With the rise of the internet, credit cards are no longer the plastic road to bankruptcy. Instead, they’re more like a hair raising, no-speed-limit autobahn which might lead right to the junction of Dead Broke and Eat Dirt. If you don’t know what you’re doing, that is.
Credit cards aren’t all bad; in fact they can be a lifesaver. But what’s important is a sense of moderation, coupled with this almighty Moneysmart tips guide. Heed our advice and you’ll be gliding across the minefields of debt, entirely unscathed.
1. Find Useable Promotions
If your credit card promotions are going into the spam folder, you’ve got the wrong card. Those promotions are not useless. They’re meant to keep your costs down.
Do you have any idea how hard the card companies work to get you those discounts? Their temps slave overnight, their secretaries are caffeine addicts, and their executives exude so much stress they kill small animals if they stand too close. Take advantage of their hard work.
For example, If you use your card for groceries and utilities, you can get a…
Cash Back Card: Pretty much what the name implies. Most of these cards charge retailers an administration fee, and then you get a cut of that fee. So whenever you buy, you get cash back. The important thing is to make sure you pay the monthly bill in full. Otherwise, all that cash back will just be eaten by the interest anyway.
And if you fly a lot, you’ll want a…
Air Miles Card / Travel Rewards Card: Every time you use an airline credit card, you’re accumulating a discount on future tickets. I saved a ton of money with my miles card, back when I was studying abroad. You might also get special rates at selected hotels, or free upgrades.
And once you’ve landed in some exotic city, you’ll want to have some fun with an…
Entertainment Card: You know those blurry rectangular shapes on the bar counter at two in the morning? That’s a pile of these things: the ultimate card for a night on the town.
Entertainment cards focus on netting you discounts at hotspots and restaurants. From pretentious Banker pubs to cool live music joints – these cards will fetch you discounted drinks and free overcooked calamari. Entertainment cards also get you discounts on movies, theme park entrances, books…anything a person needs to stay stimulated.
But if you’re a bit young for that, there’s always a
Student Card: These cards are for the tertiary crowd. There’s no minimum income to qualify for students, and there’s a low credit limit. You can get one for your son or daughter, without fear of coming home in the middle of a court ordered seizure. Most of these cards come with a $500 spending limit, just about enough for an Xbox and a couple of games.
2. Take Your Time and Shop Around
Reading credit terms is about as entertaining as reading Twilight for a guy. You’ll need to tape your eyelids open. But if you want to pick the card that’s best for you, you need to be proactive. Don’t just pick one out of the spam box. Don’t give in to the impatience of choosing a card just because it’s pre-approved, or because you can get it right now.
3. Match the Interest to Your Intended Payment
Let’s say I suck at math, so I intend to pay the minimum each month. At the very least, I’d avoid a credit card with the typical interest rate of 24 percent. Otherwise I’ll end up owing something that resembles the national debt of a third world country. I might also want a card with a longer grace period, so I can savour the air conditioning before it gets repossessed.
Now let’s say you’re Moneysmart, and you intend to pay in full every month. You may as well pick a card without an annual fee, and one where you get a bonus for it.
4. Get the Right Number of Credit Cards
I’m a writer, so I have trouble borrowing ten bucks off a loan shark, let alone convincing a lot of credit companies. There’s this myth that we’re all broke hobos or something. Still, I keep about three.
Having the right number of credit cards is useful for your credit score. If you have no credit history, there’s no proof you can pay your debts. I don’t know what qualities they look for in loan officers, but I’m pretty sure a trusting nature isn’t on the list.
So having no credit can hinder you as much as bad credit.
5. Know All the Fees Involved
Have you ever had a sardine, spaghetti and peanut butter sandwich?
Yeah that look on your face? That’s the same one you’ll have when you check your credit card bill, if you don’t do your homework on the fees. Depending on the terms, there may be late payment fees, over-limit fees, application fees, annual fees…the list goes on.
When applying for the card, don’t just look at the interest rates and the rewards. Check the respective issuer’s various fee structures. Even after applying, check every 3 or 4 months. You might end up paying an over-limit fee because you didn’t know that the credit limit was lowered last month.
6. Don’t Be Suckered by Big Bold Fonts
Don’t jump on it because you see “0% interest“. 80 percent of credit card companies have a card like that. Look at the little * next to the bold font. Often, it tells you that the zero interest only lasts for a few months, after which the interest reverts back to the norm. As with fees (see point 5), check that you’re not just looking at a promotion period.
Think about it, if cards really offered zero interest indefinitely, you could take money from it and put it into a bank account that has an interest rate. That way, you’d have a surplus after paying back the credit card bill. But we all should know by now there’s always a catch, isn’t there?!
What credit card are you planning to get? Comment and tell us!
Research by: Shubhreet Kaur
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