Credit Cards: Your Rights and Responsibilities
Everyone of legal age has the right to have and use a credit card but with this right comes responsibility. For a credit card to be a positive financial tool it must be used properly and of course responsibly. In order to benefit financially from a credit card it’s always a good idea to arm yourself with as much information as possible. While we think credit cards are a great financial resource we also know that they can be a bit tricky and their contracts often come with a lot of fine print. We’ve gathered all the most important information about credit cards so you know what your rights are and in return what your responsibilities are. Having all the information you need will allow you take full advantage of the convenience of your credit cards, while maintaining a healthy credit history.
What is a Grace Period?
Everyone who makes a purchase with their credit card can benefit from the interest-free grace period. To do this you have to pay off the balance of your credit card by the payment due date, you will then not be charged any interest. To reduce the possibility of racking up too much consumer debt, you should always aim to pay off the full balance of your credit card by the payment due date.
There is no interest-free grace period for balance transfers or cash advances. Interest will be charged right away for these types of transactions.
What is my Minimum Monthly Payment?
Technically you do not have to pay off the full balance of your credit card each month; you can pay the minimum monthly payment. Typically your minimum payment is either a set amount (say $10) or a percentage of your balance, whichever is more. If you do not plan on paying off the full balance of your credit card you still have to pay your minimum payment by the due date.
While it’s completely ok to only make the minimum payment each month you will start to see your debt grow as you continue to be charged interest on the balance your card holds. Getting stuck in the minimum payment cycle is how many people get deep into consumer debt.
What Happens if my Payment is Late?
Paying your credit card bill on time each month should be a top priority for you. Having late payments show up on your credit history is not a good; it will show potential future lenders that you might have trouble handling the responsibilities associated with credit.
If you miss your payment due date your credit card issuers will charge you interest until you have paid off your balance in full. Furthermore you could suffer these other penalties (depending on your credit card issuer):
- You could have your interest rate increased
- Your credit score could be damaged
- If you miss enough payments your issuer may want to cancel your account
Can I Cancel my Credit Card?
Yes you can cancel your credit card at any time. To do so you have to call your credit card issuer and ask for your account to be cancelled.
While you can cancel your card if you really want to, we do not recommend that you do so. How long you’ve had a credit account opened for plays a pretty big role in the calculation of your credit score, so if you cancel the account that you’ve had open the longest you could potentially be hurting your credit score.
What About Co-Signing for a Credit Card?
You can absolutely co-sign for a credit card with another person or group of people. Everyone will receive their own card and copy of the monthly statement, unless you give content to your issuer that only one person needs to receive a monthly statement.
All card holders who signed the application will be held liable for any outstanding balance, whether or not they were the ones who made the charges. Who is liable and who is not can also depend on the credit card issuer so it’s very important that you read your contract and understand all the term and conditions before you agree to co-sign for a credit card with someone.
If you get your monthly statement and there are unauthorized transactions on it then you must contact your credit card issuer right away. You should also check your contract to see what it says about the unauthorized use of your account; you’ll want to know how much liability you’ll be required to take on.
The 3 major credit card companies in Canada (Visa, MasterCard and American Express) all have zero-liability policies. However this doesn’t apply to all transactions so it’s best to get in contact with your credit card issuer to discuss unauthorized transactions.
Visit the Government of Canada’s website to learn even more about your rights and responsibility as a credit card user.