Canadians do plenty of their spending on credit cards. There were 43.4 million active credit cards in Canada at the end the year of last year – a decline of roughly 800,000 from the year previous. That’s a lot of swipes, taps and online purchases. More Canadians are also actively using card credits, resulting in an increase in total outstanding balances from $91.2 billion in the fourth quarter of 2015 to $94.2 billion in the fourth quarter of 2016, according to credit reporting agency TransUnion.

In light of statistics such as these, many Canadian financial consumers are left wondering whether it’s best to curtail their credit spending or to close their cards entirely. While this can be a bright-line of defense against overspending and accruing interest, there are plenty of ways to make your credit card work for you, rather than against you.

Pick a Card, But Not Any Card

One of the best ways to make your credit card earn its keep is to choose one that aligns well with your spending patterns. That doesn’t just mean how much you spend: it also helps to look at the categories of goods and services that make up the majority of your credit spending.

For example, if your biggest monthly budget item is your grocery bill, it makes sense to look for a card that offers rewards on grocery spending. There are such a wide variety of cards – and associated points and rewards structures – that finding the right one can be a bit of a shot in the dark. However, approaching the choice with the guideline of your spending categories in mind can make this process easier.

Don’t Spend It To Make It

It’s all too easy to overspend or stretch your budget on credit spending with the justification that “it’s alright, because I’m earning points back.” Though signing bonuses and rewards are valuable and can go a long way toward getting the most out of a credit card, there’s no better way to devalue these benefits than by causing an overall negative trend in your bigger financial picture. As soon as you realize you might not be able to pay off a balance you earned just to accrue a significant reward milestone, the impact of interest will likely erase the benefit of that reward.

Know Your Limit

Just because you can get a $20,000 credit limit on your new card doesn’t mean you should. Before you accept a credit limit, ask yourself how much credit you realistically need – and how much you trust yourself to manage it well.

A good ballpark way to estimate the credit limit that may work best for you is to double the monthly spending you plan to do with that card. Limits higher than this confer a psychological disadvantage that may push credit users to spend more than is healthy for their budget. Don’t think of a higher credit limit as a higher “ceiling” on what you can spend – think of it as an indicator of what you need to budget for. If your limit is already much higher than your average monthly spending on a particular card, you may also wish to consider asking the card provider to lower it.

The process of researching to find a credit card that you can get the most advantage out of will tell you a lot about your own financial state of affairs. You’ll be able to clearly define your spending dynamics, categorize the goals that are most important to you, and start finding ways to optimize the path to those goals. So, don’t rush to cancel that card just yet!

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