For many of us, credit cards are a part of daily life – we use them to gain rewards, to purchase things online and sometimes we use them because we can’t afford what we’re buying. Many people fear credit cards because they’re afraid of winding up with bad credit if they miss repayments, or finding themselves overspending.
I am now 26 and have had a credit card since I was 18. I’ve never had credit card debt and enjoyed the benefits of using a credit card for a number of years. Here are my tips for using a credit card to your advantage:
1) Find a Good Credit Card
The truth is, not all credit cards are created equal. It can be a bit overwhelming choosing a credit card or deciding to change credit cards, but it is worth spending a bit of time researching. Things I would look out for: interest rate, annual fees, any monthly charges, international fees, interest-free period and of course, what rewards are available. You can browse this site to decide what credit card might suit you and your family best.
The truth is, if your credit is really bad you might actually find it hard to find a good credit card. If you are initially refused a credit card because of your bad credit, you should shop around and see whether other banks will offer you a card.
One thing to bear in mind; it’s probably unlikely that you will have one credit card that will suit you for your entire life. As your family, priorities and income changes, you might want to find something that suits you and your goals better.
2) Pay Attention to Interest
Interest can be a real killer, especially if you miss the interest-free payment window and wind up paying a whole lot of interest. If you don’t log onto your online banking very often, it can be a good idea to set up a reminder on your phone or email account to remind you to pay your credit card spending back before you will incur interest. Also, look at the interest rates – they can vary a lot from card to card.
If you are starting off your journey with a bad credit rating, a lot of debt on a credit card and an overall dim situation, it might be worth checking into what options are available if you transfer your balance to a new card. Often they’ll offer an interest-free period as an incentive for you to change, and you can use this to minimise your debt as quickly as possible.
3) Reap the Rewards
Now, rewards are a sneaky thing. You might find yourself wanting to spend more to incur more rewards. I want to point out this is generally a terrible mistake. But for the money you’re already spending, why not get rewards? I am really late to the rewards game, only getting my first credit card that allows me to collect airpoints this year. If I think about all the essential purchases I’ve made over the last 8 years… well that’s a lot of return flights around the world, for free. Bummer!
I think if you’re going to get a rewards credit card, it’s important you are realistic about your purchases and don’t buy things for the sake of collecting points. However, if you’re already spending the money and you can collect points, then why not!