30 Nov Ten tips to keep your credit card under control – Diana Clement
Credit cards are the scourge of many Kiwis’ finances. They do have uses, but they’re a bit like the booze. Not everyone behaves sensibly with them and many lurch from one month to the next, a hair’s breadth from going under.
We spend $3 billion a month on our credit cards and more than 60 per cent of that money will incur interest because it won’t be paid off before the interest free days run out.
At an individual level, Mt Debt is causing huge pain. Running a balance month after month is one of the worst drains on finances known to man. The irony is that it’s the people least able to afford it who get stung with nearly 20 per cent interest on top of everything they buy.
Credit card debt is stressful, can ruin relationships and gets in the way of doing what you really want in life. So here’s some tips to get control over the little plastic card:
1. Control the “buy me” voice in your head.
If you can walk past that shop and not buy something you’re outsmarting your own brain, which is wired to buy. Think twice or three times about everything you buy. Try repeating a mantra to stop you in your tracks such as: “Do I really need it?”, “Will it put me in debt?” Or whatever is relevant to your situation.
2. Go low rate.
If you are running a balance then the interest rate you pay matters. A Gem Visa, for example, charges 24.95 per cent interest per annum, while the Co-operative Bank’s Fair Rate card charges 12.95 per cent interest on cash advance and purchases.
3. Pay nothing.
Balance transfers can give you breathing space. By transferring the balance to another bank you might pay low or no interest for six to 12 months. BNZ is offering 12 months at zero per cent on its Low Rate Mastercard with new purchases charged at 13.45 per cent, but a $60 annual fee. This gives you serious breathing space to pay down the debt. Check out the rates on sites such as Interest.co.nz, Pocketwise.co.nz or Canstar.co.nz. But remember if you don’t pay the balance off before getting more credit then you’re fooling yourself.
4. Avoid cash advances.
You pay 22.95 per cent on most cash advances through banks. That’s a very expensive way to get money.
5. Watch those fees.
The Banking Ombudsman hears from customers who get caught with unexpected fees, particularly around cash advances or overseas services.
6. Move the payment dates.
If your card payments are due the week before pay day you might not have money to pay them. David Scognamiglio, chief executive at Credit Simple recommends aligning your card payment dates with your wages or salary. “It’s a great hack for people who find it tricky to manage their money and keep their cash flow under control.”