How do you use a credit card?
Credit cards are a quick and convenient way to pay for items in store, online or over the phone. You can use a credit card as a cashless way to pay for goods or services, both locally and overseas. You can also use a credit card to make a cash advance, which gives you the flexibility to withdraw cash from your credit card account. Because a credit card uses the bank’s funds instead of your own, you will be charged interest on the money you spend – unless you pay off the entire debt within the interest-free period. If you pay the minimum monthly repayment, you will be charged interest. There are many different credit card options on the market, all offering different interest rates and reward options.
Credit cards offering rewards can be great if you know you’ll use the card enough to get significant rewards points, and use the rewards you earn.
They can also come with high annual fees that may end up nullifying the rewards, so think how often you use the card to decide whether the benefits outweigh the extra cost for you. A card with a lower annual fee might require a lot of spending to get any useful rewards, while another card with a higher annual fee might need fewer purchases to get a reward.
Also, think about the types of benefits you’d like. There’s no point in getting a card with rewards for retailers you never visit, or travel you don’t have time to use.
Credit card interest can quickly turn a manageable balance into unmoveable debt. So being able to understand how interest rates translate into dollars is an important skill to acquire.
The common mistake people make is focusing on the credit card’s annual percentage rate (APR), which often sits between 15 and 20 per cent. While the APR does provide a rough idea of how much interest you’ll pay, it’s not entirely accurate.
This is because you actually accrue interest on your balance daily, not annually. So, you need to work out your daily periodic rate (DPR). To do this, divide your card’s APR by the number of days in a year (e.g. 16.9 per cent divided by 365, or 0.05 per cent). You can then apply this figure to the daily balance on your credit card.
Think of credit cards as a short-term loan where you use the bank’s money to buy something up front and then pay for it later. Unlike a debit card which uses your own money to pay, a credit card essentially borrows the bank’s money to fund the purchase. When you apply for a credit card, the bank assesses your income and assigns you a credit limit based on what you can afford to pay back. At the end of each billing cycle, which is usually monthly, the bank will send you a statement showing the minimum amount you have to pay back, including any interest payable on the balance.
A credit card is a payment method which lets you pay for goods and services without using your own money. It’s essentially a short-term loan which lets you borrow the bank’s money to pay for things which you can pay back – potentially with interest – at a later date. Credit cards can also be used to withdraw money from an ATM, which is known as a cash advance. Because you’re borrowing money from a bank, credit cards charge you interest on the money you use (unless you repay the entire debt during the interest-free period). When you apply for a credit card, the bank gives you a credit limit which sets the maximum amount you can borrow using your card. Credit cards are one of the most popular methods of payments and can be a convenient way of paying for goods and services in store, online and all around the globe.
There are a few ways to pay a credit card bill. One way is to pay via BPAY. This means you can make your credit card payment on the phone or via the internet.
You can set up an automatic payment from an Australian bank account to pay your credit card bill each month. You can choose how much you want to pay of your credit card bill when you set up the auto payments.
Different Australian banks will also allow you to pay off credit card bills in person at one of their branches.
Some credit card companies also allow you to pay your credit card via an app whenever each statement is due.