How to: be more disciplined with credit cards

How to: be more disciplined with credit cards

If you’re considering opening a new credit card, you may worry you’ll overspend and get yourself into trouble.

And understandably so – the Australian Bureau of Statistics reported that the average household debt in Australia is $168,600, and the most common form of debt is credit card debt.

So how can you use a credit card responsibly? Let’s look at the best ways to stay disciplined.

Think of your credit card as a debit card

A great way to stay disciplined with your credit card is to treat it like a debit card. This does not mean that you can pretend your credit limit is your account balance. It means that you should never let your purchases exceed what you have in your checking account.

You should monitor both accounts regularly. Every two weeks or once a month, you should pay off your entire credit card balance with your attached checking account.

You may then be able to take advantage of the cash back or rewards programs connected with your card, and you may not have to worry about racking up debt. The Sydney Morning Herald says that you may be able to get around $200-300 per year in rewards alone.

But be careful with rewards programs. Don’t convince yourself you need to buy something extra just so you can get 5 per cent cash back. Rewards may only benefit you if you make purchases as you would normally.

You may then earn money on your usual spending, whether in cash or in airline points. Sounds pretty great, right?

Give your credit score a boost

Another benefit of credit cards is they can help your credit score. But don’t apply for a lot of cards at once – too many enquiries can impact your score negatively.

If you’re able to keep your credit card balance low, and you make payments on time, the longer you have the card the more it could boost your credit score.

Fraud protection and insurance with credit cards

Credit cards can come with other benefits aside from cash rewards. You can receive (sometimes complimentary) travel insurance through your card company, as well as price and purchase protection insurance, Canstar says.

Most cards also protect you from fraud. Security protections may ensure that suspicious purchases are detected each time a transaction comes through.

So can you be disciplined with credit cards? Consider these benefits. Staying on top of your balance by using your card as a debit card could allow you to take advantage of rewards programs, protections and a credit score boost.

For more information about your credit score or card benefits, get in touch with us at Credit Simple today.

Credit Simple

Credit Simple gives all Australians free access to their credit score, as well as their detailed credit report. See how your credit score compares by age, gender and community and gain valuable insights into what it all means.

All stories by: Credit Simple