In today’s increasingly online world, credit cards are becoming less of a luxury and more of a necessity for many people, whether it be doing your christmas shopping online, buying a book from amazon or purchasing songs on itunes, credit cards have become a daily part of our lives. Credit cards can be very useful, but if not used probably, with interest rates around 20% they can also be very very dangerous.
Here are our tips for being in control of your credit card, rather than letting it control you.
Tip 1: Pay it off in full each month
In a perfect world everyone would pay their credit card off in full each month. This way you can take advantage of the interest free period and pay off your credit card balance before any interest is charged.
Sometimes the world is not perfect though and there are months when you just can’t pay it off in full. If this is the case always pay as much as you possibly can, to reduce the interest costs. If you pay only the minimum that the bank requires you’ll be in credit card debt for years to come and could pay thousands in interest costs.
Tip 2: Keep track of how much you’re spending – it can be easy to overspend on credit cards
The key to credit cards, especially if you’re finding you’re not able to pay it off in full each month, is to keep a careful eye on how much you’re spending on it.
You could do this simply by logging into your internet banking or mobile banking on a daily or weekly basis to check where you’re at or use a tracking tool such as pocketsmith to track your spending.
Tip 3: Keep your fees to a minimum
- Don’t take out cash
- Pay on time
- Keep to your limit
If used right, there can be very little extra costs to having a credit card, if used wrong you can end up paying a fortune in fees and interest costs.
To keep your fees down avoid taking out cash from your credit card, this incurs a fee plus you start paying interest on it straight away.
Pay on time to avoid late payment fees and know and keep to your limit to avoid any honour or dishonour fees.
Tip 4: Choose a rewards scheme that works for you
Take a careful look at the rewards schemes available and choose one that suits you and how you currently live. Used correctly rewards scheme can add real value to having a credit card.
Tip 5: Transfer to a credit card with a lower rate
If you’re really struggling with credit card debt, don’t be stuck paying 20% interest. There are often balance transfer offers available at very low interest rates – just make sure that you can pay the debt off within the low interest period to avoid high interest costs again, and use our tips above to avoid incurring more credit card debt in the future.
Tip 6: Try a debit card
If all else fails and you're still struggling with credit card debt, maybe it's time to look at whether a credit card is the right tool for you. Many people choose a debit card in preference to a credit card. A debit card has all the benefits of a credit card in terms of being able to transact online but as it uses money from your bank account, you can't get into any debt.
The information contained in this article is of a general nature and should not be taken as advice. It reflects the opinions of the writer only and does not necessarily reflect the opinions of New Zealand Home Loans.
