Credit cards can be a useful tool to manage your financial matters, but if you are undisciplined, they can hurt your credit rating and your plans to get finance in the future. Yet, there are some tips you can follow, not only to avoid getting in debt, but also to really benefit from your credit card spending.
The credit card debit in Australia stands at $32 billion with third of Australians are spending more than they earn each month. Fortunately, there are some habits you can follow to help you manage your debt better.
To get the most from your card, paying early and often, thereby you will avoid payment penalties and interest charges. In addition, some cards offer a window period, whereby you can avoid interest changes for a certain period. For those that are absentminded, rather set up a debit order, which will automatically transfer funds to cover your credit card debt.
Smart credit card users know how to take advantage of the system, by getting rewards to cover interest charges and ensuring their balance is well managed.
With most transactions between $50 and $500, your balance can slowly move into the red. So be careful and stick to your budget. If you practice some restraint, it will soon become second nature.
Open your statement once it arrives and read it to see if all the charges are legit. Any errors or odd charges should be reported immediately. More so, keep a track on your spending. To do that, you can use money management tools that are available online or on some apps.
Another trick is to be aware of your personal limit and to respect that. For instance, if your limit is $30000, then that is frivolous, and it does not mean you need to spend that amount, particularly if you know your personal limit is much less. In fact, to keep your credit score healthy, you should spend less than 30% of the limit on the credit card. Which means the lower your balance, the higher your score. To help you know what your credit score is, you can get a copy of your credit report from a credit reporting body, for free once a year.
Prep for unknown emergencies like a repair on your car, by having enough surplus funds available on your credit card to cover these type of expenses. Also, if you are using the grace period to cover the emergency, to avid interest charges make sure you will have enough money to pay it back before the period ends.
Remember that once you get a credit card it’s not for life. Many things can change and there are always cards offering better benefits. For instance, to keep yourself updated about new deals you can use a comparison website like ours to give you a breakdown of the different credit card options available.