Money myths debunked
Forget the mistakes and misconceptions. We bust three common money myths to send your wallet soaring.
When it comes to money matters it’s important to sort the facts from the furphies. We clear the air to help you get ahead financially.
Myth 1 Avoid credit cards – it’ll all end in tears
Let’s be clear on this one. Credit cards need to be used wisely because, yes, they do offer scope to overspend. And if you have one of those cards charging interest rates of 20% or more, that’s going to cost you dearly.
But that doesn’t make credit cards universally bad.
Credit cards are far safer than carrying wads of cash. They’re incredibly handy in an emergency, and these days it’s hard to book a hotel, restaurant table or even movie tickets without handing over card details.
If you’re just starting out, credit cards also let you build a credit score, something lenders will look at when you’re ready to buy a car or home.
But - and it’s a big but – don’t pay more for your card than you have to. Look for a low rate card charging the same rate for purchases and cash advances, with zero annual fees. They do exist. Check out ME’s frank credit card*.
Get this part right, aim to pay off the card in full each month before interest charges apply, and it can be hard to go wrong.
Myth 2 – No one ever pays off their home loan
Oh really? Tell that to the one in three Australians who own their home outright. They owe nothing on their home loan, no monthly repayments, and no worries about interest rates. Just sweet, uninterrupted home ownership.
Join the club with a few simple strategies. First, check the rate on your current home loan. It’s harder to clear the slate if you’re paying more than necessary. Switching to a lower rate loan can see you enjoy home loan freedom sooner.
Next, add an extra dollar or so to your monthly repayments. Paying a bit more is a guaranteed way to get ahead. If you want to hold onto the cash, think about an offset account. It’s a transaction account linked to your home loan – the cash balance is deducted from the loan when interest is calculated, so it’s a smart way to make more of each payment whittle away the balance.
Myth 3 – I use an online savings account so I earn a high rate
Don’t be so sure. Plenty of banks offer eye-catching rates on online savers. Take a good look at the fine print though. Chances are it’s an introductory rate that only lasts a few months. After that the rate your money earns could sink faster than the Titanic.
Don’t be lured in by short term sweeteners (unless you like the idea of shuffling money around from bank to bank every few months). You’ll likely to earn a better return overall by using an online saver offering a consistently healthy rate.
*Credit criteria, conditions, fees and charges apply.
Members Equity Bank Limited ABN 56 070 887 679 Australian Credit Licence 229500.