Buy now, worry later? Use your credit card smartly

Buy now, worry later? Use your credit card smartly
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There's plenty of chatter about the dangers of credit cards — from high interest rates to hefty annual fees, you could be led into thinking that having a credit card is a total financial mishap.

However, you might just be using your credit card incorrectly.

Australians reject annual fees

Recent findings from Roy Morgan Research show that 27.1 percent of credit card users aged 18 to 24 opt for cards with no annual fees. In 2009, the figure was almost 12 percentage points lower, at 15.2 percent.

This figure bounds ahead of the proportion of total credit cards without annual fees (16.6 percent). Four years ago, it was 12.4 percent.

Between 2009 and 2013, the proportion of credit cards with no annual fees increased across all age groups.

Focus on features

Norman Morris, Roy Morgan Research Industry Communications Director commented on the findings:

"In a declining credit card market there is a higher importance on the features that credit cards offer."  

Securing a credit card with no annual fees can be incredibly beneficial, freeing up more money to go into your savings account. However, there is a trade-off.

"Credit cards that offer the convenience of no annual fees are increasing in popularity across all age groups, however the lack of annual fees are usually offset by being charged a higher interest rate and receiving minimal other benefits and features," Morris noted.

Accordingly, it truly does pay to consider other features that make for smart credit card use.

Lower your credit limit

If you spy a gorgeous pair of shoes or a striking suit in a shop window during your lunch break, do you act on impulse or hold off on purchasing such coveted goods?

A credit card is useful to have on hand for emergency expenses, but you might be tempting fate with a very high credit limit. 

If you tend to act impulsively when you've got your credit card on you, consider lowering your credit limit. You'll still be able to access funds when you need them, but may be less likely to splurge on big-ticket items.

Stick to deadlines

Paying off your credit card within your lender's deadlines is essential. 

If you don't, any interest-free period is going to slip you by. If your credit card payments are due on the 20th of every month and you only make minimum repayments, or pay off the amount after this date, you better say hello to interest!

It can seem daunting to whack four, five or six hundred dollars off your credit card account at once. Instead, put money aside each week or fortnight that you'll have on hand when your bill rolls around.

If you're strict about paying off what's due and avoid penalties, you'll find yourself with a much more favourable credit score — a plus when applying for credit or a home loan.

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