Whether you’re planning to get your very first credit card or are feeling like your current card is a bit out of control, it’s important to know everything you can about how credit cards really work. Product disclosure statements, account statements and the brochures you get from your card provider don’t always include everything you might want to know. Here are a few quick tips to save you money and help you get your credit card bill under control.
Banks and stores seem to always be offering to ‘up’ your credit limit, but can you meet the repayments if you happen to take your card up to its limit? If the bank offers you a $10,000 limit – consider telling them you only want $5,000 – it will force you to stay within the limit and not be tempted to buy big ticket items you can’t afford.
It’s tempting to take up offers of new cards that have interest-free periods on debt transferred from another card. But if you do this too often it can negatively impact your credit rating. Try calling your bank instead of swapping cards, most of them will match the interest-free period or other promotional offers, because they want to keep you as a customer. It’s worth a try!
Banks use tempting tactics to entice new customers – interest free periods, no annual fee for the first year etc. Before taking up a promotional offer, look carefully into what happens once the promotional period ends. You could take up a very low or no interest credit card only to find that after 3 months, the interest rate is much higher than the card you currently have, or the annual fee is twice what you currently pay. That’s why it’s important to do your homework before switching cards.
We like to think that reward points will give us something for free, but generally most people are better off with a lower interest credit card than one that includes rewards and has a higher interest rate. Most reward schemes require you to spend a huge amount of money before you have enough points to receive a gift. Unless you are diligent about your credit card repayments, paying in full every month, you would be better off saving hundreds in interest than saving points that could expire.
Debit cards can be used in exactly the same way as a credit card, but you can only spend money you already have – so you can’t go into debt. If you only need a credit card for online or over the phone purchases, a debit card can do the same job. If you don’t have a credit card, try a debit card and you may find you will never need a credit card!
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