Purchases you shouldn’t make with a credit card

Older Australians are increasingly asking for help in managing credit card debt.

Purchases you shouldn’t make with a credit card

According to the Salvation Army's financial counselling service, Moneycare, older Australians are increasingly asking for help in managing debt.

Ten years ago, 19 per cent of its clients were aged 55 or older. In the 2017/18 financial year, 26 per cent were in that age bracket.

The most common reason people are asking for financial assistance is credit card debt (49 per cent).

Gerard Brody from the Consumer Action Law Centre told the ABC recently that credit card debt was the number one reason people called the National Debt Helpline.

Credit card payments now outweigh cash payments in Australia, which is no surprise, considering how fast it is to pay with PayPass and Paywave functions, plus the increased popularity of online shopping.

But just because you can use a card doesn’t mean it’s always the best option. In fact, there are times when choosing credit could leave you worse off than paying with a debit card or cash. 

Home renovations
One of the biggest mistakes people make when renovating is underestimating the cost of the works. You might think that you will be able to afford the repayments, especially if you are tackling your renovation in a piecemeal fashion, but if you are going to accrue a debt that you can’t pay off in full when the account is due, you may be much better off taking out a specialised renovation loan.

Buying a car
Many people, especially those buying used cars, don’t trust the financing options of car dealers, but these are usually better options than forking out the 17 per cent interest of using your credit card.

Gambling
Many people have betting accounts these days, but a mistake that people make is linking these accounts to their credit card. What people don’t realise is that most of these transactions are considered cash advances, which means that you will pay extra for the privilege and get charged a higher interest rate.

Withdrawing cash
Although cards come with the option of a cash advance, this is actually one of the worst credit card features you could ever use. Cash advances have a higher interest rate than standard purchases, usually between 19.99 per cent per annum and 21.99 per cent per annum, with no interest-free period available. The interest starts being calculated from the day you make a cash advance. If you don’t plan to pay it back quickly, you could pay quite a lot in interest. Beyond that there is the cash advance fee to think about: a charge typically worth between one per cent and three per cent of the total transaction. So, if you withdraw $1000, you would pay an extra $10 to $30 and start accruing interest straight away.

Utilities
Most electricity, internet and phone companies apply a surcharge for paying their balances with a credit card, so you are better off paying directly from your bank account.

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    COMMENTS

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    Rosret
    13th Aug 2019
    11:08am
    I would love to know how you by pass the utility extra fees. Buy an airline ticket, an online purchase etc etc and there is no indication you are about to get fleeced until the very last click.
    jackie
    13th Aug 2019
    11:19am
    Rosret, BPAY payments over the phone or internet can cut the extra fees.
    KSS
    13th Aug 2019
    12:48pm
    BPay does not usually incur extra fees or do bank transfers on line. However, over the phone is still a credit card transaction so may still have a fee attached. Likewise debit cards because they are treated like credit cards. PayPal is another fee free option - and actually has some safeguards in the system if you don't receive what you bought. Many organisations are now trying to force you into direct debit transactions by making any other fee free method difficult to action.

    Every utility bill has the payment methods on it along with which will attract fees. Check directly with the airline - they may have options where you don't pay the fee. I am not defending this at all, I object to being charged extra just to pay a bill especially as I am never late in making the payment. I will change the way I pay if it means I can save the fee!
    Tanker
    13th Aug 2019
    1:16pm
    Spot on KSS. I use PayPal whenever possible as it not only cuts out any fee for using a credit card it also means that only one organisation has those card details.
    I avoid using direct debit as a means of paying any bills and am sufficiently organised to keep track of my bills using the Calendar on my computer to remind me when a bill is due and I use BPay.
    It is working for me so far.
    Tanker
    13th Aug 2019
    1:16pm
    Spot on KSS. I use PayPal whenever possible as it not only cuts out any fee for using a credit card it also means that only one organisation has those card details.
    I avoid using direct debit as a means of paying any bills and am sufficiently organised to keep track of my bills using the Calendar on my computer to remind me when a bill is due and I use BPay.
    It is working for me so far.
    Jenny
    13th Aug 2019
    2:36pm
    Just a quick warning. If you use PayPal frequently, just keep a careful eye on your transactions. I have been scammed out of money a couple of times through my PayPal account, fortunately I picked them up in time and was able to get my money back. But I could imagine someone who is busy and does a lot of transactions may possibly not notice something awry. This is no criticism of PayPal, I still use the service.
    Rosret
    13th Aug 2019
    8:45pm
    Jenny, would you say it was a problem with pay pal or that you are doing transactions with some disreputable people.

    As to the BPay - there are a lot of online transactions that don't offer that as a feature.
    ardnher
    16th Aug 2019
    5:42pm
    got caught at JB HI fi some years back...the credit card was out of my sight as they had a very high counter and you could only see the face of the person taking my card for payment. Two days later had call from bank that my card had been frozen and to come on in. That was the only time I had used the card in about 2 weeks and it is always kept in a special wallet that cannot be accessed by someone with one of those machines. I will never let my card out of my sight ever again. I lost no money thankfully!
    Westie
    13th Aug 2019
    11:20am
    I take the point of not paying utilities with a credit card, as there's usually a surcharge. However, my credit card is a Coles Mastercard with Flybuys attached, so for every dollar I spend on this card, I'm awarded 2 Flybuys points. This negates the surcharge, and I still earn a few extra Flybuys points. I avoid spiraling debt by making sure I pay the balance due on the due date, so that I can live on my Age pension, which is my sole income. This card also attracts an annual fee of $99, but the Flybuys rewards far exceed this sum, if you convert your points to Flybuys dollars. Unfortunately, few people understand the advantage of this card, especially if you use it to pay for everything you purchase.
    jackie
    13th Aug 2019
    11:24am
    Westie, I earn points with my Flybuys card with purchases. Credit cards cost you money they never save you any.
    Valalan
    13th Aug 2019
    11:39am
    I also prefer the Coles Mastercard and I think it became top choice a while ago in a survey. I use Coles for my petrol too as the flybuys card points do make a difference and we have the 4cents a litre too when we shop Coles.
    Jenny
    13th Aug 2019
    2:44pm
    Yes, I also use my Cole's MasterCard for it's convenience, as you say always paying it off within the time to avoid any interest or penalty. Plus all the advantages of Flybuys. However, I don't pay any fees, and if the card came with such fees I wouldn't keep it. Nor do I use it for anything which would attract a surcharge if that was at all avoidable.
    jackie
    13th Aug 2019
    11:21am
    I don't use credit cards and never have. For online payments its Paypal or BPAY. If I can't afford it I go without.
    Westie
    13th Aug 2019
    11:36am
    I reiterate Jackie - few people understand the Flybuys system and how it can give you the advantage of converting points into Flybuys dollars which can be spent at places such as KMart, Target, etc etc. I'm definitely better off using my credit card to pay for everything I purchase, and pay the full amount on the due by date using BPay. There is no surcharge for using BPay to pay my Coles Financial Services account.I also love the convenience of not having to carry cash. But - it's your choice of course.
    Troubadour
    13th Aug 2019
    12:30pm
    Have not had a credit card for about 25 years, and breathe easier without one!! Living within your means is the key. I too have Flybuys and have saved about $150 this year alone with Flybuys rewards.
    Rosret
    13th Aug 2019
    8:49pm
    Troubadour if you don't happen to live close enough to a bank withdrawals of cash can cost $2 or more to withdraw money.
    ardnher
    16th Aug 2019
    5:44pm
    wont be long before everyone will be forced into a cashless society..ATM's are closing down at a fast rate
    Cowboy Jim
    13th Aug 2019
    11:43am
    All the above is just common sense for people born before everyone had a credit card. Was in my 20s when Bankcard came out. I will always be in front of the payments as I use my credit card as a debit card mostly. Try to be a few hundred dollars above your credit limit. Sometimes people insist on a credit card and will not accept a debit one. So that solves the problem, easy now since we do not get any interest in our ordinary accounts.
    Karl Marx
    13th Aug 2019
    11:44am
    Credit card interest rates need to be reviewed as they are way to high. I only use my credit only when it's more convenient & pay the balance due in full so I don't incur any interest.
    I do a lot of travelling so the credit cards does come in handy at times.
    KSS
    13th Aug 2019
    1:20pm
    Credit card interest rates are irrelevant if you pay your card off each month. If you can't do that then you shouldn't have a credit card in the first place. Interest on credit cards is wholly avoidable.
    Karl Marx
    13th Aug 2019
    2:50pm
    Get with the times KSS. Most people have credit cards & some payments can only be made by a credit card.
    Unfortunately a lot of people aren't in a position to pay the owing balance each month but are still able to manage it.
    You are right about interest rates being irrelevant if you pay off the card each month but they are totally relevant to the millions of people that can't. Like interest rates for a mortgage, to me totally irrelevant no matter what the rate as I am debt free, one of the lucky ones.
    Viking
    14th Aug 2019
    5:39pm
    I don't follow your "get with the times comment" to KSS. He is quite right in what he says about interest rates irrespective of the "times". If people can manage their finances without a credit card and not get into debt, it requires little discipline to do the same with a credit card and benefit from the flexibility they offer. For those who can't get a credit card a debit card is nearly as good with no fees at all. If you're disciplined your money goes the same distance irrespective of from what you use to pay it out so those who can't pay the balance each month would still have the same problem with cash or cheques? We all get 60+ years to prepare and learn how to manage our money for retirement, how much longer do we need?
    Karl Marx
    14th Aug 2019
    9:07pm
    Simple Viking, credit cards are a way of life same as smart phones, computers, internet etc So to say "if you pay your card off each month. If you can't do that then you shouldn't have a credit card in the first place" is really a comment that was relevant last century not 2019. Even last century people got into financial difficulties because of a change of situations with jobs, relationships, bad decisions etc. Credit has always been around it's the way we access credit that has changed.
    And if you read my entire reply I agreed about interest rates being totally irrelevant if you have no debt but to the many many millions who aren't debt free interest rates whether credit or mortgage are totally relevant.
    Australia has a 1% rate but credit cards can be over 20% & haven't come down to my knowledge in a long time & don't receive the same government or public pressure to do so unlike mortgage rates.
    Viking
    14th Aug 2019
    9:39pm
    I see so you are saying that in 2019 to have a credit card you can't pay off is OK? I believe that if you have one the ability to pay off a credit card this year is as relevant as it was last Century and quite clearly judging by Australia's personal debt levels is an adage that still needs to be repeated.
    ardnher
    16th Aug 2019
    5:45pm
    use credit cards for evrything except my housekeeping and direct debits for all utility bills...and pay off in full every month..hence no interest charges to pay.
    Westie
    13th Aug 2019
    11:45am
    I reiterate Jackie - few people understand the Flybuys system and how it can give you the advantage of converting points into Flybuys dollars which can be spent at places such as KMart, Target, etc etc. I'm definitely better off using my credit card to pay for everything I purchase, and pay the full amount on the due by date using BPay. There is no surcharge for using BPay to pay my Coles Financial Services account.I also love the convenience of not having to carry cash. But - it's your choice of course.
    Westie
    13th Aug 2019
    11:52am
    Valalan - me too! There is an element of distrust with Coles Mastercard as it's not advertised extensively and people just don't understand how it works I also use ING, as it's purely an online account BUT there are absolutely no fees for ATM withdrawals, so I pay nothing in bank fees or interest charges on my credit card. Laughing all the way to the bank!!
    Viking
    13th Aug 2019
    11:58am
    The article is based on a generalisation that credit cards cost. Ours costs us $100 annually but we get back $400-500 in debit cards from points that can be spent on essentials. Additionally we get free travel insurance. The bank (Westpac) has been fantastic in withholding payment when there has been any dispute something not available with most other methods. There are no additional charges as we have automatic monthly payment set up. I once saved $10,000 on a tractor purchase two days before the end of financial year. The dealer who new I was in the market was overstocked. Payment needed to be made within two days. I put it on the card which gave me a month to organise the money.
    I
    casey
    13th Aug 2019
    12:39pm
    I was brought up with the generation of. If you don't have it don't spend it. I still pay my utilities etc by cheque at either the Post Office or by mail. I do get annoyed with some things. One example we went on holiday, everything was paid for before we left. When I checked in at the hotel they asked for a credit card. I told them it was all paid. They said we still need a credit card in case of damage or theft. HUH at my age. Anyhow I said I don't have one. With which they said I would have to pay a cash deposit, which I would get back when I leave. Same problem with car rentals. Sorry but I still believe in cash and cheque.
    gibbo111
    13th Aug 2019
    12:49pm
    Using cheques is very last years and costly. Only ever had a debit card and use cash mostly. Noticed the other day got charged a card fee when I used it at Aldi
    casey
    13th Aug 2019
    12:54pm
    Gibbo, how are cheques costly? They cost me nothing I don't pay bank fees and they are a safe way to pay. My cheques aare all crossed and stamped Not Negotiable. Best way to pay and I have a hard copy record .
    KSS
    13th Aug 2019
    12:57pm
    Yes I always pay as much (if not all) holiday costs in advance too.
    Check your credit card statement because the hotel or car hire will often charge you $1 just to make sure the card is working! The other little trick they do is place a bar on some of your credit say $500 meaning you cannot spend it until they release it and that can be several days after you have left possibly leaving you short of funds until they do!
    Cowboy Jim
    13th Aug 2019
    1:06pm
    gibbo111 - Aldi charges your card if you paywave it; should you decide to override it onto Savings and use your pin, the charge is 0. Tried it both ways, pay wave is easier but costs 0.5% of total bill. Something to do with going via Visa or Mastercard.
    Rosret
    13th Aug 2019
    8:54pm
    Hotels can hold up to $500 a day per room in reserve. That's really great if you have two rooms. It's a huge float they keep, "just in case".
    Buggsie
    13th Aug 2019
    3:05pm
    I pay almost all of my recurring accounts by direct debit and have done so for many years without any difficulties. The few others I pay by bank transfer. Both methods are free of charges. I only use a credit card when unavoidable and never for regular payments. I have never paid interest on my credit card balance as it is automatically paid off each month. I try to avoid paywave as much as possible and use my pin as then I am in control, not the vendor or bank. Banks hate me and people like me because we don't fall for their financial scams and make money for them through the unrestricted use of credit.
    ardnher
    16th Aug 2019
    5:46pm
    makes no difference if you use paywave or a pin...I find paywave more convenient.
    jaycee1
    14th Aug 2019
    9:59am
    KSS, Bpay does not incur extra fees unless you are paying Optus, who slug you the same amount as they do if paying via a credit card. Their excuse 'you are not paying via direct debit' - well, yes you are! The only difference is YOU are doing it from your end rather than them having access to your account from their end.
    Viking
    14th Aug 2019
    11:22am
    Thats the benefit of using a debit or credit card for direct debit payments, they don't have access to your bank account and you don't have to set up the payment each time a bill is due. You can also use a credit or debit card as a means of paying large bills in smaller regular amounts by depositing into the card account small sums as available.
    If cards are used smartly and with discipline they can make life and money management a lot easier. With the right credit card and putting virtually everything on it, the value of the points and shear convenience makes it financially worthwhile.
    ardnher
    16th Aug 2019
    5:47pm
    at last there are steps afoot to give kids financial advice..most do not have a clue about how to manage money
    SKRAPI
    15th Aug 2019
    1:46pm
    DON'T LIKE PAYING DIRECTLY FROM BANK PREFER 2 SEE PAPER ACCOUNT , WE SHOULDN'T B CHARGED 4 A PAPER ACCOUNT . DIGITAL IS 2 DICEY 4 MINE ...
    ardnher
    16th Aug 2019
    5:39pm
    buying what you "want" intead of what you "need" is a problem for many these day