1 in 6 Australians still fall into debt due to having the wrong card

Published on November 25th, 2020
  Written by 
Bill Tsouvalas
Bill Tsouvalas is the managing director and a key company spokesperson at Savvy. As a personal finance expert, he often shares his insights on a range of topics, being featured on leading news outlets including News Corp publications such as the Daily Telegraph and Herald Sun, Fairfax Media publications such as the Australian Financial Review, the Seven Network and more. Bill has over 15 years of experience working in the finance industry and founded Savvy in 2010 with a vision to provide affordable and accessible finance options to all Australians. He has built Savvy from a small asset finance brokerage into a financial comparison website which now attracts close to 2 million Aussies per year and was included in the BRW’s Fast 100 in 2015 as one of the fastest-growing companies in the country. He’s passionate about helping Australians make financially savvy decisions and reviews content across the brand to ensure its accuracy. You can follow Bill on LinkedIn.
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Credit cards were designed to make your life one step easier by giving you the financial boost you need to purchase personal items. It can also help you manage your expenses if used correctly. However, more Australians are finding themselves in a debt spiral due to the type of credit card they own. Finding a card that matches your current financial status and spending needs is essential. Here are five ways to know if it matches your needs.

Does it work around the way you spend?

A credit card needs to work with your monthly budget and not the other way around. If you use your card frequently to help you purchase necessities, finding a card that comes with a low rate can help you meet your cards repayments instead of having the amount being carried over into next month’s payments. ASIC also found that low rate cards are able to help Aussies save $621 million in a year. You could also consider cutting down your expenses to minimise the amount you take out with your credit card.

Minimise the number of cards you have

Sometimes having more than one card is not a solution to dealing with your debt effectively if you have not made some lifestyle adjustments. Recent research from Mozo found that 1 in 10 Australians carry long-term lingering debt which for some has lasted up to 10 years. Re-evaluating your expenses can help you see how you spend your money and help you cut down on costs.

Are you able to meet more than the minimum payments?

Credit card issuers usually require that you be able to meet the payment on your card. Checking to see if you can make more than the minimum repayment will be beneficial to you. It can also provide a safety net for those tough months where you are unable to make more than the minimum payment. This will help you know if the card is within your financial reach. If you pay off more than the minimum amount you will be able to manage your expenses and reduce your risk of falling into a debt spiral. The current amount that we owe as a nation on outstanding credit card debt is $45 billion.

Balance Transfer is not always the answer

Balance transfer cards are one of the best ways that have helped Australians effectively manage their debt, but if you do not fully understand its purpose it can land you in hot water. As much as the card can be used to reduce your debt, it is vital that you avoid using the card to foot your spending expenses. Keep in mind to cancel your old card before getting a balance transfer as this could increase your debt.

Avoid putting everyday expenses on your card

If you find yourself using your credit card to take care of everyday expenses, then it is time you re-evaluate how you spend your money. Tracking your monthly spending through a budget is one way that you can curtail using your card to take care of expenses such as your groceries. Checking your bank statements and slips can help you see which areas you need to cut down on to help you pay for your necessities. Also timing your expenses can help you cut down using your card frequently.

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