Managing your credit card
Credit cards have become part of everyday life for lots of us - but they can too often put your family's budget in peril.
Of course, the best money-saving tip is NOT to have a credit card at all. But for those of us with one card or more in our wallet, here are some ideas to help ensure the debt doesn't get out of hand.
Select a card that matches your spending habits
- Analyse your spending patterns to find out if you're using a credit card that's appropriate for your circumstances.
- Experts recommend choosing a card with "interest free days" if you pay the balance in full every month, although it'll generally have a higher interest rate.
- If you don't pay all the money owed by the due-date, choose a card that has a lower rate but no interest free period.
Rewards - are they really worth it?
- Credit cards that offer reward points generally have a higher annual fee and may have a higher interest rate too.
- The more money you spend, the more points you'll accrue.
- But if you don't pay off the credit card in full each month, the interest charges can make earning points expensive!
- To save money, use a no-frills card with no annual fee and a lower interest rate instead.
Pay more than what you owe
- If you only repay the minimum amount on the credit card your debt will balloon and you may never be rid of it.
- Pay as much as possible each month. You'll reduce the hefty interest rate charges and save money. Start with the card that has the highest interest rate.
- If you can pay the card off in full each month you'll avoid the interest rate charges altogether.
Consolidate your debt
- Switching to a new card with a low introductory interest rate may save you money. If your credit cards are maxed to the limit, it may be worth shifting all your debts onto one low interest card. But beware that the interest rate will usually revert to a higher rate within six to 12 months.
- Don't be tempted to increase your credit limit.
- Cut the rest of your cards up!
Find more family finance related articles and information
- Best finance advice
- How to deal with debt
- Insurance - protecting you and your family
- Loans, families and relationship breakdowns
- Managing a joint bank account
- Managing your loans and mortgage
- Switching bank accounts
- Using a financial counsellor
- What to do if you lose your job
This article was created for Kidspot, New Zealand's leading parenting website.
Sources include Fido , Canstar and Info Choice.