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Having a credit card in today's society can be very useful, however, beware of the common traps. Two of the main ways credit card companies make money is by charging the merchant a fee every time you use the card and by charging you an interest rate on your cards balance. If they can persuade you to use the card they will. We have a common saying here at Hoyes, Michalos & Associates, "use the card as a substitute for cash, not a substitute for borrowing".

Credit Card companies use a variety of ways to encourage you to use the card or open a new account with them. They like to target students and people in their early twenties with advertising campaigns. They are all to aware of the fact that being young and on a low wage, you'll feel more pressure in today's consumer society to use credit to finance purchases your pay cheque can't cash.

• One of the first ways is to offer you a "low introductory rate". The envelope will come in the mail with a big colorful 0.9% on the front. Read the small print carefully! The 0.9% will usually only apply for a limited time, and may also only apply to balance transfers. After the limited time is up, the interest rate will jump up to the cards regular rate.
  


• "No annual fee". If you're planning on paying on your balance in full every month, then a card with no annual fees probably makes sense, if not, choose the card with the lowest interest rate. Beware of the wording too, just because you have no annual fee might not necessarily mean you don't have to pay a renewal fee!
  


• "Bonus points". Spending more money on a credit card might allow you to accumulate points towards a holiday or a purchase of a vehicle. Again, beware, the points may only be valid for certain purchases and might only be valid for a certain period of time. The points you accumulate may have an expiry date so if you don't redeem them before they expire, they're useless.
  


• "10% off". More commonly seen in superstores/big box stores, retail outlets will invite you to apply for their credit card when you make a purchase with the offer of 10% off your purchase. Sure, the 10% saving sounds great, but consider if you don't pay off the card within the next couple of weeks, you'll be paying 20-25% interest.
  


• "Win your spending". Another advertising campaign encourages you to spend more in the hope of winning it all at no charge. The odds of winning are slim as the campaign encourages you to go out and spend more money.
  

These are just some of the ways you're being encouraged to spend money on credit. Try to avoid overwhelming yourself with debt by falling for the traps. Always consider the following questions when applying for a credit card too.

1. Can I pay for the purchase with cash, or if I buy on credit, can I pay the full balance within 30 days?
   


2. Is this a need or a want?
   


3. Are you using credit with the belief you'll be able to pay it off by landing the big job soon or winning the lottery?
   

When the limit on your credit increases it's usually because the credit card company is enjoying making lots of money from you and they want to encourage you to spend more by raising your limit. The interest they make on a $10,000 balance is higher than a card with a $2,000 balance.

If you'd like to talk about credit card debt and ways to help reduce your debt load, call us at 519-622-3773 or email us your questions. We offer a free, no obligation consultation service.

Today I met with Greg Matthews from Domus Select. Greg works in the Mortgage business in Cambridge. His company helps people to buy and sell real estate, re-finance 1^st and 2^nd mortgages. They can also help with other products such as secured credit cards and home equity visa's.

Greg was telling me that he is seeing an increase in industry regarding home repossessions. Some mortgage lenders are starting to take more note of the current housing problems being experienced in the United States and are taking steps to avoid similar problems in Canada. Your home could be at risk if you do not maintain your mortgage payments and some mortgage companies in the future may be a little quicker to 'pull the trigger' should you fall behind.

In turn, this could lead to an increase in personal bankruptcies and consumer proposals. Two things could drive this increase

• An increasing pressure to try and keep up with mortgage payments may mean resorting to unsecured credit (credit cards) to pay for other day to day expenses such as groceries, leading to higher interest charges and higher monthly repayments.
  
• If your home is repossessed and the sale by the bank does not generate enough monies to cover the outstanding mortgage balance and fees, you could still be liable to pay those expenses and shortfalls.
  

If you're experiencing financial difficulty, my suggestion would be to give our office a call at 519 623 3773 and talk to myself or one of my colleagues. We offer a free, no obligation consultation service. Everyone's situation is different and we can help to explain various helpful options for you to consider. From budgeting advise, credit counseling, consumer proposals, bankruptcy or referring you to a mortgage broker such as Greg, we can help you to understand the pro's and con's of each option so you may decide on what the best solution for you is.

Call 310-PLAN or email us your question today.