How to use your credit card as a powerful wealth-building tool

Irresponsibly using a credit card can land you in financial trouble, but personal finance columnist Christopher Liew says when used properly, it can be a powerful wealth-building tool that can help grow your credit profile and create new opportunities.

All too often, credit cards are given a bad reputation. You might have heard a friend or family member say that opening a credit card was one of the worst financial decisions they made.

Don’t get me wrong, irresponsibly using a credit card or racking up a balance without properly understanding your interest terms is an awful idea that can land you in a lot of financial trouble. When used properly, though, credit cards can be a powerful wealth-building tool.

By leveraging interest-free periods, choosing cards that reward your spending habits, and always paying balances in full, you can improve your financial health, grow your credit profile, and create new opportunities for yourself.

Last month, I wrote a column  debunking some of the most common credit score myths. One of these myths was that credit cards are inherently bad.

But when used properly, credit cards can help your financial standing. Here are some of the ways:

Making on-time bill payments is one of the top factors that affect your overall credit score, according to Equifax.

When you make your payments on time (ideally early), your credit card company will report the timely payment to both of Canada’s major credit bureaus -- TransUnion and Equifax. The greater your history of timely payments, the more your credit score will increase as well as your overall credit profile.