Are you paying too much for your credit card? Money Expert at finder.com.au, Michelle Hutchison, shares her top tips on how to fix your credit card mistakes for good.
If you think you’re paying too much for your credit card, you could be right. New research shows that cardholders paid $1.36 billion in personal credit card fees to banks in the past financial year, and $5.9 billion in interest.
Apart from those scary high numbers, what is also interesting is that many of those costs are linked to mistakes made by cardholders.
How many of these credit card mistakes have you made? Here are some tips on how to fix them for good:
1. Thinking your interest-free period applies regardless of your balance
This is one of the most common errors we see. People see the 55-day interest-free period advertised by banks and so use their card under the assumption that all their purchases will be interest-free for this amount of time. But what many cardholders don’t realise is that this interest-free period only applies when you pay your balance in full in your previous statement period. If you’re planning a big purchase that you’ll need time to pay off, make sure you pay off your balance in full before pulling out your card.
2. Paying currency conversion fees when shopping online or overseas
Online shopping – convenient? Yes. Expensive? Only if you let it be. When making purchases through an overseas-based online store or when you’re travelling you’re likely to be stuck with currency conversion fees that can range from 1.5-3.5 percent of the purchase amount, and the only way to avoid it is to find a card that won’t charge you. Options include the GE Money 28 Degrees Card or the Bankwest’s Zero Platinum card.
3. Not checking to see if a balance transfer fee applies
When you’re looking at balance transfer deals being offered by card providers – the longest currently being 0 percent p.a. for 18 months on creditcardfinder.com.au – it can be easy to think “how can I lose?” and proceed to click the apply button. But have you checked to see if you will be charged a fee? Balance transfer fees are charged by some card providers and can be as much 3 percent of the amount you’re transferring. So remember to check what you’ll be charged before you transfer your balance.
4. Believing rewards cards are rewarding for everyone
Free flights, bonus points, lounge access – it all sounds pretty good, doesn’t it? But remember the perks that are linked to your rewards credit card come at a cost, and that cost is usually in the form of high interest rates and annual fees. As a rule of thumb, cardholders who don’t spend at least $12,000 per year or don’t pay off their balance in full each month won’t benefit from a rewards card.
5. Not applying for a large enough credit limit for your balance transfer
Another common mistake with balance transfers is cardholders not applying for large enough credit limits on their new cards. Card providers only allow you to transfer a certain percentage of your the new card’s limit, with some as low as 70 percent. So if you’re looking to bring a debt of $16,000 to a new card, you’ll need to be approved for a limit of at least $20,000.
That piece of plastic – or perhaps pieces of plastic – in your wallet can cost you a lot of money, but it doesn’t have to be as much as you think. Don’t pay too high a price for the convenience of a credit card, and fix your spending habits to save yourself from unnecessary fees.
Michelle is the Money Expert for finder.com.au, one of the biggest comparison websites in Australia. Michelle loves to uncover money rip offs and hacks on how to avoid them and save.