Some people have one and some have four or five. When it comes to credit cards we use them for different reasons, but at the end of the day most of us could be a bit wiser when it comes to using them. RateCity runs through the do's and don'ts when it comes to using your credit card.
May 5, 2010
To keep your credit card debt to a minimum and increase your savings, here an insight into what areas your credit card shines and where it leaves a great big hole in your wallet.
Green zone: credit card do's
Make the most of your interest free days
Most credit cards come with interest-free periods which mean you pay zero interest on each purchase for the specified amount of time. Each time you make a purchase try and pay it back in full during this period so you don't pay any extra. If you're considering making a purchase, work out if you can pay it off before the interest free period and if you can't, maybe think about whether you really need it.
Pay off the balance each month
By paying it off each month you will save on interest charges. If you can't afford to pay off the balance each month then try paying more than the minimum amount due. The minimum monthly payment is just that, the absolute minimum. This amount is only a small percentage of your total amount outstanding and would take years and years to pay off.
Rack up your rewards
Use your credit card as a rewarding piece of plastic by instead of using your cash for more frequent purchases, such as the weekly groceries, pay it with your credit card to build up your credit card reward points. The trick is to pay it off straight away so you don't get stung with paying any interest. Before you know it you will be flying interstate for some well-deserved time off thanks to all those points.
When looking for a credit card, don't just go for the first one you see. Compare credit cards online to find the best deals. Keep an eye out for low interest rates, minimum fees and a long interest-free periods.
Red zone: credit card don'ts
Don’t make cash withdrawals
Most lenders charge a much higher interest rate for withdrawing cash direct from your credit card. They also start charging you interest as soon as you take the money out of the machine, so avoid making cash withdrawals to save on heavy interest.
Don't rely on your credit card for purchases
Your credit card is not your friend and won't tell you when enough spending is enough. Instead of thinking that you will just put in on the credit card and pay it later (if ever), pretend that you don't even have one, or leave it at home when you go out and learn to rely on it less. This will make you rethink your purchases and save you more.