The festive season is now coming to a close and we are all now getting ready for 2013. While we have been on holidays though, for many of us, our credit cards have been working harder then ever. Receiving our January statement can therefore come as a surprise with the final costs often being an even bigger one.
To help with these credit card blues, we would like to gift you 8 top tips to help you manage your credit cards and make 2013 a great financial year.
1. Read the details: Go through your credit card agreement and make sure you understand how interest is applied to your account, when fees are charged and when your interest rate goes up. If possible, dig out the terms and conditions booklet for any existing cards and read them too. You might be getting seriously slugged already. If you don’t have these terms and conditions on file, contact your bank and ask them to explain them to you. Understanding these features of your credit card can help you avoid large amounts of debt. Using your card more effectively could save you a great amount over the longer term.
2. Pay it off as soon as possible: If you pay your credit card bill late or don’t pay it in full, most companies will charge you daily interest from the date of your original transactions. So if you are just one day late paying your bill you could be charged daily interest on the entire amount. Some cards have up to 55 days to pay without charging you interest where as some may only be 40 days, so check with your bank to ensure you avoid high interest charges.
3. Try not to use your Credit Card for cash withdrawals: Cash advances are one of the worst ways to use your credit card. The cost of “using” cash for most credit cards is around the 21% mark. This means that if, at the end of the month, you do not pay your Credit Card down to Zero, the Bank will charge you roughly 21% interest on the cash you have advanced. Try to avoid pulling cash out from your Credit Card from an ATM or paying bills from your Credit Card account.
4. Consider and set an affordable limit: Start the year by checking your credit limits on all your credit cards. Some of your card issuers may have given you an increase since you last checked. Remember to keep your balance below 30% of your credit limit for ideal credit utilization.
5. Negotiate a lower interest rate: Your interest rate determines how much you pay for carrying a balance on your credit card. Evaluate this on a regular basis to be sure you are getting the best deal possible. If your current interest rate is higher than offers you receive from other institutions, then the best way to get a better New Year credit card deal with your existing provider is with some gentle and subtle negotiation.
6. Switch to a better card: If your credit card provider is not willing to offer you a better rate and/or lower fees it may be worthwhile to take out a new credit card with a different provider and make a balance transfer (this may not be necessary).
7. Read the fine print for sign-up bonuses. More credit cards are offering great sign-up bonuses, enough points for flights or cash backs. To get the benefit of these big bonuses you need to spend big, something not all of us are able to do. Most of these lucrative bonuses require you to spend a certain amount of money in a certain period of time, e.g. $3,000 in three months. Before you accept a credit card offer, make sure you can meet the requirements without going into too much debt.
8. Monitor your account for fraud. Credit card fraud has always been a problem, but it often increases during the festive season. Watch your credit card statement closely and report any suspicious charges immediately. The sooner you respond to fraudulent charges, the easier it is to get them settled.