When managing personal finances, we are often told that owning a Credit Card is a bad idea. Double digit interest rates, minimum payments that takes you years to complete, the nasty hidden costs, how it is set up to manipulate people to spend and spend more. There are so much negativity surrounding credit cards, yet the number of credit cards holders in Australia is steadily on the rise. That said, credit card can be a highly useful financial tool if used responsibly. By choosing and using your credit card wisely, you can minimise the amount of money the companies take off you. The good news is you could end up saving money instead.
In the early days, the thought of owning bad debt or worse, having bad credit ratings really scares us. For that reason, we steered clear of any ‘bad debt’ which includes owning a credit card. Until one day, we read somewhere about collecting Qantas Frequent Flyer points through credit card spending. Excited about the prospect of getting free upgrade simply by doing what we are already doing, We did a bit more research. We thought to ourselves … we have been good so far with all our financial decisions, what’s the worse that could happen ….. right?
7 years on, we still own one credit card. We have never paid any interest, any late fees or any other fees, bar the annual fee of $A 99. It is a $A 99 well spent for us considering that we saved close to $3000 and collected a staggering 200,000 Frequent Flyer Points. This is just by utilising our credit card on a day to day transaction and reaping in the benefits. On top of that, the convenience and peace of mind owning a credit card provided us is second to none. What we have learned is, It’s up to you whether credit card companies profit from you . The main secret? easy…
Be the Customer Credit Card Issuer Doesn’t Want you to Be.
Here are 11 ways you can be that customer and keep your money in your pocket , instead of theirs :
Complementary Travel Insurance
In the 7 years we have had our card, we have taken 24 overseas trips and 7 interstate trips. In essence, we have saved thousands of dollars in travel insurance fees simply by owning a credit card which offers complementary Travel Insurance.
There are huge range of reward programs offered by Credit Card Providers, ranging from Altitude Rewards to Flybuys. The reward programs offer customers rewards points for any eligible purchases made. Reward points earned can be exchanged with perks or everyday necessities such as electrical appliances, gifts, grocery shopping and many more. This is particularly useful during the festive season. Collect your reward points from your purchases and exchange your points at the end of the year with Christmas Gifts for your loved ones.
No Foreign Transaction or Currency Conversion Fees
Our current credit card also offers zero foreign transaction fees for any overseas purchase in person or online. This allow us to carry less cash and spend less on currency exchange fees when travelling. Some debit and credit card charges 2 to 3% for foreign purchases and another 0.2% for currency exchange assessment fees, which could add up. This benefit is great as you can save hundreds of dollars in purchase fees when travelling or when shopping online simply by owning the right credit card.
Frequent Flyer Points
Credit Card providers, especially the major banks collaborate with airlines such as Qantas and Virgin to offer Frequent Flyer/ Velocity points. These points are rewarded for every dollar spent or by signing up. Some credit card offers a bonus of up to 100,000 points simply by signing up for a credit card. To put things into perspective, 100,000 points will buy you a one-way Premium Economy ticket from Sydney to Los Angeles, or a Handheld Dyson Vacuum Cleaner. Furthermore, you can also collect these points and use it in exchange for flight upgrades, home appliances, outdoor gears, holiday packages and many more.
For keen travellers some credit card offers complementary domestic flights and discounts annually and as a sign- up bonus. Depending on the time of the year you are travelling, you could potentially save up to $500 in free flights.
Credit Card providers are constantly upgrading credit card security and offering users with Fraud Protection Guarantee. Zero liability or fraud money-back guarantees meant that you can get a refund if fraudulent charges are made to your account. This offers users a peace of mind knowing that your card is secured and protected.
Complementary Concierge Service that comes with some credit card are sometimes worth its weight in gold. Especially if you are time poor or simply does not enjoy planning or organising anything. Tasks such as finding service referrals, sourcing and delivering goods, event planning , finding lost luggage and flight bookings are only among other things that can be done through the Concierge Services. Some of them even offer 24/7 services!
You can earn up to $450 in gift voucher annually. This can be utilised on everyday necessities such as grocery, petrol and household appliances.
Issuers are now also providing other complementary insurances such as Extended Warranty, Purchase and Price Protection Insurances. This would be perfect when travelling or when spending on appliances, where you no longer need to spend more on extended warranty.
Cashback are sometimes offered on credits cards. These rewards provide you with the opportunity to earn back money from eligible purchases, sometimes up to 5% of total value. One of the offer stated that the cashbacks are capped at $50 per month, totalling a good $600 a year. The cashbacks are converted to easy to use vouchers, or cash credited straight to your account. You can use this towards the annual fee or just about anything else.
Most popular freebies offered with a credit card includes movie tickets, theme parks ticket, free wines and complementary Virgin or Qantas Lounge access for you to travel in comfort and style.
Things to Consider
Before you go on to sign up for a credit card to access these perks, do your research further . Conduct an assessment on your financial situation. On top of that, try not to overlook some of these important factors:
- It is imperative to compare the potential costs of owning credit card against the value of the reward you would receive to help you decide if the benefits are worth the costs
- While credit cards do reward you on your spending, it is only worthwhile if you manage your spending accordingly. Make payment in full on time and avoid spending unnecessarily.
- The reward program must work for you. There is no point buying things you don’t need just to get points. Eg: Frequent Flyer Points are best utilised on flights and upgrades instead of goods. If you don’t travel much, perhaps a credit card offering Frequent Flyer Point rewards is probably not for you.
- Pay attention to the terms and conditions prior to signing up. Make sure you can meet the eligibility and minimum spending requirements. If these requirements are in line with your spending habits, then a credit card can offer an excellent value.
- Beware of any hidden costs. Late payment fees, admin fees or any penalty charges for exceeding credit limit to assist in managing your spending.