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Managing Credit cards

Know what rates and fees apply

There’s a wide range of credit cards out there and each has different features and incentives. It’s important to look at three factors when considering which credit card to choose: the interest rate, the late payment fee (or penalty) and the annual fee. Interest rates range from around 12% to 21% p.a. and store cards can go higher to around 25% p.a. Annual fees can range between $50-$300. Most credit cards have a minimum payment amount due monthly and if you miss that you could expect to pay a late payment fee. While these fees are minimal ($6-$10), they add up over time.

Pay it off every month

You can only take advantage of credit card interest-free days if you pay the balance in full at the end of each month. Even better, if you can pay it off after each purchase, you'll keep track of your money and always know where you stand. If that’s not manageable, try to pay more than the minimum repayment each month to save on interest costs.

Avoid taking cash out

Banks charge high fees for withdrawing cash on a credit card and these transactions attract a high rate of interest from the day you make the withdrawal. Perhaps worst of all, many lenders view cash advances as a sign of credit distress, so try to avoid them.

The sky is not the limit!

Your credit card limit should be based on what you can afford, not how much you might spend! Just because a bank offers a limit increase, it doesn't mean you have to accept it.

Buy Now Pay Later

These days there are plenty of Buy Now Pay Later schemes that allow you to split the cost of goods up into several payments, but still take the goods home today. They make it easy to buy today but be careful not to spend beyond your means. You should also be aware that if you can’t meet your payment obligations it may affect your credit score and lenders prefer not to find these types of payment solutions on your statements.