If you take personal finance advice from women’s magazines or Men’s Health, you could be forgiven for thinking that credit cards are responsible for terrorism and the ebola virus. We hope you haven’t, as they might have recommended, cut up your credit card or frozen them in a block of ice.
The December holidays usually translate to big spending, whether you’re taking your entire clan on an overseas holiday or spending your entire bonus on clothes. Here’s how to use credit cards the right way so you get to cash in a little this expensive month.
Pay your bills in full and on time every time
Credit cards can help you save money. Yes, you heard that right. Thanks to the cash rebates, air miles and rewards you get for spending on your credit cards, you can end up shaving a few hundred dollars off your annual spending if you play your cards right (see what I did there?).
But that only applies if you pay off your balance in full, and on time, every single time. Just forgetting to pay your bills once can get you slapped with a late payment charge of at least $50 or $60, plus ridiculously high interest on the amount of money you spent on the card.
But how on earth do you remember to pay your credit cards on time every single time? Even the most zealous, bespectacled primary school kid forgets to bring his homework to school at least once.
The answer is to automate payment by signing up to pay your bills in full (not just the minimum sum!) by Interbank GIRO for every single credit card. Every month when your bills are due, the sum you have to pay is automatically deducted from your savings account.
Work out which are the most beneficial cards to use
Just because the auntie next door recommends a credit card that can get you cashback at Sheng Siong doesn’t mean you should be using the same card, especially if you’re more of a Jason’s kinda guy.
Similarly, your banker friend might recommend a card that gives you a huge cashback amount if you can spend $10,000 a month, but if that’s how much you spend in a year, it’s not going to benefit you either.
To find out the best cards to use, you’ll have to go through the offerings of each credit card individually. MoneySmart’s credit card comparison tool makes this easier for you.
Always ask for a wavier of the annual fee
Most credit cards will waive the annual fee for one to three years, so you won’t have to pay a single cent as a cardmember at the start.
But after a year or two, they’ll start charging. Worst of all, the annual fee will be sneakily added to your bill without a word, and if you’re the sort of person who doesn’t bother to look at your bills because everything is paid by GIRO anyway, you might unknowingly end up paying some of these fees.
One easy way to pre-empt these annoying annual fees is to check the expiry date of your credit cards. The month indicated on your credit card is the month in which you’ll be expected to start paying the annual fee.
Once you’ve been billed, it’s a simple matter of calling up the credit card company, speaking to a customer service rep and asking very nicely to have the fee waived. Sometimes they will refuse; if so, it’s best to cancel the card if the benefits you’ve received in the past year are even less than the annual fee.
Sign up when there are juicy sign-up bonuses
Some credit cards offer juicy sign-up bonuses to lure people into registering for the card in hopes that they’ll later let the bank earn money by forgetting to pay their bills on time or ringing up huge amounts of interest.
If the bonus is particularly attractive and the credit card is free to sign up for, go ahead and register for it. If the bank tries to charge you the annual fee at the end of the year you can always cancel the card. The best sign up promos are the ones that aren’t just good but are easy to get as well.
Compare the sign up bonuses offered by the various credit cards right here at MoneySmart.
What are your credit card habits like? Tell us in the comments!