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How to use credit wisely and avoid indebtedness

BLT Lapointe - 15-03-2018

If you’re unfamiliar with the way credit works, it can be a bit daunting to hear stories of crippling debt, even bankruptcy, related to this method of payment. At BLT Lapointe & Associates Inc., your financial advisors in Montreal and Laval, we believe that credit is a fantastic way to pay your way through life—as long as you don’t fall into certain traps. Keep reading to find out which ones and how to avoid them.

The credit card: an ally for your financial health—if (and only if!)

Your credit card is a practical tool for things like everyday expenditures (gas, groceries) and shopping online. To use it wisely, follow these guidelines:

  1. Choose a card that’s appropriate for your needs and means (avoid cards with credit limits higher than what you can afford).
  2. Avoid cards with high interest rates (this is often the case with store credit cards. Cards from financial institutions are less likely to be greedy in this regard.)
  3. Pay your credit card balance on time every month. This will help you establish a good credit score should you ever want to borrow a significant amount of money from the bank.
  4. Don’t use your credit card for non-essential impulse buys that you wouldn’t be able to pay for in cash. In other words, don’t live beyond your means.
  5. Take advantage of any available reward programs (accumulating points toward travel or insurance costs, for example).

The line of credit: a practical and flexible tool—if (and only if!)

Lines of credit, viewed by many as a type of “safety cushion,” generally come with lower interest rates than credit cards. They’re commonly used to finance large projects such as home renovations, purchase costly items, or take care of unexpected expenses. To use your line of credit wisely, there’s only one rule to remember: repay any money you borrow as soon as possible. If you lack discipline, this might not be the right option for you (to avoid debt, you may want to opt for a personal loan instead).

If you have problems with your credit, get in touch with BLT Lapointe & Associates Inc. We can help. Make an appointment today.