Credit Card
Credit cards are a way of life in the 21st Century but if you want to effectively manage your money, you need to use them wisely.
Credit cards offer us short term finance that is relatively easy to get through banks and lending institutions. Credit cards have reduced the amount of cash that we carry with us on a daily basis and are often linked to reward schemes in an effort to encourage us to spend more and remain loyal to the institution that has provided us with the card.
Credit cards do have their benefits and can be used as a source of emergency funds. They can also be used overseas in most countries and saves you having to exchange too much foreign currency.
There are many things to watch out for when selecting a credit card. Taking into consideration the interest fees payable and number of interest-free days is very important. There can be other fees as well including but not limited to annual account fees, fees to use rewards programs, fees for late payments, payment dishonour fees, and fees for exceeding your credit limit.
Look carefully at the reward programs to see if they are really of benefit to you and watch out for honeymoon rates. While they will often assist you early on, check what happens to the rate and interest-free days when the honeymoon is over!
Most institutions will offer a second card for a second person. Be careful with secondary cards and ensure that you totally trust the person who has hold of it, because if they disappear after spending up big, you will get left with the outstanding fees and payment.
Aim to pay off the balance every month so that you avoid paying any interest. With the interest so often at a high percentage, you need to minimise the amount you have to pay, or keep it at zero.
Many institutions will also offer cash advances, but be careful that you do not get charged interest from day one and many companies have this policy.
Credit Card Tips
Listed below are a number of tips that you should take into consideration if and when you organise a credit card for your personal use.
$ Pay your credit card account in full, by the due date each month, taking advantage of any interest-free period;
$ Use your credit card to purchase products or services only. Do not use credit cards for cash advances as often interest will be payable from day one;
$ Avoid buying anything on credit that you wouldn’t buy with cash;
$ Do not take up the offer to increase your credit limit, unless you have the financial income to support it;
$ Avoid using your credit card as it nears your limit, so that you do have some back-up if you desperately need it;
$ Don’t be tricked into just paying the minimum monthly balance each month, as interest is accumulating on any remaining balance payable;
$ If you have a secondary card, ensure you fully trust the person who controls that card, as you will be liable for the charges on the account; |
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