Plastic fantastic – credit cards, to some they are a path to financial ruin buried under unsurmountable interest accumulation. To others, they are a gravy train of juicy free rewards.
In order to get your ticket on the gravy train you need to follow a few golden rules:
- Never withdraw cash from your credit card – the interest is always higher than card purchases and there is no interest-free period to benefit from.
- Treat it like a debit card if you can. By this, I mean always pay it off in full, and only spend what you would’ve anyway. Don’t make purchases that you couldn’t afford to do in cash.
- Watch the fees, if you’re not spending enough this is where you will get nailed. Each card will charge different fees so make sure you use it enough that the rewards outweigh the fees. For example, my ANZ Airpoints Card charges $65pa, meaning I need to spend $7,800 annually on the card to break even with Airpoints Dollars.
- Your credit card shouldn’t be your fall back in emergencies, that’s what an emergency fund is for. If you don’t have one its time to set one up.
- Keep your limit low – banks will always try to offer you higher limits, it’s in their interest to do so. Besides the extra temptation, this will reflect badly on you when it comes to getting other forms of loans as banks treat your limit as your liability, not your outstanding balance.
If you follow these rules then your plastic can be fantastic. However, you need to stick to them, because once interest starts occurring it can spiral quickly.
If you’re currently in credit card debt shop around, you don’t owe any loyalty to your current provider. BNZ offers 12 months interest-free on transferred balances.