Below are some tips to help you use your card to your maximum advantage.

1. Interest free period

A card that offers interest free charges for longer, or one that has lower interest on purchases will suit a consumer who needs extra time in paying for his or her purchases every month. If you know that you can’t pay your balance on time, look for a card that offers a longer interest free duration.  Some banks offer no interest for up to 6 months or more, so this may be a good offer to take advantage of as long as you don’t overlook the date the interest rate charges commence.

2. Be aware of annual fees

If you are planning to use your credit card for basic needs such as making rare online transactions and as an emergency backup paying for an annual fee will not be worthwhile. However, if you are a frequent user of the credit card and are after the rewards programs or redeeming your points for purchases, then the annual fee may be worth paying for.

3. Stick to the minimum credit limit

It won’t always be a good idea to increase the credit limit of your card if this is offered by your bank.  By sticking to the minimum credit limit, you can be assured of not being lured by the temptation to overspend. Also, trying not to get too close to your credit limit is a good way of restraining yourself from unnecessary spending. Spend within your budget and only spend on what is necessary.

4. Avoid frequent card switching

Some people tend to switch from card to card with the aim of saving money with balance transfer rates. Though this may sound practical, if you fail to pay the required amount on time, or to switch card again before the interest rate goes up, it may end up damaging your credit.

Some banks offer a grace period of 6 months before a balance fee applies. Failing to pay up by the stipulated time will result in having to fork out unnecessary expenses. In addition, credit card companies charge a balance transfer fee so that they make some money from credit card switchers. Alternatively, you can call your bank to ask them to match the offer before switching to another bank that offers credit cards with a lower interest rate.

5. Track your credit card expenses

Keep your receipts in a safe place so you can keep track of your monthly expenses. By doing this, you can check yourself from making an impulsive purchase knowing how much you have already spent in a particular month. A debtor’s worse nightmare is spending beyond his or her budget or maxing out on the credit card, hence escalating his or her debt.

6. Pay in full

Banks require their credit card customers to pay at least the minimum charge each month.  Making only the bare minimum payments may cost you more money due to the interest mounting up. It is advisable to use your credit card to pay for items you can afford to pay in full in each to avoid the debt trap.

Credit cards can be an advantage if you can use them effectively. Look at the above tips to ensure that you are getting the most out of your credit card.

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For many of us, our credit cards are such a ubiquitous presence in our wallets that they can be the first form of payment that we reach for, whether we’re paying bills or making routine purchases. If you’re planning to use your credit card to pay your insurance premium, then consider the pros and cons of using credit to make this payment carefully before you turn to the plastic.

Pro: Using a Credit Card to Pay Insurance Premiums is Convenient

Paying bills using a credit card is often much easier than remembering to fill out a cheque for the premium, stick it in an envelope, and get it mailed out in time to post to your account prior to the due date. If your insurance premium is due monthly, then you also save the cost of an envelope and postage each month by paying with a card.

Con: Using a Credit Card to Pay Insurance Premium is Too Convenient

The convenience factor of paying insurance premiums by credit card can work against you. While it may be convenient to pay by credit card, it may be less convenient to remember to pay the charge off before you’re charged interest on the insurance premium payment. In this case, you’ve upped the cost of your insurance premium when you add in the additional interest charges.

Pro: Paying Insurance Premiums By Credit Card May Help You to Avoid Fees

Imagine you’ve been so busy that you’ve let paying your monthly or yearly insurance premium totally slip you’re mind. Now, it’s the morning of the day your insurance premium is due, and there’s simply no time to get the cheque to the insurer.

If your payment is late, you may be assessed a late charge, or your insurance may even be cancelled if you make a habit of missing premium payments. In this case, paying by credit card may make sense. You’ll avoid any fees associated with late premium payments, or the even bigger potential problem of a cancelled policy. Having your insurance policy cancelled due to non-payment of a premium can create credit and insurance headaches that will stay with you long after the payment date has passed.

If you are over 14 days late to make a payment, the insurance company may refuse to pay any claims until your account is paid up to date. If you leave it for 30 days, the insurer may cancel your policy. Your insurance company may sock you with an increased premium in order to reinstate your policy, or may decline to reinstate it at all. As though this were not bad enough, other insurers may be wary of insuring you if you have a prior cancellation for non-payment on your record.

Con: Increasing the Price of Your Insurance By Paying With a Credit Card

If you’re paying your insurance premiums by credit card because you otherwise could not afford the payment, you’re raising your insurance costs exponentially each month that you carry a balance on your credit card instead of paying it off in full. The average credit card interest rate is around 15%; if you charge your insurance premium to a credit card but don’t pay it off before your next credit card statement arrives, then you’re adding 15% to the cost of your insurance each month.

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Making Late Payments

When you sign a credit card agreement, it includes a promise to pay your credit card bill on time or face the consequences. The consequences, unfortunately, may be a nose-diving credit rating and all the trouble that comes along with that rock-bottom rating. If you’ve been lax in the past about making your credit card payments on time, now is the time to change that habit. Get your payment in the mail at least a week before it’s due, or pay online or by phone a couple days before the due date. If you have a hard time remembering, set an alarm on your phone or an email reminder.

Making Minimum Payments

Many credit card users assume that because the credit card company sets a minimum payment that paying just this minimum payment is wise. Nothing could be further from the truth. When you make only the minimum payment, you’re barely covering the interest on your debt, allowing the principal to continue to grow and your debt to balloon. Eventually, you hit the debt ceiling, otherwise known as your available credit limit. For more on that, read on:

Using All Available Credit

If your credit card issuer gives you a credit limit of $10,000, that means they want you to charge that much, right? Wrong. Just because a creditor agrees to extend you several thousand dollars in credit in no way means that you should use all that credit. When you do, you appear irresponsible, at least to creditors and to potential lenders, and the result may be a credit rating that sinks.

Aim to charge less than half of your available credit on any given credit card. If you’re to the limit on a card, start applying any extra cash you can find or make to that balance.

Juggling Credit Card Balances

One of the oldest debt repayment tricks in the credit card books is the honeymoon rate juggling act. You know the one — it’s when you open a low or zero-interest credit card with the intention of transferring a high-interest rate balance, then paying that balance down or off. While this can work, it may also backfire, shooting your credit rating down if it does.

If you’re continuously opening new credit card accounts, then neglecting to pay the debt off completely, you’re hurting your credit in two ways: one, by opening new accounts, which doesn’t help your credit rating, and two, by keeping balances that are close to the available credit limit.

You may improve your credit by using a credit card the right way. But if you’re not using your credit cards sensibly, you may be doing harm to your credit rating.

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From basic annual fees to currency exchange fees, these often hidden costs can add up and cost users hundreds if not thousands of dollars. Many credit card users aren’t even aware of some of the fees they pay, or that they may have to pay under certain circumstances, but most would agree that they’d rather not pay extra fees. The best way to keep from incurring these fees is to make sure you know what they are so you can avoid them. Here’s a look at some fees you might encounter, and how to keep from having to pay them.

Credit Card Annual Fees

This is one fee that few, if any, credit card users should ever have to pay – you can simply choose a card with no annual fee. However, you may choose to pay one if it offers genuine value for money. An annual fee is just what it sounds like: it is a fee charged each year just for having the credit card. Most annual fees are a set amount that is automatically charged to your card each year.

If you are looking for a new credit card, you may look for one that doesn’t have an annual fee, or you may look for one whose annual fee brings you a host of truly useful rewards. If you already have a credit card, find out whether you’re being charged an annual fee. If you are paying annual fees, but you’re not getting any added value in return, talk to your credit card company and ask about removing this charge along with its offered benefits.

Credit Card Late Fees

Imagine that you lost track of the date and were a couple of days late paying a credit card bill. That simple mistake may cost you $25 to $50 if the credit card company charges you a late fee. This may end up costing you even more, as some credit card companies may increase your interest rate if you make a late payment. In addition, having to pay the fee means less of your money is going toward the principal balance on your credit card bill, so the amount you’ll pay interest on will be greater as well.

Avoiding a late fee is pretty simple; just pay your bill on time. One easy way to do this is to set up your credit card payments to be automatically taken out of your bank account each month. By doing that, you’ll never be late paying your bill, and you’ll never have to pay another late fee.

Over the Limit Fees

When you have a credit card, you have a maximum spending limit. This limit may vary and is based on many things such as your credit score, how long you’ve had the card, you income and other factors. But whether your limit is $500 or $5,000, you are not supposed to go over this amount. If you do, you will incur an over the limit fee.

The key to avoiding over the limit fees is to always be aware of how much you have charged on your card. If you use your card on a regular basis, it’s easy to lose track of how much you have spent. Check your balance online or by calling your credit card company. Another way to avoid late feed is to not get anywhere close to your limit, and pay off your entire balance each month.

Cash Advance Fees

A very convenient aspect of most credit cards is the ability to go to an ATM and get a cash advance. This is especially handy while on holiday, and many people take advantage of this feature. However, every time you use the cash advance feature, you may be charged a fee.

With proper money management, you really shouldn’t ever have to use cash advances from your credit card. If you are going to need cash, try to get it from your checking account. Getting a cash advance from your credit card should ideally only be done in an emergency.

Currency Conversion Fees

If you travel overseas a lot or shop online with overseas merchants, you may be charged a currency conversion fee by your credit card. Some cards charge up to 3.5% for their currency conversion fees, and some people may not even realize they are being charged this fee. Check with your card to find out what the fee is, then keep that in mind when making purchases overseas and online. It may be better value to use the local currency when making purchases, so plan ahead when travelling and try to avoid using credit cards where other payment methods are possible.

Avoiding Fees In General

The national credit card debt for Australia is now over $36 billion, an average of more than $4,700 per person. That’s a lot of money to pay back, and each year, credit card holders are charged millions of dollars in fees, some of which they don’t even realize exist. One way to avoid those fees is to avoid credit cards altogether, but that isn’t the only way to avoid fees.

The key to avoiding credit card fees is knowing exactly what fees your credit card charges. With this knowledge, you can take the necessary steps to keep from having to pay extra fees, meaning you can concentrate on keeping your debt lower and your credit cards paid off.

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While there are plenty of perfectly good reasons to use a credit card — travel, emergencies, rental cars — there are times when you may have other lower-interest options to choose from.

Student Costs

One of the rites of passage when going to uni is getting a credit card. But if you’re using your credit card to charge your educational expenses, such as tuition, fees, books and other school-related costs, you could be setting yourself up for debt trouble before you even graduate. It doesn’t take long for the costs  associated with attending university to reach the five-digit range, or even higher.

If you’re having trouble meeting your financial obligations for university, consider taking out a student loan to pay the costs of uni. The interest rates are lower than those associated with credit card bills, and the monthly payments are lower, as well.  Better still, you won’t be required to repay most student loans until after you’ve graduated, which gives you time to establish a career before you start paying back your loan.

Wedding Costs

The wedding industry is growing by leaps and bounds, with even many of the more conservative brides and grooms spending thousands of dollars on their nuptials. If you can afford it, that’s great, but if you plan to pay for your big fat expensive wedding by putting it on plastic, it’s time to rethink your idea of the perfect wedding.

Going into serious debt for a wedding can not only destroy your finances and your credit, it can also destroy your new marriage. Adjusting to married life is difficult enough without adding crushing debt to the list of changes you’ll be required to adjust to. If paying outright for the wedding of your dreams is out of the question, consider scaling your wedding back, or delaying the date until you’ve saved up enough to pay for it.

Vacation Costs

You’ve spent hours checking airfare websites, looking for the best deal. You’ve compared rental cars and hotels, trying to save money wherever possible. If you plan to charge the costs of your vacation to a credit card you cannot pay off in the short-term, then you’ve wasted your time searching for the best travel deals — the interest you’ll pay on your charges may eat up any savings you may have realized, and add back some more costs, as well.

Credit cards are often touted as the preferred method of paying for the costs associated with travel, such as airfare, rental cars, hotels and meals. However, that’s assuming that you have the ready cash to pay off your credit card in full as soon as you return from your trip. And don’t over-use the rationalisation that you’ll be earning airline miles or other credit card rewards, because unless you can repay your charges soon, those rewards are worth much less than the interest you’ll be paying.

There are times when using your credit card is the wisest course of action, but in some situations, you’re better off looking for an alternative way to pay, especially if you’ll be unable to pay your credit card off in a matter of weeks or months.

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But no matter how you ended up in debt, you likely made a few money mistakes that dug you in deeper. To avoid debt in the future, learn from these mistakes; even more importantly, learn why we make these mistakes in the first place.

Living Above Your Means

Too often, debt is the result of wanting more than we can afford. Whether it’s vacations, clothes, cars or even homes, we assume that because we can charge or finance something, we can afford it.

While it’s understandable to go into debt to buy a home or, sometimes, a car, the problem is when we buy more home or more car than we need. Why settle for a two bedroom, one bath home when we can get financing for twice that much space? Why a used sedan when a brand-new SUV is what we really want? Make sure you’re not using more finance than necessary, to avoid excessive debt.

As for other purchases, such as clothing or entertainment, stick to a simple rule — if you can’t pay cash for it today, you can’t afford it. Learning to buy what we can comfortably afford is perhaps the best lesson when it comes to avoiding debt.

Being Unprepared

Sometimes, it’s not wanting what we can’t afford that lands us deep in debt. Rather, it’s a small setback that snowballs into a financial catastrophe, such as an expensive car repair you took out a payday loan for, or a home repair you charged to a credit card. Relying on credit to cover expenses like this is the fast-track to debt.

Building an emergency fund of at least $500, but better yet, $1000 or more, can prevent an unexpected expense from becoming a debt that will haunt you for years to come. Start small. Aim to save $1 a day, or $10 a week, just until you’ve reached your emergency fund goal. Even if a surprise expense pops up before you’ve saved up to your emergency savings target, you’re still that much less in debt.

Ignoring Debt

Debt is often like a leaky faucet. We ignore the drip, until we’re faced with a gushing disaster we can’t tackle alone. If your debts started off small and grew unwieldy through neglect, examine the reasons why. Did you often forget to make regular payments? Did you let finance charges and other fees double or triple your debt? Were you simply unable to make payments because you didn’t have the money ready?

In the future, recognize your debt repayment problems before they grow exponentially. If you’re bad at remembering to pay bills, have your payments deducted from your checking account automatically. If you’re unable to pay your bills at all, call your creditor to make repayment arrangements you can live with. But above all, deal with your debt while it’s still manageable – ignoring it only makes matters worse.

The biggest obstacle standing between you and a debt-free life is the circumstances that got you in debt in the first place. Learn from your financial mistakes, and you’ll find it easier to get out of debt.

The Convenience of Mobile Personal Finance

Imagine being able to use your mobile device to take a quick look at your accounts. any time you like.  What could that do for your budgeting success?  Take the following examples:

• Not sure if your health insurance premium payment has cleared through your bank?  With the right mobile app, you can now take a look at your account and see how it stands.
• Want to know your current credit card balance?  With the right app, you can view your recent transactions, check your balance, and more

  

As your smartphone or mobile device travels with you, mobile access to your account information can be extremely valuable.  Instead of logging into your account via your home PC, you can see all of your accounts on the go. There are many apps available, some provided by the financial institutions themselves, and others provided by third party software developers.

More Uses for Finance Apps

So, you may be able to use an app to look at your various financial accounts via the internet.  You may also, of course, visit your bank’s website via your mobile device’s web browser if there is no app available to access one of your accounts. But what else can you do with a mobile personal finance application? After downloading and installing apps for your bank and credit cards, or an app that offers combined secure access to all your accounts in one place, you may be able to do any or all of the following tasks:

• Make payments toward your credit card balance.  If you’ve saved the payment details within the app already, then it only takes a few seconds to enter the amount and pay your bill using the account information on file.
• Pay your bills from your checking account.  If your bank has a good app, mobile banking may be a very convenient way to pay.
• Save money!  If you have an online savings account, you may be able to transfer money into and out of the account using your smartphone, to capitalize on interest earned.

Of course, the ability to save money and get a lot out of the app will depend on the features included.  Make no mistake, though: banking, credit card, and other financial apps are making impressive ground towards convenience and features.  It is quite useful to take care of these needs when you’re on the go.

Take a look at some of the apps on the market, starting with any created by your own bank and credit card companies. There are some very useful third party developer apps, too. Don’t spend too much money on apps, though – if possible, test drive a free version before buying the full app.

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Compare your Options

You must compare several offers to ensure that you get the most out of your credit card. Do you know which financial institution you want to do business with? Is there a particular type of offer such as a zero interest balance transfer or rewards program that you are focused on? By comparing multiple options it becomes easier to determine what is best for you at the present time.

Know the Details

Every credit card has something unique to offer. Even when two cards appear to be identical, there are finer details that will not be exactly the same. From the interest rate to the rewards program and much more, you need to focus on the details that are most important to you. The last thing you want is to be surprised by something you were not expecting.

Use it Wisely

If you truly want to get the most out of your credit card you need to use it wisely. This means using your credit card when you know that it makes sense and keeping it in your pocket if you feel that it could get you in financial trouble.

Are you worried that you are not responsible enough to carry a credit card? In this case, you may want to avoid applying for an offer at the present time.

Reward Program Benefits

With the right reward program, you can receive points for every dollar that you spend on your credit card. In short, this allows you to get something back every time you make a purchase. Once you have enough points, you can then cash them in for a variety of rewards, from household electronics to hotel stays and flights.

Final tip: read as many credit card reviews as possible before making a final decision. What are other people saying? What do they like about the card? What do they dislike about the card? You may be surprised at all the information you find. After all, you are not the only person interested in carrying a credit card.

Everybody has their own system for finding and applying for credit cards. Where are you going to start? To get the most out of your credit card, you need to choose the right offer and then use your buying power wisely. It is easy to go overboard, making purchases that you are unable to afford.

If nothing else, make sure you have a solid grasp on what your options are as well as which credit card would do you the most good. When you make an informed decision, you will be able to get the most out of your credit card for many years to come.

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Fortunately, credit scores aren’t fixed and permanent. They can go up or down depending on your money management practices. That means there is always a chance for you to improve your credit score.

How credit scores work

Credit scores are calculated through statistical analysis methods. Banks and lending companies gather information about you that is relevant to your financial stability and how you manage your money. Some of the more typical data they may use in their analysis are:

• how you’re employed
• how long you’ve kept your job
• how long you’ve lived in your current address
• the number and value of your assets
• your payment history
• your outstanding debts

Each of these factors will be assigned their own weight, and combined to come up with a final score. This number is then compared to the scores of other individuals of similar background. An average or ‘passing’ score is usually set by the financial institution, and your score will also be compared to this. How much of a credit risk you may present is expected to correlate to how your credit score measures up to this average.

Take note that the kind of loan or credit application you are requesting may require additional factors to be taken into account in calculating your credit score. In a home loan for example, the kind of property you plan to buy with the loan is considered. Meanwhile banks will want to know how many credit cards you already own and how well you’re maintaining them when you apply for another credit card account.

Different calculation methods

It is entirely possible to have a good credit score with one lender, and yet a ‘failing’ score with another. This is because different institutions may use different ways of computing your score.

These scoring methods are often proprietary information, and are protected by privacy laws. While it is true that some form of statistical analysis is always used, you have to understand that there are various mathematical methods that can be applied. (For the benefit of our more mathematically-minded readers, some examples of these would be the Chi-squared Automatic Interaction Detector (CHAID) technique and the random forests method.)

You also have to take into account that credit scores are actually just a number, without a fixed meaning. It is still the lender who decides what is or is not an acceptable credit score for an applicant. For example, a bank may decide to set a higher passing score for home loans if it’s low on funds or is no longer focusing on this type of product.

Improve your credit score

You have to know your current status in order to effectively improve your credit score. Banks rely on credit reference agencies to supply them with the necessary information for computing your score. However, it is possible for credit reports to contain inaccuracies. Any errors may negatively impact your rating. You can always request a copy of your credit report so that you can spot any mistakes and take action to have them corrected. This will also help you monitor your financial status and performance.

Scoring systems usually compare how much debt you’ve incurred to how much credit you’re maintaining. It may be a good idea, then, to keep your ‘good’ but old credit accounts even if they’re not active. Among other things, it would show a longer history of good credit performance. In terms of avoiding credit card debt, try to keep your balance within 25% of your limit whenever you can.

Finally, nothing signals good money management as simply and clearly as paying your bills on time! Payment history is often the biggest variable in credit score calculations. If you can be consistent in this area, you may encounter fewer obstacles in your future credit applications.

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Misconception: Pay Off Credit Card Debt By Transferring Balances

The balance transfer credit card trick may be one of the oldest in the book for paying off credit card debt, but the fact that many have tried it with success doesn’t mean that it’s the safest or best way to reduce your debt. Transferring the balance from a big credit card debt to a credit card with zero or low interest can help you make a dent in your credit card balances, but only if you read the small print and make an effort to pay the best as quickly as possible.

First, make sure that the zero or low interest rate applies to balance transfers. Advertising a low or no balance card, but only applying the low or no interest to new purchases is a tactic that credit card issuers have been employing for years. If that low interest rate does apply to balance transfers, make sure that two conditions apply after the introductory rate ends:

1. The interest rate should be lower than the one you’re currently paying.
2. You should be in a situation that allows you to pay the balance down so that it is less than 75% of your available credit on the card. Otherwise, you’ll have an almost maxed-out card as soon as the introductory rate ends, and that never looks good on your credit.

Myth: Closing Credit Card Accounts Will Help My Credit

The myth that closing credit card accounts is good for your credit is one that has persisted for years, despite the fact that the opposite is often true — closing accounts can hurt your credit score rather than help it. If you have four credit cards, two of which have a zero balance and two on which you have charged 50-75% of your available credit, closing the paid off cards automatically raises your debt to credit ratio, and therefore hurts your credit.

Closing old credit card accounts and keeping newer accounts instead may have the same effect. It’s almost always better to have several open credit card accounts than to close all but one or two. If you fear accumulating debt simply because you have the cards, then cut up the cards or put them in a safe or safe deposit box where they cannot lead you into temptation.

Misconception: Using Credit Cards is Bad for My Credit

As the recession drags on and the spectre of credit card debt looms over many, using credit cards has gotten a bad rap. Credit cards are credited as being the fast track to deep debt and poor credit, but only one of those statements is true — while using credit cards recklessly can lead to debt, using a credit card is actually good for your credit. As long as you pay as agreed, that is.

Using credit cards responsibly, which means carrying a low balance or paying your card off in full each month, paying on time as agreed, and not opening more and more credit card accounts, can actually improve your credit score more quickly than your payments on an instalment loan such as a car loan or a mortgage. It’s only when you become irresponsible with credit cards that you damage your credit.

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