The Learning Centre:
3 tips to protect your credit during the summer months
Summer: the temperature rises… and so does the spending.
According to consumer spending data from the Chartered Professional Accountants of Canada (CPA Canada), 56% of Canadians are expecting to increase their summer spending over last year. Of those surveyed, 20% are expecting to put their summer spending solely on credit.
With interest rates on the rise, here are 3 tips to protect you from burning up your credit during the summer months:
#1: Review your cash flow and set a summer spending limit.
For the summer of 2018, the CPA’s consumer spending survey finds 21% of Canadians budgeting less than $1,000 for their summer spending plans, while 19% have allocated as much as $3,000.
How much of a summer vacation are you able to afford without using credit?
While being spontaneous does make vacations more interesting, if that spontaneity comes with a bigger price tag—it can also be costly. So do your best to plan where you want to go and what you want to do in order to put a realistic budget together.
If you do plan on using credit cards, keep in mind that the Financial Consumer Agency of Canada (FCAC) suggests keeping your credit usage to no more than 35% of your credit limit (since credit utilization makes up almost a third of your overall credit score). This means that if you have a credit card with a limit of $3,500, for example, your carrying balance should be no more than $875. If you have multiple credit cards and loans, do not use more than 35% of the available credit limit for each. Continually coming close to maxing out your limit(s) could raise red flags and lower your credit score.
Use our handy budget calculator to set your summer spending limit.
Tips to stretch your vacation cash even further
- Choose bookings that offer free activities
Staying in a hotel during your summer adventures? Consider booking the one that offers complimentary breakfast and free activities and amenities (if available).
- Cash in those air miles, rewards, and perks
In addition to building up your credit rating, one of the biggest benefits of putting purchases on credit is the ability to rack up loyalty points and offers with certain cards. When is the last time you reviewed your loyalty rewards? Perhaps you’ve finally racked up enough to enjoy discounted (or even free) activities, transportation, hotel stays, or meals during your trip.
#2: Take extra steps to protect your credit while on vacation.
It takes years to build up a credit score and rating, yet only seconds to have it all come crashing down. The Canadian Bankers Association reported $465 million in false charges last year. With the increased occurrence of credit fraud during the summer months, you’ll want to take a few extra precautions when making credit card purchases away from home—particularly online.
Limit the number of cards you take with you
Choose one credit card to bring with you and leave the others at home. Also, keep contact numbers in your phone in case you need to cancel a lost or stolen card. Most smartphones also enable you to load credit and other cards into apps on your phone (i.e. ‘wallet’), which you can then lock with a passcode—reducing the amount of cards you need to carry, as well as the chances of losing them or having them stolen.
Use your credit card only with merchants with chip/PIN technology
There is a greater risk for credit card fraud with terminals that only require you to swipe your card and sign. Terminals that are chip and pin-enabled offer greater security, reducing card counterfeiting by 23% according to the Canadian Bankers Association.
Download a password/PIN manager for your phone
If you’re constantly forgetting the passwords and PINs to your bank account and credit cards, consider downloading a password manager to your smartphone instead of writing everything down on a piece of paper (as this could easily be lost or stolen along with your wallet). A password manager neatly stores all of your PINs and passwords under two layers of security: the unlock code of your phone and the app’s login/passcode.
Consider purchasing a Virtual Private Network (VPN) to use with your devices when travelling
If you plan on emailing friends, family, and colleagues details of your trip, or need to access your online bank account or pension statement/investment account while you’re away, consider purchasing a VPN to connect your devices (e.g. smartphone, tablet, laptop). By using a VPN, the data you send and receive is protected so that unauthorized users cannot access your personal information, and later use it to hack your accounts (and damage your credit).
Credit tip: Traveling for extended periods of time? You may want to automate bill payments, since even one late payment can negatively affect your credit score.
#3: Conduct a quick credit check when you get home.
Both Canadian credit-reporting agencies, Equifax and TransUnion, suggest reviewing your credit file at least once a year. The best time to do so is right after an extended vacation, since mistakes are more likely to happen which could lead to incorrect information showing up on your credit report (adversely affecting your overall score). So be sure to review your credit card and online banking statement(s) carefully to ensure all charges over the course of your trip were indeed yours.
If you suspect your credit card and/or identity may have been compromised:
- Alert your financial institution and change your password(s)
The sooner you inform your financial institution about the possible breach, the faster they’ll be able to act in your defense to reverse false charges and trace them to their source. If you don’t already, you should also change passwords regularly and further strengthen security by selecting two-factor authentication (password and confirmation via phone number).
- File a report with Equifax and TransUnion
The only way for Canada’s credit-reporting agencies to be aware of any mistakes on your credit report is by you notifying them. This is why a check-up on your credit report should become just as regular as taking your car for a tune-up before hitting the road.
Need a bit of a financial cushion to give you peace of mind during your summer trip?
Call on Educators Financial Group to get pre-approved for one of our low-rate lines of credit, reserved exclusively for education members and their families. Knowing you have access to funds just in case can make a big difference when it comes to alleviating vacation anxiety, so you can simply focus on enjoying your trip and making memories.
Have an Agent-Regional Director contact you about setting up a low-rate line of credit for your trip.
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The information provided is general in nature and is provided with the understanding that it may not be relied upon as, nor considered to be, the rendering of tax, legal, accounting or professional advice. Please ensure to consult your accountant and/or legal advisor for specific advice related to your circumstances. Educators Financial Group will not be held responsible or liable for any losses, costs, damages or expenses incurred by reason of reliance as a result of the aforementioned information. The information presented was obtained from sources that are believed to be reliable. However, Educators Financial Group cannot guarantee their completeness or accuracy.