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Canada’s Peter Pig’s Money Counter

NEW Canada’s Peter Pig’s Money Counter
Learning about money is fun with Peter Pig. Kids can practice identifying, counting and saving money while learning fun facts about Canadian currency with this interactive educational game.
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A crash course in credit card basics for university students

A crash course in credit card basics for university students

By Carla Hindman, Director of Financial Education, Visa Canada

University students have many sound reasons for getting a credit card: It's a good way to start building a solid credit history, safer than carrying large amounts of cash and can be a lifesaver in an emergency. But inexperienced credit card users who don't fully understand how they work, or the need for restraint and responsible spending, sometimes dig themselves into a deep hole.

If you're just starting to build your credit history, or have a child who is, here are a few tips and cautions regarding credit card use:

Read the fine print. University students are often deluged with credit card offers. Don't apply for one solely because it has a free gift, and be wary cards that offer low teaser interest rates. Often those rates rise dramatically after a few months. Instead, look for a card with low or no annual fees and make sure you understand what the grace period is (the time before finance charges commence). The FCAC's Credit Card selector (available here) tool is a good place to start, or speak to your bank about the options they offer.

Ask about late payment and over-the-limit fees. This information is spelled out in the application process, but make sure you fully understand what it means. Look for a card that offers a leniency period with no additional charges, in case your payment gets delayed.

Pay off the full balance owed each month, whenever possible. Interest payments add up over time. For example, if you paid only the minimum amount due each month (assuming 4 percent) on a $1,000 balance, it could take over seven years and cost more than $500 in additional interest charges for a card with an 18 percent annual rate – and that's only if you don't make any new purchases. Practical Money Skills, a free personal financial management site sponsored by Visa Canada, features an interactive calculator that helps you estimate the true cost of credit card purchases over time by entering different annual percentage-rate and monthly payment scenarios.

If you can't afford a purchase today, chances are you won't be able to afford it in a month when the bill arrives. Also, understand the full costs of using your credit card for cash advances, which can carry much higher interest rates and start accumulating finance changes immediately. This can lead to a downward spiral of debt that's difficult to overcome.

Explore other alternatives. If you want the convenience of carrying a credit card without the risks of incurring unmanageable debt, there are other options such as debit cards (where money is drawn directly from your chequing account), and prepaid cards, where the funds are added to the card first, and then used.

Before you start missing payments, contact your credit card issuer. They may be willing to work out a repayment schedule that won't damage your credit rating, since that could make it difficult to rent an apartment or buy a car or house, later on. Also, many employers and insurance companies now run credit checks on candidates.

Students have enough to worry about with mid-terms and piles of laundry – getting an 'F' in credit cards shouldn't be one of them.

This article is intended to provide general information and should not be considered legal, tax or financial advice. It's always a good idea to consult a tax or financial advisor for specific information on how certain laws apply to your situation and about your individual financial situation.

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