We know it can be easy to lose track of your credit card spending if you don't keep an eye on your purchases. However, using your credit wisely can help you organise your budget, as well as take advantage of rewards and points programs, for example.
It is important to wisely manage your credit card to make sure you're only getting the best of it, so we collected some tips to keep your credit card spending healthy.
1. Keep track of your spending
It can be very easy to rack up more debt on your card than you can afford to repay, so it's important to stay in control.
The best way to do this is to keep track of your spending. Most credit card providers have online apps where you can track your spending. Make sure you know how much you're spending and regularly check your credit card statement.
2. Pay your credit card on time
When you get your credit card statement, check the date the payment is due, and make sure you pay on time. This will help you avoid extra interest charges or hefty late payment fees.
To make it easier to pay on time, consider setting up a direct debit to pay a fixed amount off the balance owing each payday. Just make sure these payments cover at least the minimum monthly payment due on the card.
3. Maximise your credit card repayments
If you only make the minimum repayments on your card each month, you'll pay a lot of interest and it could take years to pay off your credit card debt.
If you're struggling to pay more than the minimum monthly repayment, consider switching to a card with a lower interest rate, and pay off more when you can. If you switch, make sure to close the old card so you don't wind up with more debt.
4. Set a sensible credit limit
Your credit limit should be an amount you know you can repay, and one that won't tempt you to spend more than you can afford.
If you can't afford to pay off your balance each month, don't increase your credit limit. A higher credit limit makes it too easy to get into more debt.
Reducing your credit limit
If you want to avoid the temptation to overspend on your card, ask your credit provider to reduce your credit limit. You can do this by phone or by visiting a branch. From 1 January 2019, you will also be able to reduce your credit limit online. In most cases, your account will be updated within 1-2 business days.
Invitations to increase your credit limit
Credit card issuers are not allowed to send you invitations to increase your credit limit in any way (including by phone or online) - even if you previously opted to receive these offers. This applies to both new and existing credit cards.
You can ask your card issuer for an increase to your credit limit at any time.
If you need to increase the limit to make a special purchase, aim to pay the debt down quickly, then lower your limit back to a more manageable amount.
5. Don't use credit to make ends meet
If an unexpected emergency happens, or if you're just running low on cash before payday, using credit or taking a cash advance is not going to work for you in the long run. It might get you through the immediate crisis but, over time, you'll end up even more debt.
If you're having problems paying debts or dealing with bills such as mortgage, fines or utility bills, try to contact the your provider, or debt recovery agency to try to negotiate the payment.
6. Use store cards wisely
It can be tempting to get a store card if you shop regularly at a particular retailer. Purchases paid for with these cards might earn rewards points or give you access to discounts or other exclusive offers. But think twice before you sign up for store cards, as there are often fees attached (like annual and service fees), and the interest rate might be higher than other cards.
Check the terms and conditions carefully to make sure any potential savings you might earn won't be eaten away by fees and charges.
7. Check your credit card statement
The best way to check your monthly statement is to keep all of your credit card receipts each month, then tick them off against the charges on your statement. This will help you check that you have been charged the right amount for the things you bought, and that you have not been charged for anything you did not buy.
Even if you don't keep your receipts, here are some things you should look for when checking your credit card statement:
- Charges by companies you do not recognise
- Large or unusual charges
- Changes in direct debit amounts
- Duplicate charges
- If there are any transactions you didn't make, contact your credit card provider immediately, as they may be able to reverse the transaction. See unauthorised and mistaken transactions for more details.
8. Close your credit card properly
There's more to closing a credit card account than just cutting up the card. You can cancel your credit card by calling your credit provider or online through your internet banking or mobile app.
Take charge of your credit card and make sure you only pay for expenses you have authorised.
Have any other tips? Share your comments below.
Also, check out the different types of credit cards here.