Overspent in the holidays?

Feel like your credit card took on a life of its own over the Christmas and New Year’s break?  Here are a few tips to save you money and help you get and keep your credit card bill under control.

Tip 1. Pay more than the minimum 

Once you’ve already spent on your credit card the most important thing you can do is pay more than the minimum repayment amount required by your bank. It can save you thousands of dollars in interest.

Did you know?

If you had $5,000 owing on your credit card with an interest rate of 18%, your minimum monthly repayment starts at $102. By paying off just the minimum each month, it would take you 33 years and cost over $17,000 to be free of that debt.

But, if you paid $200 a month, you would have paid off the whole debt in just two years and seven months at a total cost of $6,2001. That’s a saving of almost $11,000!

Try MoneySmart’s credit card calculator for yourself!

Tip 2. Halve the credit limit that your bank offers

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 your current limit is $10,000 consider telling your bank you only want a $5,000 limit – it will force you to stay within the limit and not be tempted to buy big ticket items you can’t afford.

Tip 3. Don’t get in the habit of transferring your balance from card to card

It’s tempting to take up offers of new cards that have interest-free periods on debt transferred from another card and it can help you pay your debt off faster. 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!

Tip 4. Look carefully into credit card promotions and rewards

Banks use tempting tactics to entice new customers – interest free periods, no annual fee for the first year or reward points etc.

Before taking up a promotional offer, look carefully into what happens once the promotional period ends. You could find that after the promotional period the interest rate is much higher than the card you currently have, or the annual fee is twice what you currently pay.

When it comes to rewards most people are better off with a lower interest credit card than one that includes rewards and has a higher interest rate. Unless you are diligent about paying your credit card in full every month, you’d likely be better off saving hundreds in interest than saving points.

Tip 5. A debit card might suit you just as well

Debit cards can be used in 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 never need a credit card!


1 Assumes initial balance of $5,000, 18% interest and 2% minimum repayment of outstanding balance. Based on calculations conducted on MoneySmart's credit card calculator (www.moneysmart.gov.au)