Christopher Liew is a CFP®, CFA Charterholder and former financial advisor. He writes personal finance tips for thousands of daily Canadian readers at Blueprint Financial.
Credit cards, when used responsibly, can be useful financial tools that help you build your credit profile and can help you earn rewards and cash back for your purchases. For many Canadians, though, they’ve become a source of growing debt and financial stress.
With inflation driving up everyday costs and interest rates still remaining high, more people are relying on credit to make ends meet. The problem? Small balances can quickly turn into long-term debt, especially if you’re only making minimum payments or juggling multiple cards.
Below, I’ll break down some of the most common bad credit card habits so you can avoid getting trapped in a debt cycle.
Canada’s growing debt problem
According to Equifax Canada, credit card balances have reached record highs in recent years, with younger Canadians between 25 and 45 carrying some of the fastest-growing debt loads. As everyday essentials become more expensive and wages struggle to keep up, more people are turning to credit just to get by.
What makes credit card debt especially problematic is its high interest rate, often ranging from 19 per cent on the lower end to 28 per cent or more on the higher end.
Unlike a car loan or personal loan, credit card interest compounds quickly, making it easy to fall behind even with small balances. Once you start carrying a balance and only make the minimum payment, it can feel like you’re stuck in an endless cycle.
5 bad credit card habits to avoid
Between inflation, rising borrowing costs, and poor credit habits, many are finding themselves financially vulnerable. Understanding how credit card debt builds and the habits that make it worse is the first step toward breaking the cycle and regaining control of your personal finances.
1. Only making the minimum payment
One of the simplest ways credit card companies lure customers into debt cycles is by advertising a deceptively low minimum payment. Your minimum credit card payment may only be a fraction of what you’d pay if you borrowed the same amount from a bank in the form of a personal loan.
If you’re carrying over a large balance from one month to the next, only making your minimum payment means that you’ll be forking over a lot of interest. Often, 75 per cent or more of your minimum payment will go purely to the monthly interest fee (charged for carrying a balance), meaning that you’ll barely make a dent in your actual principal balance.
Carrying over a high balance on your card will also increase your credit utilization rate, which can negatively affect your credit score.
2. Treating credit like free money
With an extra $2,000 at your disposal, the possibilities can seem endless. The new camera you want, the vacation you’ve been dreaming about, and the car parts you’ve been eyeing are now just a simple swipe away. When combined with the allure of a low monthly payment, the temptation to treat your available credit card balance like lottery winnings can be tempting.
One of the first rules of building your credit is that credit cards should only be used to cover expenses that you can already afford with the money in your bank account. Use the cards to cover planned expenses, and then make sure you pay the amount off before the next billing cycle.
This is, by far, the most responsible and effective way to use your credit card. By only using your card for what you can already afford, you’ll be able to easily pay the balance off, which means you’ll avoid interest fees while also being able to take full advantage of any cash back or rewards offered for using your card.
3. Not paying attention to your interest rate
Credit card interest rates are variable, meaning that they can change monthly depending on the economy, your changing credit score, or simply the whims of your credit card company.
Many credit cards offer a low or no-interest introductory period for the first few months (or even a year) of owning your card. While this can be helpful for a balance transfer to pay down another high-interest debt within that short period, it can also trap you into a false sense of security.
As soon as the introductory rate is over, your rate will jump right back up. If you haven’t paid the balance off by then, you’ll suddenly be faced with mounting interest fees that will leave you feeling stuck.
4. Relying on credit to cover basic expenses
If you find yourself relying on credit cards to cover basic expenses like groceries, fuel, utility bills, or rent, then you have another problem — your income is too low or expenses are too high.
For example, if your monthly expenses are $3,000, you’re only earning $2,700, and you’re relying on credit to cover the remaining $300, then you’ll quickly mount up debt.
If you find yourself in this situation, the best thing you can do is to increase your income by picking up a side job or asking for a raise. Simultaneously, you should also find ways to decrease your monthly living expenses so that you’re not living above your means.
5. Missing your monthly payment
Missing your monthly payment typically comes with a late fee, which is just money thrown down the drain. If you consistently miss your payments, you could end up throwing hundreds of dollars away over the course of a year.
In addition to the wasted money, it can also hurt your credit score. If you’re more than 30 days late on a payment, the credit card companies may report this to Equifax and TransUnion — the two major credit bureaus. This will negatively impact your score and will remain on your credit report for years.
Breaking the cycle
By avoiding these poor credit card habits, you’ll be able to build a solid credit profile for yourself and keep yourself from getting into a cycle of negative revolving debt.
If you’re already stuck in a cycle, it’s important to face your situation and be accountable. With a solid plan, consistency, and a little bit of self-sacrifice, you can get out of debt and get back on the right track.
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