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News6 Things You Should Never Put On Your Credit Card
6 Things You Should Never Put On Your Credit Card

6 Things You Should Never Put On Your Credit Card

Credit cards can be pretty handy, but only if they’re used wisely. However misuse and abuse them, and they’re the scariest bits of plastic you’ll ever come across.

A survey on credit cards conducted for debt solutions and personal budgeting company Fox Symes found that of out of 1,006 people polled nationwide, more than one third (37%) or the equivalent of 6.9 million Australians, had either blown their credit card budgets or wanted to.

A recent ASIC review also found that 18.5% of credit card holders – almost 2 million Australians - exhibit at least one troubling debt indicator such as not being able to fully clear a debt or being in arrears on repayments.

Whilst things like clothes and concert tickets are common credit card purchases, there are certain things you should never, ever use your credit card for.

Your mortgage
Making a mortgage payment via your credit card is never a good idea says Anouska Linz, senior manager at mortgage lender State Custodians Home Loans. Firstly, you’d need to do a cash advance which would not only result in expensive credit card interest from day one, but you’d also then get hit with a cash advance fee. Then, if you’re only able to pay minimum payments on your card, not only will you run out of credit pretty quickly, you’ll also be paying as much as 20 per cent interest on this amount until you’re able to pay it off!

“If you’re struggling don't bury your head in the sand, or use another credit facility,” advises Anouska. “Speak to your lender about options. If it’s a one-off issue due to an unexpected expense, the lender may defer your payment to let you catch up with no penalty. If it’s more serious, there are hardship provisions that provide more ongoing flexibility to help you out.” If you have multiple debts and can’t keep on top of all the payments, seek out a specialist lender. “They can help you refinance into a loan that has more simple, manageable payments,” says Anouska. “It’s best to do this as soon as you know you’ll have trouble meeting payments because defaults can follow you around and make finance difficult for up to five years.”

A wedding
So the cost of a wedding in Australia is officially frightening. Back in 2012 a MoneySmart survey found the average wedding cost a whopping $36,200. And that wasn’t including the honeymoon. By putting the entire amount of your child or children’s wedding onto credit cards at an average interest rate of 16.82 per cent, you’d be paying back an eye-watering $42,288 over the next few years. The MoneySmart survey also revealed 18% of couples used their credit card, and 35% blew their budget. If you’re walking down the aisle later in life, create a different banking fund which you can top up for wedding costs – and research how to keep expenses down.

Holidays
Aussies sure do love to travel. In fact we’re the second biggest holiday spenders in the world, behind Saudi Arabia according to Visa’s Global Travel Intentions Study. However, putting a vacation on credit can saddle you with a debt that hangs around forever. A smarter strategy is to plan a more affordable trip whilst building up a vacation fund for a bigger trip.

Your groceries
According to MoneySmart an average Australian couple with children aged up to 14 spends $279 per week on food and drink or $14,508 annually. If you’re relying on plastic from a bank just to survive, it’s safe to say things are looking grim. A general rule of thumb is that credit cards should only be used for purchases you can live without. If you can’t, cut back on areas such as clothing and entertainment which aren’t so vital. Also consider reducing the amount of groceries you buy in the first place by wasting less. One NSW study shows each household throws away $1,036 worth of edible food each year.

A car
The 2015 Motor Vehicle Census reports there were 18 million vehicles registered in Australia - an increase of 12.1 per cent since 2010. However, buying a vehicle with credit should be avoided. Fox Symes’ director Deborah Southon says putting a car onto your credit card is risky. “This can easily cause you to max out your card,” she says. “If you miss a payment you can really damage your credit score. Plus, the interest rates on cards can be much higher than the rate of a car loan from a reputable lender.”

However, if you already have bad credit some lenders may not want a bar of you. “If that’s the case you need a specialised solution,” says Deborah. “Consolidating bad debts and getting a car loan in one hit, even if you have previous defaults, is much smarter than getting deeper into credit card debt.”

A dinner or bar tab
The average Australian spends a relatively lean $118 per month on alcohol cites a research study from Canstar Blue. However, many of us are prone to an expensive night of dining which can tip way over this amount.

Have any tips or advice on what to not put on your credit card? Leave a comment below.

Originally posted on .

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Brian
Brian from NSW commented:

I use my CBA Diamond Mastercard wherever possible, but I always pay off the full amount before the due date. It accumulates points which I allocate to Flightcentre overseas airfares. It also gives me free overseas travel insurance. I do my grocery shopping at Coles and accumulate Flybuys points/dollars which pays for all of my Xmas grocery shopping. Its a win-win-win situation for me. 

Stewart
Stewart from NSW commented:

Some years ago, my bank financial adviser said to use my credit card where ever possible BUT always pay it on the due date and above all, set a credit limit that you can afford. (Very important) Since then (several years now) I have not paid any Interest on my card, and it keeps me in nice wine from the Fly Buys that I accumulate. With interenet banking, it is easy to control your spending within your limits Stewart. Forster NSW 

Richard
Richard from NSW replied to Stewart:

Exactly. I have NEVER owed interest on my card. I pay it in full each month and meanwhile enjoy the convenience and the reward points ( small though they are). 

Pat
Pat from VIC commented:

i use my credit card in place of cash as much as possible but consider it as debit card. Pay it off as part of my weekly reconciliation of expenses resulting in zero balance every time.. and pocket the points at the same time which by the way paid for a return flight to China earlier this year. Play the banks at their own game with a little will power.. 

Someone
Someone from WA commented:

Credit cards are one of the few ways to take advantage of the banks, the conditions of use and charges are simple to understand and clearly defined. 

Brian
Brian from NSW commented:

I simply don’t have a credit card. Debit card only with credit facility but can only use if the money is in the account. I agree with previous comments - I’m considering ING - as they’ve improved their usefulness after reading The Barefoot Investor by Scott Page; updated edition June 2017 

Maureen
Maureen from VIC commented:

I use my credit card to keep my cash card safe/er in this day and age. the simple logic then is I pay it back asap. Usually when I get home from shopping or at least weekly. 

Someone
Someone from VIC commented:

Anything you can't pay back when your next credit card payment is due. This is the only way you can get ahead. This is from an 84 year old pensioner with no other income who never defaults on her payment every month. My credit card is always zero the day after my credit card is due, and I use my card for everything I buy! 

Someone
Someone from WA commented:

We always use credit cards. They are really great. They are paid automatically by direct debit IN FULL days before the due date. We get all the advantages, none of the inconvenients. Even the yearly fee is paid from points earned by the cards... really easy. 

Gary
Gary from VIC commented:

We got rid of our credit cards years ago, and now only have a debit card. It offers the same function as a credit card, but it's your money you are using not the bank's, so there is no interest. Just top up when needed! And if stolen, the thief cannot use it to rack up thousands of expenses, unlike a credit card with a very high credit limit! 

Bernard
Bernard from QLD commented:

One of the worst thing you can do with your credit card is sign up for "direct debit". If something goes wrong and you want to cancel your direct debit you could find yourself in all sorts of trouble. Most banks won't let you cancel the direct debit. They will tell you to contact the vendor. If there is a dispute with the vendor they aren't going to cancel the direct debit and you will keep paying. I got caught once and it cost me money and hours of phone calls and letters. Never again. 

Someone
Someone from WA commented:

The heading says it all.. "6 thing" ..missing the S. Just like this article its missing Substance. A non Story. Here's me thinking it might be warning me about Something Serious like not using it at certain ATMs because there's a Scam or Something Or warning Somewhere that over 50s are being targeted Its a Claytons Story.. The Article You Have When You Don't Have An Article 

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