Australians love using their credit cards, especially over the festive season. Falling into credit card mistakes that lead to debt can be avoided so that you don’t accumulate a hefty bill that will turn your January into Januworry. However, it appears that year upon year we still fall into the credit card traps. We have six credit card mistakes that you should keep an eye out for to help you steer clear from the red.
1. Crunching the numbers
You might think that you will never fall into the debt trap when it comes to your credit card, but the numbers don’t lie. Australians owe just over $56 billion on credit which is the equivalent of $3342 per person. Furthermore, the Reserve Bank of Australia (RBA) released figures showing that Australians owe $51.4 billion with more than $31.4 billion in interest. Such statistics are there to help us know that it’s possible to fall into credit card mistakes especially over the festive season.
2. Not tracking your spending
Living in a world where swiping for purchases is a norm can rake up a good amount of expenses on your credit card, resulting in a hefty bill. It can also mess up with a set budget you might have had if you don’t keep track of how much you are spending. You can always ask your credit lender to put a limit to help you curb your spending habits.
3. Avoid spending just for points
Credit card lenders are looking for ways to attract new customers with reward programmes. This can work in your favour especially towards Christmas. However, be careful not to put everything on your credit card. More so when it comes to purchasing items that don’t make it legible for you to retrieve your points. This can make paying your balance off in full tricky and the interest rates will erode any possible points you had already obtained.
4. Keep a mental note of repayments while you are away on holiday
Just because you have taken a break, does not mean your lender has. Set a reminder when it comes to repayments that won’t damage your financial reputation. A late repayment can drag your credit score down, reducing your chances of applying for a credit card or a loan later. This issue can be resolved if you have automatic payments set up so you can enjoy more rest time, than playing keeping up with your repayments.
5. Pay minimum now, will stack up interest later
Being able to stretch your finances can be a bit tricky when you have outstanding fees on loans and credit cards. By paying the minimum fee can help you avoid paying late fees. However, if it’s possible try paying off the entire bill on your credit card before the interest carries over. This will help you to obtain your interest free days, making repayments digestible for your finances.
6. Instant gratification through an ATM
Unexpected expenses tend to pop up, and having the available funds immediately make our hands itch to use our credit cards. This does not only through your budget out the window, but it can also make things expensive. If you plan on using an ATM for a cash advance as a quick fix, it can cripple your finances with interest rates that are usually higher than your regular purchase rate. Using your debit card can erase the element of fees or interest, because you are using your own money. A bad credit report can be easily avoided by staying within your means, and avoiding impromptu purchases that you didn’t include in your budget.