How to become a credit card whiz kid

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Credit cards have been getting a bad rap lately. Australians’ credit card debt has risen to $49.8 billion, or an average debt of $3,340 per credit card, according to Reserve Bank June data. That’s a hefty bill by anyone’s calculation.

Faced with numbers such as these, it’s easy to view credit cards as the evil spawn of a consumerist society. However, credit cards can be an enormously useful resource if used with discipline.

Here are five ways to benefit from your credit card and prove the naysayers wrong.

1. Pay the monthly balance
The surefire way to stay on top of your credit use is to treat it like cash and only use a credit card if you can afford to pay the full balance each month. Credits cards only become a problem when you spend more than you pay off, and you could potentially pay more interest than your purchases were worth. Interest charged by credit card accounts is often four times higher than the official RBA cash rate of 4.75 percent.

2. Banish fees
Many credit cards charge an annual fee but there are still 33 credit cards with no annual fees from which to choose, according to RateCity’s database. An additional 18 cards waive the annual fee if you spend a monthly minimum, usually $1,000. If you choose carefully, you’ll never have to pay an annual fee again. At RateCity, you can research and compare more than 200 credit cards.

3. Gain extras
Use increased competition among banks for credit card customers to your advantage. In a bid to woo customers, credit cards offer an entire array of benefits, such as free travel insurance when you use your card to purchase flights, extended warranties, discounts and rewards. Choose wisely and enjoy the savings.

4. Make money from your card
Some credit cards offer cash back for your spending, so you can reap even greater rewards. Cash-back schemes work in one of two ways: you receive a percentage of your total spend back, or you can redeem your rewards points as cash if the cash-back offer is tied to a rewards program.

5. Use it as a loan
If you’re a true credit card whiz kid, you can take advantage of the benefits of credit and use your card as a short-term loan – by making a purchase at the start of the 55-day interest-free period and paying it off by the due date. This is an effective way to access financing quickly at no cost.

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