Introducing the Credit Card Education CentrePosted May 13, 2014 in Credit Card Tips, News, Personal Finance
Have you visited the Credit Card Education Centre lately? Well you should – the halls of knowledge have recently been revamped with the information you need to boost your financial knowledge to get the most out of your credit card (while avoiding the not-so-nice pitfalls).
With great power comes great responsibility – a credit card can be a powerful financial tool, when used responsibly. Our goal is to empower cardholders everywhere with the information they need to use credit responsibly, without the burdens of excessive debt. We achieve this through our Education Centre.
Why Financial Literacy is Important
In high school we learn about history, calculus, and chemistry, but when it comes to financial literacy we’re on our own. Financial literacy is an essential building block of financial success – a 2008 study by Harvard/Dartmouth found that financial literacy is the crucial first step in building personal wealth.
The study found those unable to grasp the concept of calculating interest rates from a stream of payments are more likely to rely more heavily on credit and have a lower net worth. Furthermore, those who don’t understand the power of compound interest have a greater likelihood of having problems with debt repayment.
Financial literacy helps us in many ways in our daily lives:
It enables individuals to make knowledgeable, responsible financial decisions. Imagine trying to fly a jet plane without attending flight training school. With credit cards we have thousands of dollars at our disposal. If used responsibly credit cards are a great tool to manage cash flow; if used improperly, credit cards can be a financial burden. With proper knowledge, we can make sound financial decisions to help build our net worth.
It should make people debt adverse. Debt can be a helpful tool to build our net worth when used responsibly. It would take the average individual years to save up enough money to purchase a home in cash. Through the power of leveraging, we can use debt to grow our net worth tenfold. It’s important to be able to distinguish between the two types of debt: good debt, such as a mortgage or a student loan, is likely to grow our net worth, while bad debt like a car loan or a payday loan, may lower our debt worth.
It educates people on the importance of saving for the future and investing. In 2013, 42% of Canadians workers lived pay cheque to pay cheque, according to a survey conducted by Framework Partners. (Source: Canadian Payroll Association PDF) If you’d like to be a homeowner, it’s important to understand the importance of paying yourself first. With only about one-third of Canadians covered by a workplace pension, it’s more important than ever for Canadians to save for their retirement.
Why Credit Card Education is an Important Part of Financial Literacy
While saving rates have been falling for years, Canadians continue to take advantage of rock bottom interest rates by piling on debt at record levels. The household debt-to-income ratio hit 164% in the fourth quarter of 2013. When it comes to debt, it’s important to use it to your advantage and not let it be a financial burden.
Credit card education helps us in many ways in our daily lives:
Primarily to avoid high interest, unsecured debt: By only purchasing what you can afford and paying off your balance in full each month, you can avoid paying the sky-high interest rates credit cards often come with.
Use cards to benefit, not detriment of personal finances: There are many benefits from credit cards when used responsibly. Benefits include building credit, rewards, grace period and convenience. If you carry a balance on your credit card beware; not only can paying the minimum payment take you years to pay off your balance, it can cost you thousands in interest.
Current Event Examples of the Need for a Credit Card Education Centre
There are plenty of headlines in the news lately that show the importance of financial literacy.
- Carrying a balance is costly, and Canadians are doing so at a higher rate: A recent bank survey found 52% of Canadians are carrying a balance on their credit card. With the typical credit card interest at 19.99%, it could be a very long time to pay off your balance if you’re only paying the minimum.
- Heartbleed and Target issues prove the need for personal scrutiny of your accounts: It’s important to safeguard our personal information so we don’t become the next victim of identity theft.
- Skimmers and fraudsters are constantly trying to get your data: It’s important to be aware of fraudster and take the necessary steps to keep your credit card information safe and sound.
- Credit card delinquencies will rise over the next six months: A recent survey found that 54 per cent of Canadian bankers believe credit card delinquencies will rise over the next six months. With basic financial skills like budgeting and saving, there could be a lot fewer individuals defaulting.
With a lack of good financial information out there, we have taken it upon ourselves to help educate Canadians about the importance of financial literacy. Through the Education Centre we hope to educate you on how to use your credit card responsibly, while avoiding the burden of debt.
We’ve broken the Education Centre down into six helpful categories for you explore to help build your financial knowledge.