Instant access to an unsecured line of credit is the major advantage of a credit card. When used correctly, a credit card is convenient, flexible and offers a range of useful benefits to the cardholder.
To get the most from your credit card, it’s important to match the card with your spending and repayment habits. Look for cards that work the way you do, otherwise you could be paying more than you need to.
Which of the following four profiles best describes you?
- Habitual Spender – If you struggle to pay off your credit card each month and revolve a debt, try to find a low rate card with a very low or no annual fee.
- Impulse Spender – If you only use your card for emergencies and impulsive spending (such as Christmas shopping, holidays or sales), then spend a few months afterwards paying off the balance, try to find a low rate card with a very low or no annual fee.
- Everyday Spender – If you use your car for regular purchases such as groceries and petrol and pay off your balance each month then you have a bit more breathing room since you don’ have to worry about interest rates. Your challenge will be to find the card that provides the features you’re interested in at the lowest cost.
- Big Spender – If you earn and spend a lot of money on your credit card each year and always pay off your balance in full, you are probably in the market for a card that provides features and perks that you use frequently. These may include free travel insurance, concierge services and rewards programs.
Other things to consider:
- Understand the terms and conditions of introductory and balance transfer offers and periods.
- On average, cards with reward programs cost more. Only choose a rewards card if your annual spending will give you a return that will outweigh the cost of the rewards program membership.
- Know the features and conditions of your card such as the minimum repayment criteria, currency conversion fees and penalties for missed/late payments.
- Understand that there are some cards that charge interest on all new purchases if minimum payment is not made by the due date.
- Be aware there are some cards that treat BPAY transactions as cash advances.
- Be aware that most rewards programs incur an additional annual fee, however some may offer a spend per annum deal to waive that fee.
- There are some cards that allow you to earn points on cash advances and BPAY.
- Pay as much as you can off the balance each month – enough to cover interest plus fees and charges.
- Reduce the number of cards you hold. This will reduce additional costs like ongoing fees.
- Avoid store cards which usually have a much higher rate of interest
- Avoid increasing the limit of the card.
- Some institutions offer credit cards under “package deals” and allow for annual fees/rate discounts on the cards. (certain eligibility criteria to be met).
Credit card security
- Report Lost or Stolen cards immediately.
- Never let your credit card get out of your sight while making a purchase (eg at a restaurant).
- Notify your card issuer if you plan to travel overseas so that your transactions won’t be perceived as being suspicious. This could prevent your card being deactivated while you’re in the middle of your holiday.
- Make sure when shopping on-line that you deal only with reputable sites that secure their web sites through the use of https:// pages. Read the help section for your internet browser to find out how you can tell that each site is secured properly.