3 tips to protect your credit during the summer months

Summertime—the temperature rises… and so does the spending.

With Canada’s rate of inflation rising to 4.4% in April of 2023, we’ll all be spending a lot more on goods and services this summer. But how will everybody be paying for a summer full of spending when salaries haven’t exactly been keeping up with inflation?

It seems many Canadians are finding themselves having to resort to putting purchases on credit.

In fact, according to a recent Equifax Canada report, credit card spending is higher than ever, while debt payments have decreased—not a good combination when you consider interest rates are on the rise.

With that in mind, 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.

The EY Future Consumer Index survey revealed that 53% of consumers are being impacted by the rising costs of good and services—and not it’s not just lower-income earners (or those on the bottom of the pay grid) feeling the pinch. This means having to shift your spending habits.

Start by determining how much of a summer vacation you’re 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. 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 on 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 number 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 traveling

If you plan on emailing friends, family, and colleagues during your trip, or need to access your online bank account, pension statement, or Educators investment account while you’re away, consider purchasing a VPN to connect your devices. 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.

Looking to maximize your summer cash flow? Look no further than Educators Financial Group.

With over 45 years of helping education members with their finances, we can help you uncover ways to spend less from September to June, so you’ll have more financial wiggle room in July and August. Plus, we can even put together a customized plan to help you work towards your specific dreams and goals, based on your current budget.

Contact us about getting your finances set for summer and all year round.

Sources:
https://www.newswire.ca/news-releases/will-consumer-habits-react-to-looming-bank-of-canada-interest-rate-increases-in-time–820035486.html
https://financialpost.com/executive/executive-summary/posthaste-canadians-are-changing-their-spending-habits-in-response-to-inflation

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