This personal finance bumper is the first piece I ever did with Gail-Vaz Oxlade for City The 5 and I still find it fascinating how psychology affects our spending habits.  Off camera this is a subject we often talk about because it really is a big deal.

Credit cards can totally mess with our minds but it’s amazing how some of us still don’t get how credit affects us on a day-to-day basis so here are the 6 things we need to know about our credit cards.

We buy more crap – Why save up for that brand new dress or the latest gadget when you can buy it right now on credit?  You can literally have whatever you want within seconds just by charging it.  There’s a reason why credit card companies set up shop right outside the entrance to malls, they want us to buy now and pay later.

credit cards

We spend more – Would I like to upgrade to a poutine?  Yes!  How about a milkshake for your drink?  How much is that? Wait, it doesn’t matter I’m charging it!  With credit we never see the money disappearing so we end up spending more but with cash we’re carrying a fixed amount so we spend less. Think about it; if you only have $20 in your wallet do you really want to blow it all in one meal?

Small businesses get hurt – Most of us use credit cards because we like points, I admit I love earning travel rewards but you know it’s not actually free right?  Merchants are charged 2-4% whenever credit cards are used so that’s how your rewards get paid out.  I use cash at small businesses so they don’t lose points to the credit card companies.

Interest rates are killer – Credit cards have insane interest rates, usually hovering around 20%.  If we’re carrying a balance and just making minimum payments, it’ll take years to pay it off and by then we would have spent probably double the original cost price just in interest.

visa round

It builds our credit – It’s true credit cards help us build out credit score (without carrying a balance) which is vital if we ever want to get a loan/mortgage or even a cell phone plan.  Having a solid credit history is a must so I do encourage getting a credit card, but to start with a very small limit.

We save less – As children our parents taught us that if we want something we need to save for it first but along came credit cards and we all forgot this basic lesson.  Traditionally we would get paid, put aside some money for savings and spend what’s leftover but with credit spending has now become the first priority.

Final word
Mismanaging credit can ruin you financially but we all need credit in our lives eventually.  The key is we need to be responsible with our credit cards, charge it only if you can afford to pay it off on time every month.

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Image courtesy: Sascha Kohlmann via