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5 Things You Need to Know About Credit Cards


5 Things You Need to Know About Credit Cards


When used effectively, credit cards are great tool for you to track your spending, and receive rewards while doing so. There are some millennials who are completely against credit cards, simply because they had a bad experience with them, or they do not trust themselves with a plastic card, allowing you to spend beyond your limits.

According to a 2014 Bankrate survey, 63% of millennials do not have a credit card, compared to 35% of adults over 30 who do not have a credit card.

1) Credit Score

Lenders like to see credit history – and credit cards are a great way to get started to build your credit history. As long as you consistently pay off your credit cards before the due dates; credit cards will do no harm to your credit score.

Missing your payments (or making late payments), and maxing out your credit cards will harm your credit score.

According to The Economist, lenders are looking into social media as a source of assessing a borrower’s ability to repay credit. Interestingly, the founder of ZestFinance, Douglas Merrill, claimed that “applicants who type in only lower case or only upper case letters are less likely to repay loans” (The American Genius). In fact, Facebook owns a patent on technology that allows lenders to search the credit score of the borrower’s friends on social media, in order to assess risk.

“applicants who type in only lower case or only upper case letters are less likely to repay loans”

2) Rewards

There are plenty of rewards available for using credit cards. Rewards can typically be divided into two categories, points and cash back. Points give you a certain amount of points for every dollar spent, and cash back gives you a percentage of your purchase back, in cash.

Review different credit card companies, and see the type of rewards they offer. Depending on your preferences, you may prefer one reward over another. Or perhaps, you may even receive more benefits from cash back rewards. It depends on the company, and your preferences.

There are several useful tools for comparing credit cards, such as ratehub.ca – a Canadian financial comparison platform, or bankrate.com for Americans.

3) Interest Rates

Yes, credit cards do have interest rates that can be higher than personal loans – however, that applies only if you do not pay off the full balance within the grace period. Grace period for credit cards are a certain number of days the balance is interest free – basically before the due date.

Grace periods are typically almost one month long (again, it depends on the credit card company). Some credit card companies may offer a promotion – such as a 0% balance for 12 months. If you’re going take advantage of this, ensure that you’re financially capable of paying off the balance at the end of the term, otherwise you’ll be paying at a higher interest rate. In this case, it would be best to get a personal loan, where you would be able to pay off debt at a lower interest rate.

4) Extended Warranty/Customer Protection

A friend of mine was shopping in Toronto, where he purchased a shirt at a high end retail store. Moments later – his shirt got stolen as he was sitting down in the mall. As the Toronto Police had advised him to do – he called up his credit card company in regards to the incident, and they reimbursed the purchase of the shirt. That’s the beauty of purchasing items with your credit card, instead of using cash.

Credit cards typically offer customers great extended warranties on purchases, and customer protection. Again, it depends on your credit card – you can simply check the warranty benefits of your credit card by searching online calling the number on the back of the card.

5) Safety Features

Some Millennials (and other generations) believe that credit cards can be unsafe – with the risk of being hacked. Yes, this has happened before – however, keep in mind that credit card holders have 0 liability over unauthorized transactions. There are high security features in place to prevent such situations. Ensure to review your credit card statement before paying it off – to make sure all transactions are legitimate.


Personally, I always use my credit card instead of cash or debit. It helps me keep track of my spending, as my purchases are consolidated into one bill. I also use my credit card for automatic payments, such as cell phone bills – this helps me save time when the bills are due. Responsibly use your credit card, and it’ll benefit your credit score, which can help you qualify for a mortgage or a car loan.

You may also be interested in: What Can a Hacker Do to Your Bank Accounts and Credit Score?

Writer: Jelani Smith 

Disclaimer: All investing can potentially be risky. Investing or borrowing can lead into financial losses. All content on Bay Street Blog are solely for educational purposes. All other information are obtained from credible and authoritative references. Bay Street Blog is not responsible for any financial losses from the information provided. When investing or borrowing, always consult with an industry professional.

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