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Understanding Credit Cards

Credit cards are very common. They’re a convenient way to pay and, for many people, paying with credit has almost completely replaced paying with cash. However, if you’re not careful, you can get into trouble with credit cards. Credit card debt can add up very easily and it can be quite difficult to pay down. That’s why it’s important that you truly understand credit cards and the rights that you have when using a credit card.

When you fully understand your credit card and your rights, you will be able to make more informed decisions that could put you in a stronger financial position.

There Are Laws Designed to Make Credit Cards Easier to Understand

Canada has several laws in place that are designed to make it easier to understand your credit card:

  • When you sign up for a card, you must be given explicit information regarding the card’s interest rate, as well as details on any other fees or charges that may apply. This information must be provided clearly near the beginning of the credit card application or in a related document.
  • When you receive your credit card, it must be accompanied by the agreement or contract. All information about the card must be clearly stated.
  • When you receive your monthly credit card statement, it must include the following details:
    • Your outstanding balance.
    • The approximate length of time it would take to pay off the full balance if you only made the minimum required payment.
    • A description and the date of each transaction posted to the account in the last month.
    • Information on purchases made, cash advances received, payments made, interest charged, and any non-interest fees that have been charged.
  • You must be given written details of any changes made to the terms and conditions of your card, or any card features, at least 30 days before the changes are set to go into effect.
  • A credit card issuer has to ask your permission before raising your credit limit.

You Must Give Explicit Consent to Be Signed Up for a Credit Card

A common situation is being stopped in a store, or on the street, and being asked to sign up for a card in exchange for a gift, or so you can earn reward points on store purchases. The cards being offered in these situations are almost always credit cards. In order to be signed up for a credit card, you need to provide written consent. If you provide oral consent, the issuer must follow up with a written document for you to sign.

Always take the time to read any document before you sign, ask as many questions as you’d like, and don’t feel pressured by salespeople.

You Must Consent to Receive “Credit Card Cheques”

Credit card cheques, sometimes called “convenience cheques”, are cheques that are directly charged to your credit card. They’re meant to be used in places where you’d like to pay by a credit card, but a credit card is not directly accepted.

It’s very important to know that you begin paying interest immediately if you use one of these cheques.

Before you receive credit card cheques from the card issuer, the financial institution must receive your explicit consent.

You Can Cancel Your Card at Any Time, but Think it Through

You are legally allowed to cancel your credit card whenever you would like to. However, you will need to pay off any remaining outstanding balance before doing so. You can cancel your card by calling the credit card issuer. However, before you cancel a card, think it through. Each credit card you have affects your credit score and cancelling a card that you’ve had for a long time could potentially hurt your score.

Remember that cutting up your card or not using it anymore does not cancel your account. You must explicitly request that your card be cancelled.

What to Do if Your Rights are Not Respected

If you feel that your rights have not been respected by any federally recognized financial institution, you should contact the Financial Consumer Agency of Canada. Provide this agency with the details of the situation and keep detailed records, including written documents and details of any conversations that you have had with the institution.