ARTICLES > How to Use Your Credit Card Wisely.
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How to Use Your Credit Card Wisely.
So, in this article we thought we’d give you four hints on the wise use of your credit cards. I know it’s all pretty obvious, but this is where the crunch comes for many Kiwis – we are racking up huge debt which we then struggle to repay. 1. Keep a track of how much you spend. This is the basic issue for most people. We forget that a couple of dollars spent in the local cafe, ten dollars at the supermarket, thirty dollars in the CD shop, forty-five dollars for that bargain in the clothes shop – it all adds up. Often to more than we expected! We have probably all experienced that moment of horror when we open our credit card bill at the end of the month only to discover there is a lot more we’d expected. The answer is simple – set a spending limit and stick to it. 2. Be aware of the interest rate and fees you’re being charged. At present most of us will be paying a little over 20% interest on the debt we put on our credit card. Knowing that should make us think twice before buying anything. For instance, when you are in a shop thinking of purchasing an article that may be on special, do a quick calculation to determine precisely how much that item is actually going to cost you. You may be put off buying it when you realise what you are really paying. Often times the interest rate of your card will well and truly outweigh the benefit of the purchase’s special price. Remember also that many cards have fees associated with them. Those fees are often added onto your account and so you’re paying interest on those also. 3. Always pay you card off before the end of the month. If you can’t do that, pay off more than the minimum repayment. You know this already. Credit cards are great and so handy. And we all know we the danger of not paying it off before the interest payments click in. And we all have the greatest intention of paying it off within that time – but most of us don’t! Some unexpected expense comes up. Or the amount owing is more than we can afford. There will often be a reason for missing that vital payment. Many people figure that, once they’ve incurred the debt, they may as well just repay it using the minimum monthly repayment figure as calculated by the bank. That will compound the problem. Check this out: If you owe $2000 on your credit card at 20.95% interest (the current rate for many credit cards), and you pay off the minimum of $100 a month,The debt is repaid in 1 year with only $215.55 going out in interest. So you see, you go hard at repaying it for a year and you save $260 in interest and over a year of living with the stress of that debt. Remember also, this example is based on only a $2000 debt, many New Zealanders carry far greater amounts of debt than that. 4. If credit card spending is a constant problem for you – cut the card up!  Simple as that! If you find yourself constantly struggling to pay off your credit card bill, then you MUST stop spending on your card. Continued spending, coupled with the interest and fees you’re being charged, will lead to a crisis for you and your family. Stop it now! ► A novel way to freeze the spending on your card:I heard of one person who needed to freeze the spending on their card and they did – literally. They froze it in an ice cream container of water. That meant if they wanted to use it they would have to defrost it first.They quickly discovered that often they just couldn’t be bothered, or else, by time thawed, they’d waited they’d had time to think about the purchase and had decided they probably didn’t need that item after all. And, no they couldn’t defrost the card in the microwave – the microwaves would have erased all the information stored on it.
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