For most people, the major problem is staying on top of the payments. However, with good management, a credit card can be no more expensive to run than its more parsimonious cousin, the debit card.
So, with sound money management principals in mind, here are the top 10 pitfalls to using credit cards.
1. Ignoring the best deals
Interest rates can vary hugely between lenders. The difference between highest and lowest rates could cost you serious money over the course of a year. Also, look out for the extras and choose the one that best suits YOU. If you hate flying, what’s the point in racking up air miles?
2. Paying the minimum, or paying late
Pay the minimum or pay off the card after the due date you lose the interest-free period on new purchases, which extends the repayment period. That's like giving away money, so stay on top of it.
3. Not paying at all
Worst still, pay nothing and not only is your debt rising, risking your own personal credit crunch, you could be in for penalty rates. Ouch. Ignore that monthly statement at your peril. Try adding a recurring monthly reminder a couple of days before due date in your computer's calendar.
4. Exceeding your limit
Checking your statements has never been easier with most vendors offering online services. If you’re nearly at your limit, pay a bit off, or just stop putting money on it. Bust the limit and you really will pay for the mistake.
5. Having multiple cards
Having a wallet full of cards makes it much harder to keep track of your total debt, and the repayment dates, which become easier to miss. See above.
6. Having a limit that’s higher than you need
The higher your limit, the greater the temptation to spend it. Stick to a manageable budget.
7. Misunderstanding introductory offers
That rate look too good to be true? It probably is. Lenders often offer discounted rates but don't shout so loudly about the time frame they operate under. The big surprise comes six months after signing up when your super low rate soars. Do the homework before you sign up.
8. Not reading the fine print
Talking of homework, read that fineprint. It’ll also tell you how much you get stung for withdrawing cash and balance transfers.
9. Buying things you don't need
Sounds a bit obvious, doesn't it? But it's way too easy to buy things on impulse (the arch enemy of the happy saver) that you have no real use for. Take your card shopping when you already know what you want to buy and how much it costs.
10. Not looking at your spending habits
Be honest. Do you pay bills on time? Save regularly? Spend no more than you earn? If the answer to any of these is an emphatic NO!, then maybe credit cards just aren’t for you.$view = new stdClass(); $view->name = 'credit_card_listing'; $view->description = 'filterable credit card list'; $view->access = array ( ); $view->view_args_php = ''; $view->page = TRUE; $view->page_title = ''; $view->page_header = 'The Credit Card Comparison tool allows you to compare the features of cards currently offered by New Zealand based financial institutions. Depending on your needs, cards offering Interest Free Days, A Rewards Program or No Annual Fee may be most suitable for you.';
Compare Credit Cards - Independent interest rate and fees comparisons for New Zealand banks.