Credit cards can be a force for evil or a force for good.
One path leads you down the road of mindless overspending and monthly interest charges. The other path leads to points, freebies, reduced fees and increased happiness.
So for years I used my credit cards wrong. Completely wrong. As soon as my paycheck ran out I would put any purchases on the credit card. Leading to a bill at the end of the month. Then I would have to spend most of my next paycheck trying to pay it off, which lead to me being broke and ….you guessed it, putting more purchases on the credit card. Eventually I was thousands of dollars in debt. (That’s a whole other blog post.)
I think credit cards are difficult for a lot of people to manage, the temptation to spend that available credit is high.
So whats the answer? Well as my rich co-worker says “Credit cards are easy, you just pay them every month when the bill comes”
Is that like the weight loss advice “just eat less….duh”. Uh thanks, I never though of that *eyeroll
For both these problems the answer is simple but in practice not at all easy.
In reality we have to apply some strategies and new ways of thinking to really master the situation
In order to get the most out of your credit card you do actually need to pay it off each month. I suggest that you pay as you go rather than waiting for the surprise bill 30 days later. Every time you make a purchase transfer the amount from your checking account over to your credit card. No money in checking? Then NO PURCHASE FOR YOU. This is a way to start building discipline with credit card spending and never letting yourself get into credit card debt.
These days there are a variety of cards available including no fees, low interest or platinum cards with built in travel insurance (a nice saving if you plan to travel overseas soon). I like platinum cards as I’m a bit of a reward chaser.
However most great points/air miles earning cards have big fat fees. You’ve got to wonder if the fees are going to cancel out any points you might earn. So you do have to do a little math. How much money are you going to funnel through the card and are the rewards worth more than the fee. Credit cards compare NZ does a good job of rounding up all the different types credit cards available in New Zealand and is a good place to start if you are looking for a card.
Haggle those fees, call them up, tell them you are looking at a variety of new credit card options and are their fees negotiable? You don’t know if you don’t ask. If you have other business with the bank like a mortgage or term deposits they may be even more willing to negotiate fees with you. Every fee eats in to the value of the rewards so its important to try and get these as low as possible.
A lot of credit card companies are going to try sign you up for repayment insurance if you’re paying it off as you go then you don’t need this.
Once you feel like you’ve mastered credit card discipline you can start maximizing rewards. Put all your purchases through the credit card (excluding those that charge extra for credit card transactions), groceries, petrol, bills (energy online lets you pay your power bill with a credit card through an app with no extra charges), work expenses that you can claim back, all household spending should go through the card. You’ll be surprised how quickly it all adds up. Keep an eye out for bonus days where purchases can earn you double or triple airpoints. We’ve enjoyed thousands of airpoints over the years just by mindfully spending with the credit card.
Even though we are dedicated to paying our mortgage down early and building our savings we have also enjoyed small holidays around New Zealand thanks to rewards earned on the credit cards. We’ve even used points to purchase a Air New Zealand Koru membership (lounge access, extra baggage allowance) for that extra feeling of luxury while traveling. My feeling is that it’s certainly been worth our while.