Credit Card Debt Advice

Mastercard. Visa. American Express. Diners Club. They may all sound different, but they are alike in so many ways. Credit cards are useful financial tools, if used correctly. Unfortunately, many credit card users have overspent their way into serious credit card debt.

In fact, the Reserve Bank recently released numbers that were quite sobering: total Australian credit card debit now stands at a whopping $43.25 billion.

What You Need To Know About Your Credit Card

1. First, if your credit cards are maxed out, or seriously close to becoming maxed out, then your credit score takes a beating.


2. Second, if you continue to rack up credit card bills, there will come a time when you begin to struggle to make payments, and you may even fall behind or pay late. Once again, your credit score takes a hit.


3. Third, if your credit card situation is at the point of no return, then you have few options and a reduced chance of obtaining finance elsewhere, such as for home loans, car loans etc.

What can you do to maintain your credit card situation and protect your credit rating at the same time?

• Use credit cards only when you can afford to pay them off. Period.


• Make a concerted effort to pay off your credit cards in full, at the end of each month, to avoid finance charges.


• Use a debit card to make purchases instead of a credit card. A debit card, unlike a credit card, is linked directly to your bank account. Many individuals find that using a debit card keeps their spending in check.


• Know your credit card’s interest rate and negotiate a better deal with your credit card company, if possible. Or, shop around for a better interest rate and use a balance transfer option to transfer your higher-interest credit cards to one with a lower rate.


• When choosing a credit card, consider not only the interest rate, but any rewards that may go along with it. Credit cards with rewards programs are ideal for business travelers, for example, that may earn points towards free airfare or hotel stays, and are also beneficial for those that earn rebates on purchases. Be aware though, that many of the cards with reward schemes will have a higher interest rate - this is how credit card companies make their money back on the rewards! Consider if you really need rewards. There is no point having a credit card with a frequent flyer scheme attached if you dont ever intend to fly anywhere.


• Always pay your bill on time – no matter what! Credit card companies have the right to charge you substantial late fees if you miss just one payment. These fees will continue to be charged on a monthly basis if you do not make your repayments on schedule.


• If you have been sent a letter in the mail offering a chance to double your credit limit - be very careful in accepting such offers. You need to be aware that increasing the limit will also increase the minimum monthly payment due. Be sure to read all the fine print and learn about fees and charges before committing to a new limit.