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How To Make Your Credit Cards Work for You, Not Against You

Why did you choose to have a credit card instead of a debit card? It’s because you decided that the benefits of a credit card, such as rewards systems and fiscal freedom, outweigh the costs of fees and interest charges. But the truth is we can’t all be profiting from our credit cards or else it would not be worthwhile for banks to keep handing out generous rewards and lending us money.

To be one of the Australians benefitting from their credit card more than it’s costing them, you need to make your credit cards work for you, not against you. Here are some helpful tips for using your credit card wisely so you get the most out of its advantages [link to ‘Is it good to have multiple credit cards’ blog].

Pay in full and pay on time

The first and most important credit card habit to adopt is paying your bill in full every month. It can help to pay it off in small bits throughout the month instead of in one go at the end.

You can also ask your bank to decrease your credit limit if you feel like the amount you’re spending is becoming unmanageable. Of course, you won’t be able to increase it again without submitting an application that requires approval.

If you’d prefer to avoid this hassle, you can set a self-imposed credit limit instead. Simply take your credit card out of your wallet after you’ve reached your hypothetical credit limit of, say, $500 and keep it in a drawer until all the debt has been paid.

Finally, don’t forget that paying on time is just as important as paying in full. Late payments typically incur a fee and will hurt your credit score over time.

Keep track of your payments

One of the many benefits of credit cards is that you can easily access a long history of all the payments you’ve made.

Keeping track of how much you spend each month is a useful way of ensuring you won’t overspend. You may not like to set a strict budget for yourself but so long as you remain aware of how much you’re spending, you’re likely to naturally curb your spending yourself when necessary.

After an expensive weekend trip with friends, it’s far easier to not think about how much you spent in total. But don’t bury your head in the sand until you find you can’t make credit card repayments. Instead, use an excel spreadsheet or an app, such as Spendee, to stay on top of your expenses. 

Match your rewards to your lifestyle

Credit cards with generous rewards systems and incentives are incredibly enticing. But these credit cards often come with much higher annual fees. In order to ensure the rewards you reap outweigh the fees you pay, look for a credit card with a rewards system that fits your lifestyle.

For example, don’t choose a credit card that accumulates rewards when you spend money on flights and hotels if you don’t travel frequently. There is a wide array of rewards systems centred around different spending habits. Make sure you find one that will work in your favour.

If you need help finding a credit card with a credit limit and rewards systems that feels tailored to you, turn to the experts at Compare & Connect. We will compare deals across the web to find the perfect one, at no extra cost to you.

Sally Writes 23 Dec 2020