How to better manage your credit cards & save

With over 70% of Australians having at least one credit card and more than half of those having more than one, credit card management has become an increasingly popular topic.

In this article we’re going to look at things you can do, or stop doing, to help you better manage your credit cards.

#1 Keep or get your number of credit cards to a bare minimum

Different credit cards come with different benefits and we may be tempted to make use of a huge range of credit cards for various purposes but, generally speaking, having multiple credit cards can and will get very expensive. This is because, even if you don’t make use of the available credit, you will still have to pay monthly or annual credit card fees, and these do not come cheap.

How many credit cards should I have?

The number of credit cards that you should have will depend on your personal financial situation, how often you make use of the various credit cards and, for what. If you’re struggling to keep up with your repayments this is an indication that you have too many credit cards. Likewise if you haven’t made use of a specific card for 3 months or more, there’s simply no reason to keep maintaining its annual fees.

It is important to note at this point that you may very well be able to maintain two or more credit cards for varying purposes and enjoy the various benefits and rewards while not paying too much in fees.

This will depend on how frequently you use the card and whether you pay off your balances in full every month or make only the minimum payments. We’ll take a look at which types of credit card is right for you based on this metric in a subsequent tip!

#2 Choose the right credit card for you needs

Never fly? A frequent flyer credit card would be a waste of money for you. Thinking of getting a credit card for the very first time? Balance transfer and premium credit cards are out of the question.

Pay off your credit card in full every month? A low annual fee credit card may be the best option for you. Tend to maximise cards and carry balances for a longer period of time? You need to get a credit card with a low interest rate.

These are just some of the things you may want to consider when looking to get, or keep a range of credit cards. Let’s have a quick look at the various types of credit cards available in Australia and just briefly mention who would be best suited to each type.

• O% or low interest credit cards: 0% interest cards offer a period during which you won’t be charged interest on your credit card balance. If you do not maintain your credit card payments or once the promotional period ends, the 0% interest credit card will revert to the revert or standard rate. Who should use this card: Anyone wishing to make larger purchases on their credit card and those who tend to carry credit card balances from one month to the next.
• Balance transfer credit cards: These credit card allow holder to transfer credit card balances from existing credit cards to their balance transfer card and enjoy a 0% interest period during which they can pay off their credit card balance without having to incur interest as well. Once the introductory period over the interest rate will revert to the revert or standard rate. Who should use this card: anyone with one or more credit cards with balances that are incurring high rates of interest.
• Frequent flyer credit cards: these types of credit cards are for those who travel frequently and want to enjoy the benefits of various airport lounges, seat and flight upgrades as well as accommodation and vehicle rentals. Who should use this credit card: frequent flyers and those who are disciplined and can clear their credit card balances in full every month.
• Low fee credit cards: these credit cards will have no annual fees or a low annual fee but will, in turn, typically have higher interest rates. Who should get this credit card type: those who are very disciplined with the use of their credit card and will not carry balances from month to month.
• Reward credit cards: rewards credit cards offer a range of cash back rewards, discounts and a range of point based rewards programmes. These cards should be compared well and both interest rates and annual fees must be considered carefully. Who is this card suited to: those who wish to earn points or cash backs for their everyday spending on their credit card.

#3 Keeping up with your credit card repayments

At the very least, you must maintain minimum credit card repayments on a monthly basis to ensure that you not only keep any introductory offers active but that you don’t end up defaulting on your repayments and doing damage to your credit.

Making extra payments on credit cards is always advised as this will reduce your balance and reduce the amount of interest charged. If you’re just keeping up with minimum repayments you will be charged a lot of interest overall and this can be avoided by making these extra repayments.

#4 Avoid drawing cash & always review your credit card statements

Drawing cash using a credit card is an extremely expensive exercise that should be avoided at all costs. This is because the rates for cash advances are expensive. Other transactions that could be considered as cash advances include gambling, balance transfers and transferring money from a credit card to an everyday account via your online banking account.

Finally you should always review your credit card statements on a monthly basis and ensure that you recognise all the transactions, are being charged as per your credit card agreement and that you’re repayments and credit balance are as they should be. You should also look at your credit card debt in conjunction with any other debts that you may have and ensure you have a suitable debt repayment plan in place.

Bonus tips for better credit card management

• Make extra payments on the credit card with the highest interest first.
• Consider using a balance transfer credit card if you’re paying high rates of interest and are struggling to pay your balances down.
• If you tend to overuse your credit cards, consider lowering your credit card limit.
• Do not base your choice of credit card on rewards points and programmes but consider interest rates and fees too.
• Cancelling your credit card should always be done through your provider, just because you don’t use it doesn’t mean you will not keep paying for it.
• Do not cancel multiple credit cards at once if you want to keep your credit score healthy.
• Try to get all your credit card repayment due dates on the same day to make them easier to keep track of.
• Try contacting your credit card provider and negotiating better interest rates or fees, especially if you’ve maintained repayments over a long period of time.
• Avoid paying bills, buying prepaid cards or foreign currency as well as drawing cash using credit cards as these are considered cash advances and come with a pretty hefty fee.