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Student: Mom suggested I should build my credit early, when I was 16 or 17. So she gave me my own credit card, it was under her name, but when I was 18 she got it put into my name.
I use it basically for shopping. Anything over $30 or $40 I'll probably put it on credit, anything under that I'll use cash.
Jaclyn: Hi. My name is Jaclyn and I'm your podcast host. Our podcast topic today is "Love at First Swipe: The Do's and Don'ts of First Time Credit."
This podcast deals with managing a credit card responsibly. Why you should apply. What the advantages and disadvantages are. And how to keep interest rates down. We'll also talk about how to use it securely.
Jaclyn: To answer some questions for us on this topic is Gord Tyndle, Branch Manager at RBC Royal Bank. Hi Gord.
Gord: Hi Jaclyn. Great to be here with you today.
Jaclyn: Thanks for coming and giving us some great tips.
Gord: You're more than welcome.
Jaclyn: So why should I apply for a credit card?
Gord: Jaclyn a credit card provides a convenient and secure way to shop, track your expenses and manage your financial resources.
Getting a credit card enables you to slowly build your credit history, assuming you pay your bills on time, each and every month. Establishing a good credit history will help you in the future when applying for a car loan, mortgage or line of credit.
Jaclyn: So it's really a good investment in terms of becoming an adult and having a real history in terms of finances and really showing off that you can pay on time and pay off those bills correctly.
Gord: Absolutely.
Jaclyn: So what are some of the other advantages of having a credit card?
Gord: Well when it comes to budgeting, it you look at it this way, credit card statements are a quick way to keep track of where your money goes each month. Your monthly credit card bill will have an itemized list of all of your purchases. This will help you better understand and confirm where you are spending your money.
You can purchase an item now and pay for it when your statement is due without incurring interest charges as long as you pay your outstanding balance in full, each month.
Credit cards allow you to collect loyalty program reward points these points can add up over time and can be exchanged for merchandise, gift certificates and more.
Jaclyn: So it's really like getting free money or just extra bonuses for using that card.
Gord: Yeah. Extra rewards. Extra bonuses. Exactly as you said it.
Jaclyn, many credit cards offer valuable insurance benefits, which people need to look at.
It can be saver to carry a credit card than a lot of cash. Cash of course can be lost, stolen or easily spent. So having a credit card can be a lot safe.
A credit card can get you out of a jam if you need cash quickly, in the event of an emergency.
A credit card is an easy way to make online purchases. By being careful and doing the proper research, shopping online can actually become a cheaper way to buy some items. You can find it cheaper online than maybe in the store.
Jaclyn: What are some of the disadvantages of having a credit card?
Gord: Thank you for asking that, because people always talk about why they want one, but they forget about the disadvantages.
Or course there can be higher interest rates on credit cards than other forms of credit like loans or lines of credit. Now also people have to realize that many specialized credit card companies charge much higher interest rates than major financial institutions.
People also have to make sure they look at the introductory offers with special low interest rates. Because those can expire after a certain period of time. Make sure you read the small print and know what you're getting into.
For some people spending on their credit card seems very easy and very painless. Some people make purchases without fully considering the real cost or how they'll pay off their purchases.
Jaclyn: So it might be good to keep all your receipts so you know exactly how much you're spending and it's not just, "Oh, umm… Here's my credit card.", and, "It's all on my credit card." And it just starts adding up and you don't really know what you're total is.
Gord: Exactly.
Unfortunately sometimes, Jaclyn, missing payments can result in even higher interest rates and like any form of credit, irresponsible use of your credit card can damage your credit history.
Jaclyn: And that has quite lasting effects.
Gord: Very long lasting effects. And you want to keep your credit as good as possible at all time.
Another piece of advice is to avoid making cash advances on your credit card unless it's absolutely necessary, and an absolute emergency. Most people are unaware that cash advances work differently than regular credit card purchases. Interest charges begin immediately and remain until the entire balance is fully paid off.
Jaclyn: So what can I do to keep my interest charges down?
Gord: Well the first thing you need to do is pay off your credit card balance in full every month. And if you can't pay the full balance, pay as much as you can, don't simply make the minimum balance payment required. And if you carry a balance each month, consider a credit card with a lower interest rate. Jaclyn the faster you pay off your outstanding balance, the less interest you'll end up paying. Make extra payments thought the month in advance of your due date. You don't have to wait for the bill to come you can pay online at any time you want.
Jaclyn: Which is actually more convenient really.
Gord: Very convenient, very flexible and, again, saves you money.
Don't use high interest credit cards. And be a smart consumer. And know the cost of using credit cards. Read the agreements that come with your credit cards.
Jaclyn: How about safety? What can I do to protect myself from someone stealing my credit card information?
Gord: Well the first step is, immediately sign the back of your card as soon as you receive it. And also call to activate your credit card as soon as it's received. So do that, sign it and call in to active it at the same time.
Keep all your credit card receipts and spend time matching your receipts to the charges on your statement. Make sure you call your credit card provider right away if you see a charge, that you don't recognize, on the statement.
Jaclyn: And that's also a good way of keeping track of what you're spending as well.
Gord: Exactly. A good form of budgeting.
By checking your accounts online frequently, you can minimize any issues caused by credit card theft or fraud. Now if you know your credit's due to expire, the expiry date is coming up, keep a close eye on your mail delivery to make sure that your new card arrives.
Very simple, and I know that some people may think that it's too simple, but treat your credit card like cash. Never leave it unattended. Always know where your credit card is at all times.
And then take all the receipts and carbon copies home with you Jaclyn. When you go to the ATM machine and use your card, or self serve gasoline pumps and restaurants, make sure that you take the receipts and destroy them by shredding them before throwing away. So don't just throw them away, shred them before you throw them away.
Jaclyn: So that way no one can steal your number or your other information.
Gord: Exactly. Exactly. Keep a place somewhere with a record of all your credit card account numbers, in a secure manner, and that way you have them written down somewhere. Carry your credit card number and the toll free customer service number that appears on the back of your card, in a secure place. Separate from your card from traveling.
Never lend your card, or share your PIN number with anyone. That's very, very important. Don't user a PIN number that can be easily guessed, such as you birth date, phone number, student ID number, etc. Also memorize your PIN number, do not have it written down anywhere.
Jaclyn: Now, this is really my worst nightmare, what if I lose my credit card or it gets stolen?
Gord: Well make sure you store your card in a secure place, where you'll know that it's missing immediately. So if it's in your wallet and it's not there you know it's missing.
Jaclyn: And then you can back track and find out as soon as possible.
Gord: Exactly. Exactly. If you've back tracked, you've gone back to the retailer you used it at last, it's not there. Call your bank, right away, immediately when you notice your card is missing. The emergency number will be printed on the papers that came with your card, or can easily be found on the bank's website. So don't be afraid to call the bank, even if you don't have the credit card number.
Once you've informed your bank that your credit card has been stolen and lost, it can be blocked from future use, and a new card can be issued to you. And when you report your lost or stolen card immediately, Jaclyn, your liability is minimal.
Jaclyn: So action first and then deal with everything else afterwards.
Gord: Absolutely. Again being very pro-active if you know that your card is missing.
Jaclyn: That was a great overview on first time credit cards. Thank you Gord for your time and for joining us today.
Gord: Jaclyn your welcome it was great to be with you today.
Jaclyn: We realize that every student's situation is unique. So if you have questions about coping with unexpected financial challenges get in touch with a representative at your RBC Royal Bank branch or give us a call at 1-800 ROYAL® 1-1 or (1 800 769-2511) today.
We're very interested in hearing what you think. If you have any comments, questions about dealing with money, or ideas for future podcasts contact us today at studentpodcasts@rbc.com
We won't be able to respond directly to questions or comments, but we may use your input for future shows.
For a transcript of this podcast, please visit www.rbcroyalbank.com/studentpodcast
Of course every student's situation is different. In this podcast, we mean to give you information that most students will find helpful, but you should speak to someone who knows your unique financial situation before implementing a plan.
Also, the testimonials at the beginning of the podcast are the unscripted opinions of the people who spoke them - not ours.
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