TORONTO - No matter how you swipe them, credit cards are full of pros and cons that weigh heavily on young Canadians and can sometimes be a make-or-break influence on their pocketbooks.
On the one hand, a credit card can help beef up credit ratings before a cardholder seeks a loan for a big-ticket purchase like a home or car. But those pesky points programs can sometimes prove so attractive that consumers dig themselves into a deep hole of debt.
"The biggest mistake young people make with a credit card is that they use it to enhance their lifestyle," said Clay Gillespie, financial adviser at Rogers Group Financial in Vancouver.
"They ramp up their lifestyle by spending more than they earn, and they're paying 18 per cent on that. That comes to bear five to seven years after you've had the card."
More young Canadians are growing up with plastic cards in their pockets than ever before and it's setting a dangerous precedent, say observers. Sometimes their parents even co-sign for them while they're still minors and set them loose into the marketplace.
The trend could develop into a dangerous habit for some shoppers, because it creates the illusion of a seemingly endless cash flow that the user carries into their adult life, financial experts suggest.
"Some people think if they've got $500 (in credit) they have $500 (in cash) - that's not the case," said John Nardi, a financial adviser at Edward Jones.
In a short amount of time "seemingly little purchases can become massively expensive" as unpaid bills start to generate interest, he said.
Credit card newcomers should heed some common warnings to avoid these circumstances, Nardi suggested.
First, don't get caught up in extravagant cards that promise hefty rewards like travel points or gift cards for purchases - most of those require an annual fee. Nardi suggests those cards are typically for experienced users and can often increase a new user's chance of overspending.
Young credit card owners also should avoid signing up for cards that they don't require or aren't likely to be approved for, he said.
"If you apply for credit cards and you get turned down for them, it does (negatively) affect your credit rating," Nardi said.
It's also worth planning for the future and laying out how credit cards could stifle those goals. Prospective homebuyers could hit a setback if they're hoping that more credit cards will benefit them when they're seeking a loan.
"If you've got a $5,000 or $10,000 line of credit when you're looking to buy a house or any major purchase, the bank looks at that as money you've spent - even if you haven't spent it," he said.
To play it safe, avoid racking up extra cards that aren't essential, including the ones offered by department stores, which typically charge sky-high rates in exchange for a minor discount.
"A lot of the cards are designed for certain users, so you want to get a card for what you actually need," said Gillespie.
While low-interest credit cards are the way to go for some Canadians, others can't deny the allure of points incentives, said Laurie Campbell, executive director of Credit Canada, a non-profit credit counselling organization.
"We'll have people come in here and they may owe $30,000 or $50,000 ... but they don't want to cut up their card and start to deal with that debt because they're worried they'll lose points," she said.
To play it safer, most major Canadian banks offer basic credit cards, sometimes without any fees. Those ones generally don't give you points, but also help ensure you don't dig yourself into a financial rut.