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Wednesday, March 14, 2012

Creative Credit Card Capers

Aah, the credit card.  Is it the bane of your existence or an indispensable financial tool?  Are you living at the end of your credit limit, paying off the minimum amount each month then spending it again before the next paycheque?  Or are you using it to keep track of your spending whilst keeping your cash in the bank earning as much interest as it can before paying off the entire balance of your card when the bill comes? If you are the latter, I don’t need to tell you anything.  If you are the former, you probably don’t want to hear anything but for those of us in the middle, here’s a few tips to get those debts reduced without making drastic changes to your lifestyle. 

Rounding Up
If your finances are so tight that you only pay the minimum of your credit balance when it’s due (and lets face it these are tough times) a good trick to get that balance down is to pay a fraction more than what the bank is asking.  Round up to the nearest $10 and pay that instead.  You’ll find that you won’t miss those few dollars and you’ll be on the road to paying down your debt sooner and better still, paying less interest to the bank.

Transfer your balance
If you have a heap of money owing on your card and are having trouble paying it down because of huge interest bills, consider transferring your balance to another lender.  Periodically banks will offer very reasonable rates on balance transfers to get your business.  At the moment there are banks offering less than 1%.  If you have $10000 on a card which is costing 12%, that’s $1200 you have to pay the bank in one year.  Transfer to a bank offering these deals and you’ll only be charged $100.  Use the other $1100 to pay down the card and look for another balance transfer deal next year. Of course, you’ll have to be careful not to run the balance up again on your current card or you’ll be in worse trouble.

Work at the beginning of your credit and not the end
You may be at the limit of your credit card and therefore don’t use it anymore except to pay the CC bill when it comes in.  Instead of looking at it as just another bill, why not use your card as a tool for your expenses.  When you get paid, decide how much you want to save and leave this in your savings account.  Transfer the rest onto your credit card, then use this instead of your EFTPOS card or cash to pay your bills.  This has the benefit of you paying less interest on your card, and if you manage to pay it off each month, you will benefit from the interest free period (if you have that feature), which will mean that you pay no interest at all.  Obviously you’ll need to make sure that you are not charging more to your card than you are putting into it. Remember to include the interest in your budget until this gets paid out.

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