, they will increase your interest rate by 5 percentage points i.e. from 19.99% to 24.99% and you will lose any promotional interest rate (introductory balance transfer or purchase rate) you may have had i.e. from 0% to 24.99%. President’s Choice Financial reserves the right to increase your interest rate 5 percentage points after reviewing your credit card account or credit history for any reason whatsoever! If you’re late on a car loan payment with another company, PC Financial can increase your credit card interest rate.
  2. Many Canadian credit card issuers only require you to pay a minimum of $10 of your previous months credit card balance plus interest. While you may be thanking your bank in the short term for the convenience of only having to pay $10 of your balance, the truth is the bank is setting you up to be on a debt treadmill. If you have a $2,000 balance, a $10 monthly minimum payment plus interest will take you over 16.5 years to pay down! The lesson? Always pay more than the minimum and try to pay off your credit card debt as fast as you can. If you need some breathing room get a balance transfer credit card that offers a 0% rate for 10 months.
  3. With juicy 0% interest offers for as long as 12 months, you might be enticed to get a balance transfer credit card. And while we’re a big proponent of balance transfer cards, just remember, the interest rate only applies to the balances that you transferred from your other credit cards to your balance transfer card (which are great when used properly). Any new purchases you make with your balance transfer card will have the normal interest rate applied to it, even during the introductory period. So don’t go spending thousands of dollars thinking you have no interest to pay over the next 12 months… the 0% balance transfer offer only applies to your existing credit card debt, not anything new.
  4. Most of us think that our credit limit is, in fact, our spending limit. Common sense would be on your side, but reality is not. Many Canadian credit card issuers will allow you to go over your credit limit, without your required consent, and will then assess you with up to a $45 over-limit fee! So that pack of gum you bought in the store for $2.50 that brought you $1 over your credit limit, may have been a lot more expensive than advertised. Moreover, you may owe a lot more on your credit card than you budgeted for.
  5. Credit card cash advances can be very convenient ways of accessing cash. However, just remember there is no interest free grace period with cash advances. Most will start charging interest from the moment the advance is completed at a rate often times more than your standard purchase interest rate. In addition, your bank will also likely charge you a fee the greater of $5 or 1% to access cash from your credit card, making it a truly expensive way of getting cash, and problematic if you forgot about the interest charges.

So, while credit card rewards, 0% balance transfers and low rate cards are all great opportunities for the savvy and responsible credit card user, used improperly and credit cards can inflict a frightening sting. That’s why we continue to recommend the Golden Rule of credit card use: set-up an automatic bill pay from your bank to your credit card that auto pays the entire monthly balance, that way you’re never late, and will never pay interest.

Author Bio

GreedyRates is Canada’s go-to resource for all things personal finance. Our expert articles and videos cover every topic under the financial sun, including credit cards, credit scores, loans, bank accounts, budgeting, investing, RSPs, TFSAs, GICs, taxes, and more. Want our advice on a personal finance issue? Send us an email at [email protected] and we’ll gladly give you some free tips.

Article comments

Lyne says:

I I’ve recently signed up to your site and already have learned a lot. I filed a consumer proposal 14 months ago. It was by far the best option for me. I pay my monthly fee religiously and have a decent monthly income (pension and CPP disability). However, since the proposal, I’ve had a few “events” that have produced debts that I’m having a difficult time repaying. For example, a vet bill. I have a service dog who almost died from a tic bite. He contracted Lyme. That was 2.5K. I didn’t have vet insurance as the costs were prohibitive. I also accrued some medical bills from an adult son who has no medical coverage. They are legitimate and not as a result of his negligence or laziness. I almost lost him twice. My question is this, how can I deal with those debts when I can’t seem to get a secured credit card or a loan without insanely high interest rates? I have 1 secured credit card (PC Financial with a credit limit of $500.). They won’t increase my limit in spite of paying it off in full every month. My son is unemployed since COVID, his CERB has expired and he’s too high risk to return to work. I’m supporting him and he lives with me. He helped me while he received CERB and paid his car payments and VISA but he has no additional funds. I have a debt of approximately 2K max. It may not seem like much but with the extra I pay for the proposal, covering my sons expenses and my inability to obtain credit, my monthly cash flow before addressing the debt is almost non existent. He’s also on medication (again not covered), but we did manage to obtain Trillium but only for $300/year. I also have a high monthly px expense and although I have coverage, it still adds up to approx $300 easily between the two of us. I have no assists, rent and my vehicle will join the junk yard within the next 12 months at the most.
Any suggestions?

Aaron Broverman says:

Hi Lyne,
I am sorry that so much has happened to you all at once, especially when the consumer proposal had worked out so well for you.
I am not a certified financial advisor so I would feel irresponsible if I advised you what to do for such a specific and nuanced situation. I do have some resources for you though. I would look into finding a money coach in your area from an organization like Money Coaches Canada or The Credit Counselling Society. These organizations can pair you with a personal credit counselor who can come up with a strategy for your specific situation. It’s also fee-only, so there are no commissions and since they know their clients already have money issues, the fees for service are relatively inexpensive. Good luck and let us know how it goes.

Cindy Weiss says:

I just found this site. You guys are great! I can’t leave the site because there seem to always be “just one more thing I need to read”.

I really like the idea of receiving sign up bonus points, even better when I spend a certain amount within 3 months and get a bigger bonus. I’ve just done this with a three different amex cards.I’ve paid them off so they all have zero balances
Can I cancel them and then re apply to do it again?
Do I need to wait a certain amount of time before I cancel and then reapply?
Thank you so much for all the great info provided in a clear easy way to understand.

GreedyRates says:

Hi Cindy!

Thanks for the kind words and for using GreedyRates!

Unfortunately Amex has recently put in place lifetime limits on the number of times you can re-apply for the same Amex card. You’re only eligible to receive a bonus once per card. However, you can apply for an unlimited number of different Amex cards and receive the welcome bonuses of each. Here’s a copy of Amex’s disclosure for the Amex Gold Rewards card (same for all other cards):

“This offer is only available to new American Express® Gold Rewards Cardmembers. For current or former American Express® Gold Rewards Cardmembers, we may approve your application, but you will not be eligible for the welcome bonus.”

Hope that helps and thanks for using GreedyRates.ca, let us know how else we can help – spread the word!

GreedyRates Staff