How much do you owe on credit cards?

I agree.

I have a few grand tucked away on a Visa Debit.

Plus some more in savings.

Then an every day account.

Credit Cards can go suck a big fat one

People who use credit cards are not necessarily as stupid as some people think they are.

As far as I’m concerning, having a few thousand dollars sitting a visa debit earning you $0 interest is not the best financial strategy.  You could have that money in a high interest savings account earning a few hundred dollars a year.  As long as you pay the balance off the credit card every month before the interest free period you wouldn’t be paying any interest.  There are plenty of low or $0 fee credit cards out there that wouldn’t cost you any money.

I have a credit card attached to my mortgage offset account.  All of my salary goes into my offset account.  I don’t get charged a yearly fee on the credit card as part of my mortgage ‘package’.  I put every single purchase on my credit card during the month (besides the ones that have a credit card surcharge).  I pay my credit card on the last day of the interest free period.  My money sits in my bank account offsetting my mortgage for up to 55 days longer using this method.  Oh, and I get reward points on the card - just enough to buy a $100 Bunnings voucher each year.

I guess my point is, as long as you can manage them and make them work for you, credit cards are not as evil as people think they are.

Agreed with Anna. I have $0 debt and a Visa debit for buying things that for whatever reason require a credit card number. Live within means and you are set.

Credit cards can be excellent for tracking spending as long as one is disciplined and diligent in paying them off at the end of the credit free period.

Credit cards basically allow you to use the BANK’S (!) money during the credit free period, while your own money can be sitting in a high yield online saving account.

Credit cards give you an itemised bill each month on exactly where you spend your money so you can track and alter your habits to suit.

Credit cards also are usually free, if you have a home loan package with the banks.

Credit cards also offer a whole host of other reward options, that over a period of time, can provide some vouchers etc.

To use them however, one needs discipline and never never have a credit limit greater than $5000.

It’s actually smart to have a credit card in reserve, visa debit cards are for people who cannot thrust themselves to manage their money.

I have a card with a limit of 38,000, not just for emergencies, but for investment as well.

eg. ANZ put out a share offer July 2009 I believe it was, I picked up $30,000 worth and sold them again just after they hit my account.

Sure as this was a “cash” transaction I needed to pay interest from the first day, but what’s 3 weeks interest payments when I made $4200 profit in those three weeks with someone else’s money?

Fast and easy credit is not just for buying plasma TV’s.

Think outside the square…

You can now get a Visa debit card with most banks, but when they were first being offered, a credit check was required. How do I know? Because I applied for and was rejected for a Visa debit card because I had no credit history. Oddly enough I could get a credit card with a $2000 limit via another institution.

@Tanya, I agree, only stupid people make generalisations like that.

OH, wait… d’oh!

I do get interest on the Visa Debit account and the rest of the money is tucked away in a high interest saver. You loose your interest in the high savers if you keep taking money in and out all the time. Best it only goes in and keeps climbing. Hence the link to the Visa Debit.

It’s a lifestyle choice.

I see my friends stress over their debt and I’ve chosen to live a debt free life.

Same as choosing to live as a vegan.

Personal choice.

BSwan - there are quite a few high interest savers where taking out money will still give you a high rate. I’m using UBank at the moment (6.51% if you deposit $200 in the acc which can be taken out without forfeiting the rate). That’s not the only acc but that’s the highest at the moment.

CCs make the bank money with the times you FORGET to make the payment. That would be my biggest issue, even though I’m really disciplined with money.

I pretty much use my Visa Debit as another version of my EFTPOS card where EFTPOS isn’t accepted. I have a “high interest” savings account (not high interest because it’s with a big bank paying crappy rates but better than 0%) at the same bank as my main transaction account which is linked to a visa debit. If I need more than a few hundred $, which I keep as general use money in my transaction account, I just do an instant bank transfer between accounts. If I need a lot of money NOW and don’t have the time to transfer, well I’d be asking myself why I need the money so urgently. I haven’t come across that situation yet!

Of course high interest accounts are the way to go - and I’ve never been with one that penalised you for taking your money out either… Shop around!
As for EM, well I happen to have 30k in my bank account so my lack of money management would not preclude me from speculative investing with short notice… If I wanted that…
I’ve never had a reason to get a credit card, as I’ve always been pretty good at saving and I’ve had a visa debit for 6 years. I never needed a credit card to get a debit card either - and I have 3 visa or mastercard debits with different banks. The only bank I haven’t had a visa debit with is ANZ because they wanted to charge for it and tried to sell me a credit card.. That and their poor deposit interest rates and exhorbitant transaction fees led to them being the only bank I’ve left.

Nova - you realise that most cards give you an interest free period (usually providing your paying off your card month to month in full).

With mine I put all my purchases on the card and then once a month when I get paid I pay off the last months closing balance - that way I have an extra month to earn interest on that money

Hi Michael

Yes I do realise that, and if it works for you, all the better.

For me, however, delaying the actual payment by a month would make it so much easier to let my spending get out of control (definitely a psychological thing!).

If I take the money out of savings straight away, it’s done and dusted, and I’m less likely to make any impulse purchases before my next pay.

Works for me, but each to their own.

Thats interesting because I’m opposite. I take out a set amount for incidentals such as lunch, a bus ticket, anything else I’d like to buy, and that amount has to last me the week. I like to see the cash in my wallet because it is easy to see if I’m overspending and reflect on where money is going when I’m handing it over. I find it easier to spend too much without realising it if I use eftpos because I can’t “see” the money. The best thing is if I get to the next weeks “allowance” and I still have money left I can go spend it all!

The best thing is if I get to the next weeks “allowance” and I still have money left I can go spend it all!
That’s what we avoid by doing it all on the cards. It is hard looking at the statement for Mrs Westies card, she makes so many transactions, but at least they are all there. Whereas is if she was spending cash, it would literally be impossible (been there, tried, it just lead to arguements over where the money went).

Cash? I think I withdrew $200 for something I didn’t think I could pay for with a credit card about 3 months ago. I’ve got $100 still in my wallet and probably about another $15 in change in my drawer - the rest has gone on lunches, junk food and other unnessecary spending which I would never do with a credit card.

Definitely, Tim. A bit of pain now means it’s a lot nicer later on.
My debt a few years ago was up around the 20k mark - now it’s at a very manageable 1.5k, and will be 0 in another month or two. Forego all unnecessary large purchases and get it respectable! Any new cash or bonuses (eg, tax return, govt stimulus package) got put on the card.

I use my CCard for everything - and pay in to the card via a large weekly direct debit from my bank account (just under half my take-home pay. A bit goes into savings, and a large chunk goes to rent). When the debt goes, I’ll change to balance transfer for the new purchases.

I like the freedom of a card, plus I’m part of a good rewards program (dept store gift cards are good). Once I got used to curbing temptation, I realised I can make my CCard work well for me.

Too right Tim, I only called my CC company yesterday to find out why I was being charged two lots of interest, one called cash and one called retail, and the guy said it was because I hadn’t paid my balance transfer in the first 6 months.
I got a payout figure and paid it out straight away and have started a new budget plan

I agree! This is similar to what I do. For me I overpay the mortgage, then when a bill hits I pay less that week on the mortgage and pay the bill off instead. The mortgage is always ahead then and I don’t have a credit card at all. There has been an occasional week where bills have meant I pay nothing into the mortgage that week. Happily that is fine as there is plenty already paid in the mortgage.

I’d suggest that’s because they’re a self selecting group Justine.
Not many people will want to write in about how they are poor financial managers and have a massive CC debt.
Much nicer to write in about how awesome you are.

Mike, you’re not my father-in-law are you?  He cycled a debt which grew to about 35k around and around through several credit cards and a personal loan for something like seven years.  Though he often got stressed, it actually worked for him.  He just had to keep the money moving, and every month he was always worried it wouldn’t quite work out.  In the end he decided to sell his house and pay off all his debts.
But to answer the top question, I’m one of those boring people with no debts.  I use a CC and pay it off every month.  I’ve got about 35k of savings spread between an ING online account, a share trading account which I never get the time to use properly, a speculative currency trading account which is a bit of fun but not actually profitable, and a small business I’m working on.  I prefer having no debt, but then you can do more if you borrow.  To each his own.

Blackadder, hopefully these suggestions will be of help.

In terms of cutting costs:

Have you gone over all your bills to ensure that you are on the best rates?

Have you taken the time to ring each of the service providers your bills relate to in order to negotiate even better rates?

Do you have any superfluous bills that can be cut? Foxtel etc.?

When was the last time you checked the health of your financial products? Are their better available? Are you paying fee’s that can be targeted?

In terms of shopping, how are you organising you purchase decisions? With things like food especially, as a society we throw out a lot of money on unused goods. Meal plans like weight watchers allow you to limit your spending and your waste. I use the Jillian Michaels plan myself. She gives you a shopping list and teaches you how to cook it at the same time. Everything you buy is used and it saved me a fortune.

Also with shopping, are you using the internet to its full potential? Not only can you compare to get the best prices, there are websites available now that let you download and print coupons.

Are you taking advantage of the available services like my-budget etc?

In terms of finding that little bit extra:

Are you claiming your tax deductions weekly? You can use a ‘request to vary taxation form’ (available via the tax dept. website) to have your employer take less tax out of your pay each week.

Are you getting the most out of you current financial products? Correct use of credit cards and loan feature can save big money. Many cards often have built in clauses that stipulate advantages (such as insurance) in the event of hardship or redundancy. It is worth while calling to banks and providers for a copy of your contracts to see what you actually have. You may be surprised at true extent of your entitlements.

If you wife has free time can she do things like sell craft on e-bay?

Can she start a club with neighbours in a similar position? Coupon shopping clubs that use mass coupons and the power of bulk orders can save a fortune and often as the organiser it is possible to earn extra on top depending on how you set the club up. Recycling clubs are also profitable if done right, and never underestimate child minding for friends.

Can you sell advertising? Large companies have things like stickers that go on your car without damaging it that they are willing to pay good money to have you drive around with. (Contact advertising agencies). This works for things like face-book and twitter too.
Are you able to barter services rather than pay cash for them?

Are you able to rent anything out? Renting out a spare room to a stranger is often not very desirable however renting out things like shed space for example is less intrusive and often far easier to manage. (you’d be amazed how many people want to borrow/store a working mower etc.)

Well, I hope something in all that was helpful. All the best.

I was once in a similiar position as you blackadder. I had 8k to go on my car loan and roughly around 4-5k credit debt. I managed to get 4k from some one who owed me. So i paid of the cards first. That left the Loan which i paid in two years. I kept paying the most high interest account first. Mean while i had a little money box that a threw mine and my husband loose change in.
At the end of the month I’d take that change bank it, and than instantly pay the loan with it.
I’m still in debt today, which was my own fault, and should have been paid of by now, but circumstances arrive that you can not forsee.

Chin up, I have sold stuff on ebay, and now sell accessories to family and friends. Even managed to sell some educational dvd’s for children for a neat profit.

If you have enough borrowing capacity, you could try recycling the CC debt onto credit cards with a promotional interest free period (usually 6 months or so) until you get yourself sorted. I’d recommend doing this AFTER you refinance anything with home loans (assuming you aren’t rolling it into your home loan) since it can affect your home loan borrowing capacity.

As long as you are whittling down the debt and not increasing it, recycling the debt onto interest free period credit cards is a good strategy.

ahh yes, Interest free is great as long as you understand the terms. Usually you must make one payment in a month or similar. I set up a scheduled payment to cover that. Then just before the interest free period ended I paid a lump sum to get rid of it.

You have to read the fine print, but my interest free loan saved me about $900 with the money offsetting the mortgage instead.

cretin,

People that have self control are the ones that SHOULD have credit cards.  Those without self control are the ones who should avoid using them.

By having a credit card you get many benefits:
- free travel insurance
- extended warranty
- concierge service
- rewards program

Plus, if you’re sensible, then you can utilise the interest free period.  What I mean is that you put as much as possible of your regular expenses on your credit card, and keep the cash in a high interest account (or preferably a mortgage offset).  Then on the last day to pay, pay the account in full.
This way you earn money from having the card!

I don’t like that you’re wheeling out the lines “common sense” and “self control”.  All this does is put down people that use the cards, and highlight your lack of financial knowledge.

Back OT - I do the above myself and currently owe $2500 on my credit card.  That will be back to $0 at the end of the month.

Scott,

personal discipline in only buying only what you need, when you need it, (and not buying stuff just cause i have a credit card),.... means that when a person HAS self-control, he/she DOES NOT NEED a credit card, and therefore shouldn’t have it.

Do you understand the logic??

Besides, i have found the value of the ‘benefits’ you mentioned outweighed by the costs of having a card (besides the no-fee ones).

I am in a much better position simply keeping my cash in an online high interest or mortgage offset account than.

Sure i miss out on some interest free days, but i feel the value i get from them out of everyday purchases is minimal.
For example: 55 days worth of 6% interest (that i could have earnt elsewhere) on a $70 grocery bill is 63.3 cents.

Unless you’re a big spender, it doesnt add up to much over the year.  And if you are a big spender, then it doesn’t really matter whether you have a credit card or not since you are spending all your money on crap anyway!!!

And the extra hassle of ‘another account’ to manage that can easily charge you $100 by simply missing a payment by one day - is not worth the headache.

My property, shares, and over $100k in the bank by age 35 on a modest income are testimonial to this.

See I think the point is that if you can have the money on your home loan for the 55 days it makes it worthwhile. Without the home loan I would have to agree you are much better off without the card.

If you have a home loan and a credit card and you are not doing things in this fashion you are paying more interest than you need to on your home loan.

Ahh, interest free.  I feel a little morally guilty about it, as it relies on people not being able to pay it back in order for me to never worry about paying interest on large purchases.  Other than that though, it’s essentially free money as long as you understand the terms.

Whatever happened to willpower and commonsense in people?

And this response is why the majority of comments are from those who have no debt.

Not everybody in debt has lacked will power or common sense. Some through circumstances out of their control may have got into debt.

Ever considered being too sick to work full time for 1.5 years but needing to pay medical bills not covered by medicare.  Not everybody has a support system to help at times like this.  IE no family to move back in with to live more cheaply. There wasn’t cable, smoking, alcohol, mobile, going out, a car, expensive clothing or high living etc to cut from my budget.

When I was able to start working full time, I was only able to do low stress & low paying jobs.  It can take a heck of a lot of time to reduce a debt if you’ve only got $10 extra to the minimum repayment.

Being in a debt trap doesn’t automatically equate to a character failing.

Cretin,

“personal discipline in only buying only what you need, when you need it, (and not buying stuff just cause i have a credit card),.... means that when a person HAS self-control, he/she DOES NOT NEED a credit card, and therefore shouldn’t have it.”

I can see what you’re getting at, but it still isn’t what I consider wise.  I only buy things I need, and only when I have the money, but I put it on my credit card to:
1) Get the reward points
2) Get extended warranty (if applicable)
3) Hold on to that money for another 55 days and earn interest on it (or in my case reduce interest on my mortgage)

When you add all that up, plus the free travel insurance that I or my wife use yearly (saved us $300 just last month), you will see that the paltry $129 I pay for the card is repaid many times over.

So no you don’t need a credit card.  But you can definitely be in a better place financially with one.
I haven’t paid interest on this credit card, ever.

I think paying attention to your expenses is the bravest thing anyone can do!! Good luck!

debt doesn’t just magically follow you though, you have made sure that it does

I think that is rather foolish. All of those credit providers will be running a credit history check against your name every six months - and those stay on your credit history for five years. Good luck trying to get a home or investment property loan. I owe about $1000 on my amex card - paying it off each month without interest.

James, hmmm, let me see.

Existing mortgage - check.
GREAT credit history - check.
Good Financial management - check.

AFAIK, credit providers don’t actually pass on this sort or information AS YET. They’re not allowed to. There was some chatter on a news story about 5 months ago where the credit providers were agitating to be allowed to do this - more to catch dodgy card applications - but weren’t able to do so currently. And even if they did, with my cards being paid off when required, my history is completely clean, plus the fact that I already have a decent mortgage.

I sleep OK at night.

Fat Pat, your mail is incorrect.

Every balance transfer is a credit application. Every credit application is logged on your credit file. Just request your credit file from Veda Advantage or Dun and Bradstreet and you’ll see for sure. Every time you apply for credit, credit providers are entitled to pull your credit file. Even a pre-approved balance increase is logged as a credit application on your credit file.

It’s great that your system is working for you, but it may not work for other people.

debt is still debt though. Job circumstances may change, or you may be needing to apply for extra finance and that debt (that never gets paid off) may get in your way.
but, not my problem

Dental work has accounted for some of my CC debt this month. I had to pay in advance.

Then the health insurer sent a cheque for the same amount, which went onto the mortgage.

So in a sense, a rather large dentist bill gave me $1200 for about 30 days interest free!

I am sorry but if we all waited until we could “afford” to have children then the greater population would never be able reproduce!!!!!

Yes and no, the plan was to get married about a year later when we would well and truly have had the money saved up, but for a few different reasons we brought it forward. We knew what we were getting into, knew it would be on the credit cards with high interest rates. What I wasn’t prepared for was how uncomfortable I would feel about that level of debt. We could have transferred them to lower interest cards and just kept plugging away as we planned but I spent way too much time thinking about it and getting worried about it.
It has made me really debt averse!
The wedding was fantastic and considering we both come from large families that all had to be invited we could have done a lot worse than $15k.
However, I won’t be putting myself in that situation again.

I think mortgage redraws are a great way to reduce debt.  Sure, it serves a great purpose by reducing the mortgage, but at the end of the day is the 7% interest your saving on the mortgage better than the 17% on the credit card?

Using those assets wasnt a bad thing Boredatwork, its sensible for your situation.