Credit cards are often made out to be a trigger for irresponsible spending. Conversely, they can also help consumers build smarter financial habits, encourage people to monitor spending, be more aware of shopping trends and even frequently monitor statements for fraudulent transactions.
Whether you’re new to having a credit card, trying to clean up your debt or just routinely managing your finances, these tips will help you manage your credit products wisely.
How to manage a credit card wisely
According to Equifax Canada, total credit card balances reached $113.4 billion in Q1 2025, with the average Canadian credit card balance now $4,052, up 6.5% from the previous year. For many Canadians, managing one or more credit cards can be difficult. Debt adds up quickly with everyday spending, and if you aren’t tracking your budgets accordingly, you can rack up a hefty balance in no time. Being smart with tracking will promote financial awareness and maximize rewards in the credit card’s accelerated categories.
Luckily, financial institutions offer mobile apps and alerts to notify you of everyday purchases, fraud notifications and even spending trends so you are more aware of your habits.
Monitor your monthly statement and learn the habit of budgeting
In 2024, Canadians lost more than $554 million to fraud, with credit card fraud accounting for nearly one-third of reports, according to a report from Canadian Anti-Fraud Centre. A good rule of thumb is to monitor your monthly statement and look for charges you don’t recognize. This habit also allows you to assess your spending. Scan your monthly credit card statement and ask yourself: which expenses are necessary and which expenses are discretionary.
By consistently monitoring your credit card account and analyzing your spending, you can enhance your ability to prioritize your expenses while minimizing credit card risks. This budgeting practice helps ensure that you have enough funds to cover necessary payments. It’s also the foundational for learning the discipline of how to budget and save for significant expenses, like a vacation, home renovation or retirement.
Develop the habit of paying your bills on time
When it comes to payment, it’s best to pay the full balance every month. If you can’t, you should endeavour to pay more than the minimum, pay on time and even set up automatic payments so you don’t miss any due dates.
Late and overdue payments are major factors in the calculation of your credit scores — and credit scores dictate how expensive debt and loans will cost, and the availability of credit. The better your credit score, the more options you have and the cheaper borrowed funds will cost you.
Access tools to build your credit score
There are a few best practices to maintain or build a good credit score. An easy way to do this is to keep your credit utilization ratio below 30% (ideally around 10%). From a practical point of view this means if you have a credit limit of $10,000 no a credit card, you do not charge more than $3,000 on the card, before making a payment — ideally, you do not charge more than $1,000, at a time.
Another easy way to build a solid credit score is to make the minimum payment, on time. Ideally, though, you will pay the full statement balance to avoid interest costs.
Another option is to employ the 15/3 rule. According to credit experts, using the 15/3 rule can help you increase your credit score in a relatively short period of time. The theory is that the frequent, regular and consistent payments signal to creditors your ability and capacity to use credit responsibly and reduces your credit utilization (how much you borrow from the available funds) and your debt-to-income ratio (how much you owe versus how much you earn). To employ this strategy simply repay your credit card bill twice per statement: The first payment is 15 days before the due date and the second payment is three days before the statement date.
Finally, consider using free Canadian credit monitoring tools from Borrowell, Credit Karma, or directly from banks to monitor your credit history and credit score.
Learn how to spend smarter and master credit card use
A recent survey found 32% of Canadians have less than $1,000 in emergency savings. This is a signal that even a simple budget framework, like the 50-30-20 rule, can help.
Using the 50-30-20 rule, you spend 50% of your income on bills and everyday expenses, 30% can be used on things you want, and 20% is set aside for savings. Using your credit card statement and your overall budget, you can quickly determine if you’re following this smart spending rule.
If not, examine your spending and find ways to rebalance how you spend your money. Do this consistently and you’ll find it easier to save for bigger goals while spending more strategically.
Develop long-lasting (and beneficial relationships)
When it comes to maintaining your credit health, you’ll want to be aware of the major factors that go into calculating your credit score. While credit scores can be complex algorithms, in general the major factors include:
- Consistent history of paying on time — Consistency is key
- Your credit utilization ratio — This is the amount of credit used, compared to credit you have access to. Lower ratios are better
- Average age of your credit products — Do you have long-standing credit relationships? Longer relationships are considered better
- The variety of credit products you own — From credit cards to mortgages to car and student loans: variety is better
- Number of recent hard inquiries on your credit file — How often a creditor has checked your credit history
While many responsible consumers often want to simplify their access to credit, there is a danger to closing and cancelling credit cards and other forms of revolving credit. For instance, if you close a credit card you’ve held for decades, this can alter the average age of your credit products and can hurt your credit score. Another way to hurt your credit score is to consolidate high-interest debt on a lower-interest loan (for instance, a low interest credit card). While this can be a great strategy for reducing the cost of debt and getting out of debt faster, it can be tempting to close all other credit cards and this can hurt your utilization ratio which can hurt your credit score.
Find ways to save on the cost of borrowing
For those who want to pay down their debt quickly it’s best to consolidate higher-interest debts using a low-interest credit card. Most standard Canadian credit cards still carry annual interest rates of 19.99% to 22.99%, though low-rate cards range from 12.99% to 13.99%. With higher interest rates across mortgages and loans, paying down credit card balances has become more urgent.
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Bottom line
When used responsibly, credit cards are a great way to build awareness of your financial health. It requires users to spend within their limits and monitor usage and trends, while free tools will allow you to ensure optimal product diversity, as well as a utilization ratio of your credit products to maximize your credit score.
The great news is you can now get free credit reports online from Equifax and TransUnion anytime — not just annually.
Finally, you must frequently monitor monthly statements and credit reports to find any errors and flag them for investigation so your credit history is reflective of your spending habits.
Sources
1. Equifax Canada: Delinquency Levels Show Signs of Stabilizing, But The Financial Gap Continues To Widen For Some Canadians (August 18, 2025)
2. Canadian Anti-Fraud Centre: Recent scams and fraud
3. Chartered Professional Accountants Canada: Canada’s Debt Dilemma: New CPA Canada study reveals a disconnect between Canadians’ financial awareness and actions (August 29, 2023)
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.