Six Credit Card Traps to avoid
Credit card can be dangerous! Many people in New Zealand today find themselves buried by inescapable debt that can be traced back to being overzealous in the use of their credit card.
Sure, credit cards are handy. They provide an easy way to purchase things online or if you don't want to carry cash around with you, but it's so easy to forget when you buy something with your card, you are incurring a debt. And, once you get into credit card debt, it can be very difficult to get out of.
That's why the team at Futurisk want to remind you of the six credit card traps you need to watch out for:
1. Extra Credit
Every credit card will have a credit limit - that's a maximum amount you can have owing on your credit card at any one time. When you first received your card the issuing bank will told you what credit limit is. As time goes by, the bank will offer to increase this limit for you - particularly if you have been paying your card off each month before the interest payment clicks in. BEWARE: this increased limit will immediately increase the chances of you overspending. That's what the banks are hoping for....to get you into debt so that they can make money off the interest you owe.
There was a time when banks didn't even give you a choice about the increased credit, they just put it on your card and called it a, "privilege." The law has changed, however. These days banks should ask if you want the extra credit. If the bank approaches you to ask if you want to increase your credit limit, decline their offer
2. Cash advances
Here's something a lot of people don' realise. When you buy goods with your credit card there is usually a one month credit free period, BUT, when you get cash out on your credit card you begin to pay interest immediately.
Avoid using your credit card to et cash out of the bank.
3. Card payment surcharges
Have you ever gone to use your credit card and had a vendor tell you it will cost you extra to put purchases on a card? That used to be illegal. These days it's considered acceptable provided the vendor tells you about the surcharge before you use your card.
I
still think it's a bit on the nose, however, and I refuse to pay such surcharges. Wether you do or not is up to you, but be aware, the surcharge is usually a percentage of the purchase price of our goods. That means, on a large item the surcharge can be quite high and can easily wipe out any saving you thought you were making.
4. Missing payments
Be careful, with some credit cards, if the bank does not get full payment the day it is due or before you will be charged interest in the full balance. The best way to ensue this does not happen is to arrange to have your credit card bill paid monthly by direct debit or internet banking, that way you never miss a payment.
5. Purchasing goods overseas
When you use your credit card overseas you will usually incur two fees: the first is the bank's fee. The fee is often associated wit currency conversion and may be called something like a "currency conversion fee."
The second fee is charged by the credit card company.
When combined, thee fees can add up to 3% (perhaps a little more) onto your purchase price. It doesn't seem much, but 3% added onto your overseas trip can become quite a large sum of money.
6. Lodging security
Sometimes, when you use your credit card to book overseas travel-related items,you will be charged interest immediately; e.g. if you use your card to book a hotel room for a trip you are to take three months' time, you may be charged interest from the time of booking rather than the time of staying in the hotel.
In a similar way, if you rent a car overseas the trader ma reserve an amount of credit to secure their payment or to cover any possible damage to the car etc. That means, you may find when you use the card it has less credit on it than you expected despite you having actually bought anything.
Most people know nothing about the lodging security until it's too late.
If you are travelling overseas with your credit card, or using it overseas with your credit card, or using it overseas from within New Zealand, it pays to find out first, what the various conditions of use are.
So, these are Futurisk's six credit card traps. One thing we cannot stress enough- avoid credit card debt.
What if I'm already in debt? If you find yourself struggling with debt right now, contact the team at Futurisk. We may be able to restructure your debt in a way that savs you hundreds, even thousands of dollars.
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