02 9683 5999THE FOLLOWING ARE SOME TIPS TO HELP SAVE MONEY ON CREDIT CARDS
IF YOU CAN’T AFFORD IT DON’T BUY IT
Only charge items to your card or withdraw cash if you know you can afford to pay off your balance within a realistic time frame, and be aware that most credit cards charge additional fees and higher interest for late payments.
A benchmark is your average monthly spending on your credit card should be 20% of your credit limit.
AVOID PAYING UNNECESSARY FEES
Most banks charge an annual fee for their credit cards, so it’s worth limiting the number of credit cards you have.
Credit cards that offer reward programs may charge an annual fee for the program. It’s worth finding out what the fee is and weighing up the benefits of the rewards compared to the fee you pay to receive them.
Make monthly repayments on time and don’t exceed your credit limit, to avoid additional fees. Types of fees that may be charged are late payment and over limit fees.
If possible, avoid using your credit card to withdraw cash. Most banks charge a fee for each cash advance in addition to any higher interest rate that cash advances might incur.
In addition, the interest free period for most credit cards will not apply to a cash advance. Instead, interest will be charged from the date you receive the cash.
AVOID INTEREST PAYMENTS ALTOGETHER
If you have a credit card that offers interest free days, you can avoid paying interest on your purchases if you always pay off the closing balance on your card in full, by the due date on your statement (the closing balance will be shown on your statement).
MINIMISE INTEREST CHARGES
Always pay at least the minimum repayment by the due date. Better still, if possible, pay more than the minimum the more you pay, the faster you can reduce your credit card debt and the less interest you will pay.
MAKE THE MOST OF YOUR INTEREST FREE PERIOD
Many credit cards offer an interest-free period. The number of interest-free days in this period varies from card to card, but can be up to 44 or even 55 days.
CHOOSE THE RIGHT SORT OF CARD TO SUIT YOUR NEEDS AND SPENDING HABITS
Choose a credit card that is right for you. If you plan to pay off your balance each month, interest rates may not be much of a concern. If you have a card with an interest free period and you pay your card off in full each month, you will be paying off your purchases before they incur any interest charges. As a result, you might want to concentrate on things like fees, and the rewards you might be eligible for.
If you don’t think you’ll pay off your card in full every month, and you are comfortable with having an ongoing balance on your credit card, then it is likely that you will pay a certain amount of interest with each repayment. In this case, you will probably want to look at a card with an attractive rate of interest, rather than a rewards program. Even if you do plan to keep a balance on your card, consider trying to pay off more than the minimum payment each month it will reduce your debt faster and will save you interest in the long run.
SHOP AROUND AND COMPARE CARDS
Different banks and financial institutions offer different types of cards, so it’s important to shop around to find the card that best meets your needs, and provides good value for money.
MAKE THE MOST OF REWARDS
Credit card providers offer a range of incentives and rewards and its worth thinking about how best to choose between them. You should be aware that there is often a cost associated with a reward scheme by way of a higher interest rate or higher fees. If you think you will have an ongoing balance on your card, don’t accept a higher interest rate just because you want the rewards. The value of the rewards is unlikely to be more than the increased interest cost.
If however, you are confident that you will be able to pay off your balance each month, you should shop around for a card offering the rewards you want, like flights, theatre tickets, cash back or store vouchers. Paying for a flight on rewards can significantly reduce the cost of a holiday!
