In Australia alone consumers have racked up a staggering $49.5 billion in credit card debt
In Australia alone there are 15.85 million credit card accounts currently in use and consumers have racked up a staggering $49.5 billion in credit card debt. But not everyone is using their cards wisely.
Australians are paying hundreds of thousands of dollars each year in unnecessary charges due to mistakes they’re making with credit cards. Consumers are being urged to use their credit card wisely in order to avoid nasty debt that can develop quickly and last for years.
Jeremy Cabral, publisher of leading credit card comparison website, CreditCardFinder.com.au, points out the five most common credit card mistakes and gives tips on how to rectify them.
1. Paying bills late
If you pay your credit card bill late, and don't pay it in full, you will attract late payment charges and will not benefit from interest free days on purchases. This will become even more important once we move to a positive credit reporting system here in Australia. Always pay your credit card on time and in full, to avoid additional interest and late payment charges.
2. Making only the minimum payment
If you carry a balance, always repay more than the minimum repayment amount. An extra $50 a month can go a long way in reducing your interest charges and repayment period.
3. Failing to compare cards on the market
Compare rates and fees regularly. Always choose the right credit card for your spending and repayment behaviour.
- If you carry a balance month to month and have a rewards credit card, you should consider switching with a balance transfer to a low interest credit card that reverts to a low purchase rate. It's important to repay the balance in full before the introductory period ends.
- If you spend a lot on your credit card, always repay it in full, and on-time and don't have a rewards program attached to your card, consider switching to a frequent flyer card or another rewards program credit card.
- If you only use your card in emergencies, consider a no annual fee credit card.
- If you plan to make large purchases on your card, consider a card with a special introductory rate on purchases that reverts to a low interest rate. It's important to repay the balance in full before the introductory period ends.
4. Spending without a budget in mind
Spend only what you can afford to repay within the interest free days period - a lot of cards commonly have a 55-interest free days feature. It's also important to have a budget to plan how much you can afford to spend.
5. Withdrawing cash at ATMs
Avoid using ATMs to withdraw funds as they attract very high cash advance charges and interest is charged immediately from the day you withdraw the funds. Plan your spending appropriately to avoid ever having to use your card for a cash advance.
"By understanding these mistakes, you can take charge of your finances and free yourself of unnecessary financial stress. By rectifying these mistakes, valuable savings can be made, as well as shaving time off the repayment period,” concludes Mr. Cabral.
www.finder.com.au is a free service which, since 2006, has helped over 4.8 million Australians save time and make an informed decision when comparing credit cards issued by Australian banks and credit unions.