Smart ways to use your credit card

Credit cards are a convenient money management tool if they’re used properly. Handy to shop online, when you’re travelling, or to juggle your budget in a temporary cash flow crisis.

But they can become a liability if you’re constantly using them to plug holes in your budget or buying things you can’t afford or don’t need.

A crash course in credit cards

  • Credit cards have higher rates of interest than some other forms of credit (like personal loans).
  • Interest rates vary depending upon what features or rewards the credit card offers. Generally, the more rewards and features, the higher the interest rate.
  • Unless you pay your credit card off in full each month within the interest free period, buying items with a credit card will always cost you more money than if you pay cash.
  • If you only pay the minimum amount each month, you will pay more in interest, and take longer to pay off the credit balance.

Smart (and not-so smart) ways to use your credit card

Smart: Have one, simple credit card with a reasonable interest rate and low credit limit and only use it when you need to.

Not-so smart: Using a high interest credit card with a big limit to supplement your income or buy things you can’t afford in the hope you’ll soon be able to.

Smart: Pay your credit card in full each month within the interest free period.

Not-so smart: When you max out one credit card, ask for another one and max it out too. Or ask for a higher credit limit and spend right up to the limit.

Smart: If you’re paying off a large sum, pay more than the minimum repayments each month. Set up an automatic payment so your credit card gets paid without you having to think about it. ASIC’s (Australian Securities and Investment Commission) credit card calculator helps you work out the fastest way to pay off your debt.

Not-so smart: Only pay the minimum monthly amount. This exponentially increases the length of time it will take to pay off your card and the amount you’re paying off.

Smart: If you have more than one card, pay off the card first with the smallest balance or highest interest rate. If you need help managing your debt, contact your credit card provider straight away and ask for help.

Not-so smart: If you run into trouble with your credit card, do nothing and tell nobody.

Smart: Check your credit card balance each month to make sure you’re the only one using your card. Check for charges to companies you don’t recognise, large or unusual charges, duplicate charges or changes in direct debits you haven’t authorised.

Not-so smart: Assume credit card scams won’t happen to you, and people never make mistakes when charging your credit card.

Freedom and flexibility

A credit card can give you the freedom and flexibility to pay in different ways in all kinds of places. Using it carelessly can land you in financial hot water and cost you lots of money and time to pay back.

Keeping things simple can help, which is why the Bluey Visa Credit card comes with no annual fee, a low interest rate, 55 days interest free and a 0% 12-month balance transfer offer.

Talk credit cards with QBANK. Call 13 77 28.

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Credit Cards

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