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; |
Saving Money with Credit Cards and Cheque Accounts
Sadly, there are many, many people who pay fees for ordinary banking services, like a cheque account, credit card, or ATM usage. Fortunately, all it takes is a little alteration to long-standing habits to save those fees, which add up over a year to a lot of money. And as we all know, every little bit helps in these current financial markets.
A free cheque account is easy to obtain these days. If you have any money to deposit, you can get one simply by asking. The exact mechanics varies between banks, so you'll need to ask at your local branch, or check the offers online.
For example, some banks will only provide free cheques if you apply at the same time for a savings account. The minimum deposit required is usually very low, often less than $100 to open the combined accounts. Others will agree if you allow them to move money from your cheque to savings once per month.
Some require that you write no more than X cheques per month - the exact number varies but it is generally between 5 and 10. That barrier is also easy to overcome simply by doing more of your payments online, since paying bills online reduces the number of cheques you have to write every month.
Credit card fees are also largely a thing of the past for those who exercise a little willpower, self-control and do some homework.
The biggest savings, of course, can be gained by reduced interest charges. You can use your credit card for any purchase you want without paying interest so long as you pay the card off in full by the due date. This also helps remind you to live within your means, a valuable goal in these uncertain times.
It’s also easy to ensure that you pay no annual fee. With banks still competing for your credit card business, anyone with decent credit can get a no-fee credit card. There are a few exceptions, like an American Express card, but that card offers few advantages to most people to offset the large annual fee payable.
ATM fees used to eat up your money with fees however you can avoid these too, with the right selection. If you're planning a trip and don't want to carry cash, ensure you get a few traveler's cheques. Many banks offer travelers cheques free to customers and that's one more thing to ask about when you're looking for that free cheque account.
The key is to spend the time to shop around the banks and read the fine print. It’s probably not the most exciting thing in the world when it comes to banking services, but it can save you a lot of money each year.
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