High fees and sneaky interest hikes could be draining your finances.
There’s no denying credit cards are useful but there are also important traps to avoid. We look at simple steps to play your cards right.
Check the rate you’re paying
If you’re not sure about the interest rate on your credit card, take a look at your latest card statement. You could be in for a nasty surprise.
While home loan rates have tumbled, the average card rate has skyrocketed from 16.9% p.a. in January 2015 to 17.03% p.a. at present.
Sticking with a high rate card means wasting money because cheaper options are available. Some low rate credit cards for instance, offer a rate under 10% - not just on purchases but also for cash advances.
Annual fees can really stack up
Annual card fees have also climbed steadily, up from an average of $89.39 in January to $94.46 in April 2015.
Unlike interest charges, which can be avoided if you maintain a zero balance on your card, the only way to sidestep annual card fees is by opting for a card that has no annual fees altogether.
Card rewards – not always rewarding for your circumstances
We all love to get something for nothing, but reward-based credit cards generally charge rates at the higher end of the spectrum, and the cost can easily outweigh any freebies. One Canstar study found that on a card balance of $5,000 you’d need to spend $122,787 on the card just to earn enough rewards to cover the interest costs.
Unless you’re a seriously big spender, it can make better financial sense to stick to a low rate card offering generous interest-free days and zero annual fees. It’s an easy way to minimise card costs.
For more advice on playing your cards right, call ME on 13 15 63 or visit mebank.com.au/creditcards.
Members Equity Bank Limited ABN 56 070 887 679 Australian Credit Licence 229500