Credit Card Tips
| Credit Cards Tip # 1 |
Avoid cash advances
Interest-free periods offered on credit card accounts do NOT apply to cash advances. In most cases, you will pay interest on that cash right from the time you withdraw it. ANZ and Westpac cardholders pay a bigger penalty - a fee of 1.5 per cent of the withdrawal. That's $15 straight off on a $1000 credit card cash advance. |
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| Credit Cards Tip # 2 |
Choose a card that matches your needs
Make sure that the credit card you use is the most suitable for your spending patterns. If using a card for extended credit and don't pay off the balance in full each month, choose a card with a lower rate. It may not offer any interest-free period, but the lower interest rate should save you more in the long run. If you use your card for the convenience of paying for everyday purchases such as petrol or groceries, try a credit or charge card with maximum interest-free days, then make sure you pay it off in full each month. This way you get the benefit of up to 62 interest-free days on purchases, as well as rewards, discounts and frequent flyer points. But watch the annual fees on rewards cards. |
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| Credit Cards Tip # 3 |
Do you qualify for a 'relationship discount'?
Relationship discounts are available from banks and credit unions for those borrowers who consolidate a range of banking business with the one institution. Home and personal loan interest rate discounts, term deposit bonuses, savings account fee waivers and credit card annual fee waivers are commonly offered. |
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| Credit Cards Tip # 4 |
Do you qualify for annual fee waivers?
Some institutions offer to waive the annual fee if you spend enough on your card each year, or if you have a home loan or lots of savings with the bank. If your card spend is more than $5000-$10,000 a year you may be able to choose a card with all the benefits you want and avoid the annual fee. But make sure you only use your card to make purchases you were going to make anyway. Spending money for the sake of reducing fees or earning rewards points is false economy. |
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| Credit Cards Tip # 5 |
Don't be distracted by sweeteners
Many lenders offer credit cards that include introductory discounted interest rates, rewards programs and insurance. Make sure you look at the overall ongoing cost of credit of any card option you consider - the standard interest rate, interest-free period, annual fees - and weigh these up against the real value (if any) of the added extras. |
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| Credit Cards Tip # 6 |
Don’t let ancillary card fees creep up on you
Watch out for the increasing range of ancillary fees and penalties charged for using your credit card. It's not just the annual fee and interest charges you have to worry about these days but fees for late payment of your monthly statement, exceeding your credit limit, having a periodical payment refused, issuing secondary cards on the same account, replacing a lost card, duplicate statements, taking cash advances and making overseas ATM withdrawals. These all come at a cost ranging between $4 and $90. |
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| Credit Cards Tip # 7 |
Interest-free periods don't apply unless you pay off in full
To avoid paying interest on your credit purchases you must pay the full outstanding balance on your statement (not just the minimum payment required) by the due date. If you don't, you will be charged interest right back to the date of purchase on each item – thus forfeiting the interest-free period on those PAST purchases. What's worse, you must pay the balance off in full before you will get any interest-free period on CURRENT and FUTURE purchases. |
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| Credit Cards Tip # 8 |
Look beyond the banks
Get a feel for what's on offer across the wide range of financial providers around these days. Credit unions, building societies, mortgage originators, community banks and boutique online or telephone banks may offer better interest rates or lower fees than the big banks because they are anxious to win new business or they are non-profit organisations. |
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| Credit Cards Tip # 9 |
Loyalty can cost you
Store cards such as David Jones and Myer may offer benefits of convenience, discounts, added warranties and extended credit, but aren't cheap.
Although these cards don't charge annual fees, the interest rate can be up to seven percentage points higher than alternative cards. Shoppers should therefore use them for specials and loyalty benefits, but pay them in full by the due date to avoid being whacked with high interest charges. |
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| Credit Cards Tip # 10 |
Maintain card security as fraud grows
The instances of ATM and credit card fraud are on the rise, as latest disturbing news reports reveal.
Tips to help avoid becoming a victim:
• don’t let anyone swipe your card twice without giving you a ‘transaction cancelled’ receipt for the first swipe – card ‘skimming’ is growing where fraudsters swipe cards through a second machine to record details.
• Be on your guard when withdrawing money from ATMs - if anything seems out of place with the machine or people around you, don't transact.
• Hang onto ATM receipts as proof of your transactions.
• When buying over the Internet, deal only with reputable online merchants whose sites offer full security (check the padlock sign at the bottom of your web browser)
• don't send card details by e-mail, your details are not secure (if you must, send half your card number through in one email, the rest in a second message)
• Avoid paying by credit card over the phone or by mail order. If you must, only give card details to established companies with a verified physical address.
• keep your card in sight at all times to ensure no-one copies your card details.
• don’t store copies of your password or security number with the card
• beware letterbox thieves – arrange to pick up new or replacement cards from your branch rather than have it sent through the mail
• check statements closely each month and report any unauthorised transactions to your bank immediately
• read correspondence from your bank before discarding it – it may contain important card account information and not just marketing material |
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| Credit Cards Tip # 11 |
Make low-interest-rate cards work for you
If you're a "revolver", a card user who doesn't pay off your card in full each month and has debt revolving from one month to the next, increasing competition is working in your favour. A host of new low-rate cards are on the market which have interest rates up to 9 percentage points lower than the high interest rate cards charging 16 to 18 per cent. There are also many balance transfer offers around that give you even lower rates of 5 per cent for the first six months or so on balances you transfer from another card. You could save $200 in interest in the first year alone on a $2000 revolving card balance by taking advantage lower interest rates. |
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| Credit Cards Tip # 12 |
Pay off more than the minimum each month
Don't be content just to pay the minimum payment amount. For those who can't pay off the whole balance on their cards, it's important to try and pay as much as possible each month. Paying just the small minimum required each month will consign you to long-term revolving debt incurring enormous total interest charges over time. Card providers have lowered the minimum payments from 3 or 4 per cent of the outstanding balance to as low as 1.5 per cent in some cases in recent years.
If you can't pay more than the minimum, it's probably time to transfer the debt off the card to a personal loan at a lower interest rate. |
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| Credit Cards Tip # 13 |
Think hard about the rewards you want
Annual fees for cards are on the increase – and the highest fees are usually on the cards with a rewards program attached. At the same time, the points earning rate is going down. Reserve Bank reforms forced on credit card providers mean they are no longer willing to offer frequent flyer points without charging card holders for the privilege. Either by a higher annual fee or introducing a dedicated rewards fee. It now pays to make sure you aren't paying for a reward program that you don't want. If you're chasing frequent flyer points make sure the benefits outweigh the costs, that is, the value of the points you earn each year in flights is more than the annual fee. This is becoming more difficult to achieve as many reward programs now offer less than one Qantas point per dollar spent. |
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| Credit Cards Tip # 14 |
Twelve tips to ensure internet security
Online banking fraud is on the rise and there are a number of ways you can protect your credit card and bank accounts if you transact over the internet:
• keep your computer secure and the access to it;
• don't send credit card or account details by e-mail;
• reject any email that asks you to follow a link to website and input account details for verification - even if the website looks authentic, its probably a fake replica
• make sure you log out of your online account when finished - especially at work, libraries and net cafes
• deal only with established and reputable merchants;
• only make payments to secure websites - look for the padlock symbol in the bottom-right of your browser and click for details
• if using a new site, do business first in a small way;
• check your accounts and report discrepancies immediately;
• ignore the "remember my password option" on banking and shopping sites
• change your password regularly;
• cancel any card that has been used fraudulently;
• read a company's privacy policy before buying online |
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| Credit Cards Tip # 15 |
Use a debit card instead
The safest form of card is not a credit card at all, but a debit card which offers all the convenience of paying with plastic. A debit card links to your savings account and debits it to cover the costs of purchases. Some cards can act as both a debit and a credit card. |
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| Credit Cards Tip # 16 |
Use your credit card to save bank fees
Instead of withdrawing cash to make purchases, use a credit card with interest-free days to make as many purchases as possible. At the end of each month, pay off your credit card in full by the due date using just one of your free transactions. |
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