Q. I plan to use my credit card to get me through this holiday season. Will the new credit card legislation reduce my interest rate or my ability to apply for more cards? — Sondeep, Mississauga
A. In May, Finance Minister Jim Flaherty proposed sweeping changes for credit card issuers. However, there are no provisions to force issuers to reduce the interest rate charged, but payment allocation on balances can be in your favour. You can apply to as many issuers as you deem appropriate, but that is not recommended, as it can work against your rating. Individuals should have no more than one or two cards. Just keep in mind that the more cards you have, the more you owe.
Using credit to finance your holiday season is not a good idea. Many Canadians fall into debt in December and carry balances on their credit cards that haunt them past Canada Day celebrations. For the holiday season, limit your spending to the cash in the bank.
Here are some of the changes Flaherty will introduce:
• Minimum 21-day interest-free period on all new purchases
• Statements must give clear indication of how long it will take to pay off balances, if monthly minimum payments made
• Issuers cannot increase credit limits without expressed consent by cardholder
• Payments must be allocated in manner that is advantageous to cardholder
• Limit debt collection practices.
The vicious cycle of borrowing to get out of debt, never works.
– Henry Choo Chong, CGA, can be reached at firstname.lastname@example.org and 416-485-5225.