BY CANNA CAMPBELL
Financial tools can enhance our lives with efficiency and convenience. However, it is important that we understand how to use them the right way, so we get the most out of them. A popular financial tool that almost all of us are familiar with is a credit card. A credit card can support our cash flow, enhance the efficiency in tracking spending and budgeting and could even protect us against dodgy purchases (depending on the features of the specific card you choose), all while opening up a global marketplace.
But, we have all heard stories about what can happen when they are misused. However, when credit cards are used correctly they can be a useful tool in our financial arsenal. They allow widely accepted access to cash around the web and around the world and come with other features and benefits too. Here’s some tips on what to keep across to make the most of your credit card.
Have one credit card only – This simplifies and minimises your financial responsibilities as it is easier to see everything in one place and get a quick picture of your spending, making it easier to manage.
Set your own limit – a provider may give you a preapproved limit that’s higher than what you might actually need. You can ask for it to be reduced in most cases which could benefit your borrowing power when you go for a home loan or personal loan, not to mention remove temptation.
Have a budget and stick to it – your credit card is designed to help manage your cash flow without the need for cash with the added benefit of being able to see all your transactions in one place. This doesn’t mean you can do away with your budget. Use your card to easily pay for the items on your budget in store or online and keep paying the full amount off each month.
Your credit card is separate to your emergency money – always have a separate savings account for emergencies. If you ever need to dip into your savings account for urgent circumstances, remember to replace the savings as soon as you can. If you are running a tight budget, brainstorm some side hustle that can generate additional cash outside of your income.
Pay your credit card in full, every month – or even better, transfer the fund from your everyday account, each time you use your credit card. This simple habit helps you stay credit card debit free and feel the handspace benefits.
Cross reference your actual transactions against your budget. This not only helps you stay on top of your budget, but also allows you to identify and resolve any security concerns or new spending habits trying to sneak in.
Have access to your credit card via your banking app. This provides a complete picture of your financial situation, reminding us of our financial goals and dreams.
Make your card work for you – before you pick your one and only credit card, do your research and ensure it has features that work in with how you use your money. These could include a low annual fee, low interest rates, added security features, mobile payments, flight and cashback rewards, additional insurance and loads more.
Be sure to check the fine print; particularly around memberships and reward programs. A loyalty program can be really valuable and save you money, but only if you use it. So, only pay for the bells and whistles that you value.
Watch your habits – we can often pay a laziness tax when it comes to our spending. A good habit to get into is to periodically look through your statement and cancel subscriptions you no longer use or contact companies like your utilities, internet, insurance and phone providers for a better deal.
Understand your credit score and what it means for the future. When you apply for a loan, your bank will run a credit check and this is where they can see your previous credit management habits. If you have had a bad run with debt, this may impact your ability to borrow. Think of your credit card as a reference check that holds the reigns on your financial and lifestyle goals. Employing this mindset will motivate you to demonstrate your A+ personal finance skills!
There are many Australians who have a credit card and use it wisely and it is easy to be one of them. Pay your card off on time, make the most of any loyalty or reward programs and enjoy the responsibility that comes from having a credit card.
Canna is the founder of the financial media platform, SugarmammaTV, and author of financial advice books The $1000 Project and Mindful Money. She comes from a corporate finance background and is a licensed financial planner. SugarmammaTV provides educational content that helps make money and finance more approachable. She is also the founder and director of financial planning firm, SASS Financial Services.
This article was prepared in partnership with ING. The information provided in this article is of a general nature only and does not consider your personal objectives, financial situation or particular needs. The views expressed in this article are provided independently by Canna Campbell, a Financial Planner and an Authorised Representative of Wealthstream Financial Group Pty Ltd (AR 000309372) featured in the article. ING makes no warranty as to the accuracy, completeness or reliability of the information, nor does ING accept any liability or responsibility arising in any way from omissions or errors contained in the content. ING does not recommend any products, services or financial strategies mentioned in this article. ING strongly recommends that you obtain independent advice before you act on the content. Canna Campbell uses ING’s trademarks under arrangement with ING. ING is a business name of ING Bank (Australia) Limited, ABN 24 000 893 292, AFSL and Australian credit licence 229823.
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