This morning I was at a networking event with a range of other professionals and a topic often discussed came up – Credit Cards and the way banks are often so “helpful” in giving you a new credit card, unfortunately they are not there to help when you can’t afford the repayments and may even treat you very badly all of the a sudden if you miss a payment or two.
I thought I would share a little of my knowledge – now the below comments are just my opinion and should not be taken as financial advice but hopefully they may also be a starting point for a discuss with your friends and family. At the end of the day knowledge is power.
- If a bank offers you a “free” credit card with your new home loan or transaction account just say no. Credit cards really are not that helpful in life and you can get one quite quickly if you need one in most situations. I have never heard a client say to me “gee if only I had an extra $5000 in credit card debt right now” but I have plenty whinging and going through financial strain because they have $5000 or $40,000 more credit card debt than they want and need.
- If you do choose to have a credit card choose one with the lowest rate. Don’t be wowed by how many points you can earn…points are not money.
- If you role your credit card debt over to a new card to take advantage of a 0% interest offer then immediately cut up and close your old card!
- Now to the big question – some people will say you “need” a credit card for emergency purposes in case something goes wrong – this is just not true and a cash surplus of say $5000 or $10,000 sitting in a high interest bank account or as a redraw in your mortgage is far better than a credit card but if you decide you do need or want to have a credit card for emergency purposes and to book hotels etc please keep the limit within sane boundaries – for normal Australians on average salaries this should be $1000-$5000 in my opinion.
Hopefully if you find this article this is helpful – if you need further help then please get in touch below.