Cutting credit card cost doesn't always require some scissors. Source: National Features
CUTTING up your credit card can seem a drastic way to solve a spending problem, particularly when you consider the convenience and reward points that a well-managed card can deliver.
Fortunately, there are ways to cut your credit card costs before grabbing the scissors.
MyBudget director Tammy May says it is vital to keep track of due dates, limits and payments to avoid getting stung. "Prioritise which credit card gets the biggest payment. The highest interest card should be paid off first," she says.
"Avoid cash advances because they attract much higher interest that can sometimes be up to 29 per cent.
"The biggest tip is to spend less than you earn."
May says every day she sees people running into credit card trouble, often because of a large unexpected expense.
Others use credit cards to fund their lifestyle and their income to make the minimum repayments. "Eventually the income is not enough to cover the minimum payments."
James Hutton, head of consumer cards at ANZ, says paying the balance in full each month is the ideal way to avoid interest, but simply making more than the minimum repayment can help.
"If you have multiple credit cards you should think about consolidating debts onto a no or low interest card," he says.
"Always make regular repayments and consider setting up a direct debit if you're worried you'll forget the repayment dates."
Savingsguide.com.au founder Alex Wilson says people can get trapped by not understanding the workings of a card's interest-free day period, which is effective "from the start of the bill cycle as opposed to the date of purchase".
"That leaves a lot of people vulnerable without realising it," he says.
Wilson says cutting up the credit card is common among people who realise they are not disciplined enough.
"The biggest trap is not to be pulled in by marketing gimmicks. It's often better just to go for a low rate that will save you money in the long run."
