Main > Living > Money > Credit & store cards
You know you have too much credit card debt when . . .- Your debt is not decreasing and you cannot make any savings.
- You make minimum payments on your credit cards.
- You have more than two or three credit cards, and you're at or near your credit limit on at least one of them.
- You take out cash advances on your credit card to pay other bills.
- You've tried to purchase something with your credit card and it has been declined, or you've been denied credit, or your checks have bounced.
- You get calls from debt collectors.
- You lie to your spouse or other family member about your spending or hide credit card statements from family members.
If you realize that you are in over your head, the sooner you act, the easier it will be to get out from under the burden of debt. There's no easy fix, but it is possible to turn your finances around if you work at it. You can make a start by making a priority of paying off the loans that have the highest interest rates. Another method is to pay-off a small debt first, just to give you confidence.
thesource (378)
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Main > Living > Money > Credit & store cards
Avoid credit cards: by using a cash or debit card rather than a credit card you won't be able to spend more money than you have. If you tend to get carried away when shopping you should seriously consider this option.
thesource (378)
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Main > Living > Money > Credit & store cards
Know that credit card companies are designed to earn their income via consumer debt repayments. They know very well, and deliberately profit from, the irrational optimism of consumers. That is, people usually believe their ability to repay a debt in the future will be better than their ability today.
kellyjones00 (593)
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Main > Living > Money > Credit & store cards > Balance transfers
Credit cards: If the high interest rates on your credit card are hurting you, you can often transfer your debt to a new credit card from another company and pay a highly reduced rate of interest for a period of time (eg, six months). This can give you an opportunity to get on top of your repayments.
thesource (378)
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Main > Living > Money > Credit & store cards
Card Management: If you have several cards, you are best off accruing your points on one only, with a backup card in case you max out your main card, or their system is down when you go to make a purchase. But that doesn't mean you should get rid of your other cards, though you should make it impossible to use them. Choose two that are most favourable and put the rest in a relative's house somewhere where they won't attract attention - like in a garage or something. Alternatively, freeze them in a small container in the freezer.
myxlfidian (150)
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Main > Living > Money > Credit & store cards > Debt-collection
Debt-collectors 'buy' debts from lenders such as credit-card companies. They then try to find the borrowers, and may contact people with the same or similar name, even taking them to court for unpaid debts. So although you might receive notice of incurring a debt, it may not be you that ever owed the money in the first place.
kellyjones00 (593)
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Main > Living > Money > Credit & store cards > Interest rates
It's okay to use credit cards, if the bill is cleared each month. This leaves your cash in the bank to earn interest. But it is a false economy if you're paying more interest on purchases made by credit.
kellyjones00 (593)
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Main > Living > Money > Credit & store cards > No-no's
Steer clear of cash advances from credit cards, which usually incur a hefty fee.
kellyjones00 (593)
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Main > Living > Money > Credit & store cards > No-no's
Never pay a credit-card cheque into your account, as you'll be charged heaps of interest. They are classed as 'cash' by card companies that send them to clients, so have a higher interest rate.
kellyjones00 (593)
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Main > Living > Money > Credit & store cards > Store cards
Store cards do not charge similar rates to credit cards. The interest rate is much higher, unless you clear your card each month.
kellyjones00 (593)
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Main > Living > Money > Credit & store cards
If spending more than $200, it's best to use a credit card as you'll get extra protection under consumer law if the company you buy from goes bust or the goods are faulty.
kellyjones00 (593)
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Main > Living > Money > Credit & store cards > Interest rates
Interest rate reduction with lock-in: One of the most underutilised methods of saving on credit card debt interest is to try to negotiate a lifetime interest rate. Simply shift all the debt out to another card with a balance transfer, and call the credit card company to say you are about to close the card unless they offer a reduced rate. Go for about a quarter to a third of the regular interest rate. It will remain at that low rate for eight years to life, making the accrued interest bearable.
I recently did this with two balance transfers. If I had not done this, I would have been struggling to pay the interest charges.
myxlfidian (150)
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Main > Living > Money > Credit & store cards > Interest rates
Rentalrewards.com.au. In Australia, this system enables you to pay your (housing) rent on your credit card for a 1.76% fee per charge. Sounds like a good way to lose money but it's the other way around.
With 55 days interest free, you earn up to two months interest on the rent, so long as you have the money in an interest bearing account paid monthly and calculated daily. Also, if you use a credit card with airline frequent flyer points, you get tens of thousands of points per year. Altogether, you make a gain of substantial proportions.
myxlfidian (150)
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Main > Living > Money > Credit & store cards > 'Rewards'
Buy everything on credit card if you get frequent flyer points for each dollar, and pay your statement in full each month through making scheduled online payments as soon as the bill arrives. The fastest way to build points is to have two people using different cards but linked to the same account (an additional cardholder). All purchases go to the one account (primary cardholder). Do not purchase anything on credit if an additional fee applies (i.e. some supermarkets and budget vendors charge extra for credit purchases).
myxlfidian (150)
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Main > Living > Money > Credit & store cards > Interest rates
Bust annual credit card fees: Empty all debt off the card through a balance transfer. Then threaten to close the card unless the annual fee is waived this year. Or, if the card is upgradeable to another card, ask a curly question about a feature of the more expensive, deluxe card (i.e. does it cover domestic car rental excess or just international?) and if they say yes and you know that is wrong, upgrade the card and get details of who told you the wrong information. Call back a week or so later and say you were given the wrong information. They will refund the WHOLE FEE as a gesture of goodwill, even though the upgraded card fee might only be an extra $30 over the budget version. Downgrade the card later if you don't want its extra features.
Keep a list of when annual fees are due so you can close the card before they charge it if they refuse to waive it. In general, don't keep cards with annual fees unless they offer exceptional benefits like frequent flyer points for each dollar spent, annual 0% for six months balance transfers on several thousand dollars, low balance transfer rates (under %6) or free travel insurance.
myxlfidian (150)
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Main > Living > Money > Credit & store cards > 'Rewards'
Credit Cards vs Cash:
When you use a credit card, you don't feel the pain of parting with anything, like you do with cash. Studies have shown that people spend 12-18% more when using credit cards than cash. You don't get the ouch-y moment you get when you spend cash.
I think you should try a card that has airline reward points for every purchase with a major airline. If after 12-18 months you do not find you achieved any real reward with the points (i.e. you just got a toaster or something), you should revert to cash for face-to-face purchases, debit cards for the internet, and one credit card for credit card only internet purchases and travel.
If on the other hand you get 80% off a flight to Bali or something, you should stay with the credit card system, but not use it to spend more. I don't actually understand why anyone would spend more with a card because if you think of it as cash (as I do), you would want to minimise what goes on it at all times.
myxlfidian (150)
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Main > Living > Money > Credit & store cards > Balance transfers
Paying off the full balance: You can do two things:
1) Throw every dollar you can at it to get it down and then "live off the credit" as you will have no cash
2) Balance transfer whatever the shortfall is to another card and pay the rest. Go for cards that offer sub 6% balance transfer rates, usually just for 5 or 6 months.
Balance Transfers: When you conduct a large balance transfer to another card (with a lower interest rate), for the sole purpose of taking advantage of the lower interest rate, it is advisable to divest the new card of all direct debits and cut up the card (if you need to) to prevent you from using it. This is because any purchase you make on the new card will accrue interest at the normal high rate until such time as the transferred balance is completely paid-off.
If you intend to make a large balance transfer, make sure it happens after an annual fee is applied if you can. This is because annual Fees are actually regarded as purchases (crazy, I know) and so you will pay interest on them until the huge balance transfer is paid. Some cards deliberately do this so they can charge you a purchase interest rate for something on a card they know you want as a balance transfer card.
myxlfidian (150)
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Main > Living > Money > Credit & store cards > Paying debts
Rules to save you extra costs: Try to pay your card 72 hours before it is due as internet payments may clear after the due date. The bank's computer will automatically charge interest in that case.
Be aware of the first day of your statement cycle (usually listed on the statement). Purchases made on that day get the full 55 or 62 days interest free before payment is due. Also, hold back on purchases during the last 10 days of your monthly payment cycle.
If you cancel a gym membership or something and they still charge you, keep a copy of the letter you sent (and send it at least two weeks before the last payment) and call the credit card company which processed the disputed transaction. With a copy of your letter, they will take up your case on your behalf, as a disputed transaction case. I have received refunds through this method.
Be wary of phone and utility companies that charge an extra percentage for direct debits off credit cards. Use a bank account direct debit instead.
myxlfidian (150)
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Main > Living > Money > Credit & store cards > 'Rewards'
Bonuses: Some credit cards offer an extra 1 year warranty on whitegoods and appliances purchased on the card.
myxlfidian (150)
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Main > Living > Money > Credit & store cards > Interest rates
6% interest rate with no expiry: Asked your credit card company for a rate reduction and got rejected? You needn't worry. Find two cards that offer 5.99% on balance transfers for 5 or 6 months. It's not an uncommon feature. Transfer the balance to one card, and make a note of its expiry date. A week before the special rate is due to expire, transfer it to the other <6% card. Do this ad infinitum and you will always be under 6% interest. It's a bit more work than a lifetime or long-term interest rate reduction but they are not always freely available. Sometimes they include punitive conditions like having to close down the card the transfer is coming from, for example.
myxlfidian (150)
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Main > Living > Money > Credit & store cards > Paying debts
Pre-scheduling payments: The longer you have a payment scheduled online, the more real it is and the more you can deal with and accommodate it. I recommend you set up online access for all your credit cards. Nine times out of ten the electronic statement for the previous month is released on the first day of the new cycle, and this will tell you due date, total amount and everything else the paper one will, only about 2-3 weeks earlier. Schedule your payment based on that document online and you will not get any nasty surprises when the bills arrive in the mail.
myxlfidian (150)
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Main > Living > Money > Credit & store cards > Interest rates
Interest free days on your credit card: If you have, say up to 55 interest free days on your credit card purchases, it doesn't mean you have 55 interest free days from the day you make your purchase. It means that interest begins to accrue 55 days from the start of the statement period in which you made the purchase. For example, if you make the purchase 30 days from the start of the statement period, then you will only have 25 interest free days.
thesource (378)
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Main > Living > Money > Credit & store cards
Getting a home loan: Something you might not realise is that credit cards are treated as liabilities, even if they have a zero balance. The reason being, at any given time you could max out the card. So if you have a $10,000 credit limit, your lender is likely to treat that as a $10,000 debt when assessing your application.
If you don’t use your credit card much, or pay off the balance in full each month, it would be worth getting as low a limit as possible on it if you’re looking to get a home loan approved.
myxlfidian (150)
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