Debit and Credit Cards

Credit Cards vs

Debit Cards

Comparison

• Must be 18 years old

• It’s own independent account

• Form of payment

• Can be charged for foreign transactions

​Credit Cards

• Available at opening of account

• Linked directly to your account

• Form of payment

• Use anywhere in the world

​Debit Cards

• It’s not free money

• Funds must be repaid within a time period

• Online Purchases

• Earn rewards (cash back, avion miles)

• Builds your credit score

Importance of Credit Card

-Louis DeNicola

​“A higher credit score signals that a borrower is lower risk and more likely to make on-time payments.”

How Banks Calculate Credit Score

​1. Payment History (35%)

2. Debt Utilization ratio (30%)

3. Credit History (15%)

4. Credit Application Frequency (10%) 

5. Credit diversity (10%)

Good Credit Score effect

• Lower interest Rates

• Better Rates on car insurance

• Have more housing options

• Get approved for higher credit limits (loans)

• Look better to potential employers

Impacts of Credit Cards

• Builds credit score

• Extra Level of Security

• Emergency Funds

• Rewards Points

Positive Impacts

• High cost of borrowing

• Can dig yourself a hole

• Too many credit cards, or credit effects credit score negatively

Negative Impacts

Bank Accounts and Savings

Credit Card Account

Debit or chequing account

Savings Account

Tax Free Savings Account or RRSP

• Shows what you owe in positive Dollars

• Interest Associated with account if not paid in period.

  • Personally, (wants)

Credit Card Account

• Money have earned and own

• Fee associated with owning the account

  • Personally (needs)

​Chequing Account

• Low Interest Earnings

• Emergency Fund

• Short term Savings

• Allows you to move money easily

Savings Account

TFSA

• Tax Free Savings Account

• Tax Free interest on investment Gains

• Withdraw money at any point

RRSP

• Registered Retirement Savings Plan

• Reduces taxable income when you make investments

• Retirement Savings, get taxed on the withdrawal.

How I manage my Accounts

Emergency Fund in Savings

• 1-2 months Budget:

Pay of My credit card Debt

• Pay it off as soon as possible

Chequing account

• Personal Predetermined amount of spending money

TFSA

• Leftover Money

• Rent

• Wifi

• Power and Water

• Groceries

• Car Payments

Budget