How to build credit with a credit card

Whether you’re paying for your education or buying a home, at one point or another, most of us will need to take out a loan. Using a credit card can be a helpful way to build credit—which can impact whether or not you can qualify for the loan and your interest rate. But be warned, a credit card can be both a blessing and a curse.

We’ve listed the top tips to make sure that you’re building a positive credit history, without going into debt.

1. Pay off your balance in full.

You shouldn’t purchase anything on your credit card unless you can afford to pay it off before interest begins to accrue. This way you’re building credit and collecting reward points without getting dinged. Most credit cards have a grace period before you’re hit with the interest.

2. Don’t just pay the minimum.

But if you do end up carrying a balance (hey, it happens), don’t just pay your minimum. Not only could you end up spending a fortune in interest, it doesn’t look great on your credit score which can impact how your financial institution looks at you for borrowing in the future.

3. Pay on time.

While we’re talking about making those payments—don’t forget to pay on time. This might seem obvious, but it’s a mistake many people make with their first credit card. Make sure you check your payment due date—paying late is another way to end up with a negative credit history.

4. Be careful with cash advances—convenience comes at a price.

While cash advances can come in handy in an emergency, they often don’t have an interest free period. This means that every day you’re not paying back that advance, you’re accumulating interest.

5. Look into your interest rates.

Speaking of interest, know what you’re signing up for. Most credit cards charge around 20 per cent—be aware of the interest rates and terms before you begin racking up purchases.