Which Is Best For You? – Forbes Advisor Canada

Credit cards are meant for smaller, more frequent expenses that you can pay off relatively quickly. We even recommend paying off your entire bill before it’s due. Credit card companies only charge you interest if you carry a balance from month to month, so by paying it off entirely, you’re essentially getting a free short-term loan.

When you do it this way you can even put all of your spending on a rewards card, so you get all of the benefits without having to pay interest. The key here is discipline, though; it’s often too easy to start charging more than you can pay off, and the rewards you earn won’t outweigh the interest you’ll owe.

Some credit cards, like the MBNA True Line, also offer a 0% intro APR period on purchases or balance transfers. If you’re looking to make a big purchase or consolidate other credit card debt to a lower rate, you may want to consider a credit card. Make sure you can pay off the balance before the 0% APR period ends, though.

Credit Card Advantages

If you use your credit card for everyday spending and have the discipline to pay it off each month in full, this type of financing can be a powerful way to earn cash back or travel rewards. Some people pay for all or part of their vacations this way.

But even if you’re not able to do that, credit cards can still be a good backup for when things go wrong. If you haven’t built up your emergency fund, a credit card can help bridge the gap for unexpected expenses. You can get the money you need instantly simply by swiping a card.

Finally, for true cost-cutters looking to save money on new purchases or to pay off existing debt, opening a 0% intro APR card and paying off the charge before the end of the intro period can be a good idea, too. It’s just about the cheapest financing strategy you’ll find.

Credit Card Disadvantages

One of the biggest advantages of credit cards—ease of buying stuff simply by swiping—is also its biggest disadvantage. Because it’s so easy to use a credit card, many people get lulled into debt. After all, the minimum payment is usually pretty reasonable.

But if you look closer, making the minimum payment (especially with the high interest rates that credit cards usually carry) means you could be paying off that same balance for years. And that’s assuming you don’t make additional charges on the card.