10 ways to use your credit card wisely

Credit cards can be a useful tool to free up your cashflow, manage your finances and build your credit history. To get the most value from your card, there are some tips you can take up to avoid any of the risks that come with paying on plastic. From paying more than the minimum requirement each month to rewarding your spending, here are 10 ways you can use your credit card smarter.

1. Pay bills on time

Each month, you're required to pay your credit card bill by the statement due date. You can find the due date listed on your credit card statement. It's important to pay your bill on time to minimise your interest costs and avoid late payment fees. Plus, late credit card payments are listed on your credit report and can hurt your credit score. To make sure you're paying your credit card statement on time each month, you can set up a direct debit.

2. Pay more than the minimum

You're only required to pay the minimum repayment to avoid late payment fees each month. However, the minimum repayment is usually only around 2% or 3% of your total balance. If you only pay this amount, that leaves the remainder of your debt to grow with interest. Instead, you should aim to pay your balance in full each month. Not only will you avoid interest costs, but you'll usually get to take advantage of up to 44 or 55 interest-free days on purchases.

If you can't pay your bill off in full, you should still aim to pay as much as you can and more than the minimum repayment. This will help you clear your debt faster and reduce your interest costs. You can use Finder's credit card repayment and interest calculator to determine how much of your credit card debt you'd need to pay off each month to meet your financial goal.

3. Use rewards credit cards

If you always pay your balance in full and frequently pay with credit, you could reward your spending with a card that earns points. You can choose a frequent flyer credit card that collects airline loyalty points or a rewards card that earns points with a bank loyalty program. You can usually earn points per $1 spent on eligible purchases (which includes most everyday expenses but excludes balance transfers, cash advances and gambling costs). These cards often reward thousands of bonus points on sign up as well. You can then redeem your points for rewards including flights, holidays, cashback on your account and gift cards.

These cards usually charge higher annual fees and interest rates than other cards. So they're best suited to people who can pay off their balance each month and earn enough reward to offset the yearly costs.

4. Take advantage of introductory offers

Many banks attract new customers by offering introductory deals on interest rates and rewards. If you want to spend and save on interest, you can find cards that charge 0% interest on purchases for a promotional period that can last up to 14 months. There are also cards that offer 0% on balance transfers, which could help you repay an existing debt with no interest for up to 24 months or more. If you're comparing frequent flyer or rewards cards, you'll notice that many offer new customers thousands of bonus points when they first sign up. Some cards also charge $0 or a discounted annual fee in the first year.

These introductory offers can be a great way to get extra value from your new card, but there are usually terms and conditions involved. For example, you may need to sign up by an offer end date or meet a spend requirement to access the offer.

5. Compare cards to find the best deals

Before you apply for a new credit card, you should take the time to compare your options to find the best card for you. By comparing a few different cards and providers, you could find a product that offers a cheaper interest rate or annual fee or more competitive rewards and extra features. You can get started by comparing credit cards from a variety of Australian financial institutions on Finder.

6. Negotiate lower rates

If you're about to close your credit card, your bank may be open to negotiating a lower purchase rate to keep you as a customer. This is especially true if you have a good credit score and have been a loyal customer. Before you cancel your account, contact the bank's customer service number and ask if you can negotiate a more competitive interest rate or annual fee before you take your business elsewhere.

7. Watch out for hidden fees

Banks issuing credit cards are not allowed to hide any charges, by law. To get around this they print all this information in the small print on the back of the application form using legal terminology, which is almost never understood by the average customer. Many cards carry a number of fees which the innocent customer may not discover until they get stuck with paying them. Watch out for things like processing fees, late payment fees, transaction fees, going over the credit limit fees, balance transfer fees, overdraft protection fees and some even stick the customer with a fee if the payment is not received by a designated hour on the due date.

8. Consider a balance transfer

If you're struggling to repay an existing debt or want to cut your interest costs, you could consider a 0% balance transfer credit card. You can use these cards to pay off your credit card debt with no interest for a promotional period that can last from 6 to 26 months. If you have more than one credit card, you can consolidate multiple debts onto one card as well.

At the end of the introductory period, any remaining debt may attract the cash advance or purchase interest rate. You may also be charged a one-time balance transfer fee when you first move the debt.

9. Limit your number of cards

The number of cards you should have is dependent on your financial habits. You may have multiple cards for different needs. For example, you could be using one to pay off a debt with a 0% balance transfer offer and another to earn points as you spend. However, too many credit cards can damage your credit score and add to your debts if you're not paying them all off each month.

10. Emergency credit card use

If you're not using a credit card to pay for everyday expenses, it can still help to have one in the case of emergencies and unexpected expenses. If you're getting a credit card for a rainy day, you may want to consider one that charges a $0 or low annual fee so that it isn't burning a hole in your pocket while you're using it.

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