As your mum will warn you, they have sky-high interest rates and fees, tempt you to spend money you don’t have and if you do get one you’ll probably find yourself on a downward spiral of debt and debauchery which ends with you living under a bridge somewhere eating pigeons.
And she’s right, as usual.
Having a magic card that lets you access money you didn’t earn is like a block of cheese in a mousetrap for some people: you know you’re going to get a knock on the head but you still have to nibble at the brie.
But for others, perhaps those with a bit more self-control, credit cards can actually be a useful financial tool. Here are five ways to make a credit card work for you.
1. You’ll never be caught short
Having a credit card means that you’ll never be caught short.
Obviously, this assumes that you haven’t maxed out your card spending money you don’t have on things you don’t need (in which case you probably should have listened to mum).
If that assumption is correct, then a credit card can be a lifesaver in any number of potentially awkward financial situations, like when it’s two days before payday and you run out of, ahem, money.
Or when you forget to transfer funds from your savings account to your everyday account and need to pay for dinner.
Or when you’re in a foreign country and the closest ATM is an overnight bus ride away, but you just spent your last bit of local currency buying a third pair of hippie pants… You get the picture.
2. You can get (up to) 55 days interest free
Many people don’t realise that you generally won’t be charged interest straight away on credit card purchases (there are exceptions to this, such as when you take up a balance transfer deal or withdraw money from an ATM on credit).
In fact, interest only kicks in on the balance that’s left on the card after the due date for the statement period that the transaction occurred in, which in most cases is 15 days after the statement was issued.
A statement period lasts 30 days, so if you make a transaction on the first day of the period and pay the balance in full on the due date, then you will enjoy a free 55-day loan.
3. You never have to pay any interest. Ever.
Most providers allow you to direct debit the full balance of your credit card out of your savings account each month.
You can relax knowing that you’ll never get stung for forgetting to pay the bill, and you won’t have to fiddle around cross checking reference numbers against biller codes when you could be doing something else, like spending money on your credit card.
The icing on the cake is that you can be sure you’ll never pay the bank a cent of interest for using your card.
To make sure this works and avoid any nasty surprises, you’ll obviously need to make sure your savings account is topped up and you’re not spending too much on the card each month.
If you’d prefer to organise to pay the balance manually before the due date each month, it’s easy to that too (and you still won’t pay any interest).
4. You can pay to play the points game (and it’s good fun)
Many credit cards come with some form of rewards program, where using your card earns you points that can be redeemed for anything from frequent flyer points to a new toaster. Some even offer a free domestic return flight each year.
The flip side is cards that offer rewards usually charge a hefty annual fee, so before getting one you need to be sure that you’ll receive enough benefits to make the premium worthwhile.
To do this, first work out how many points you receive per dollar spent, known as the earn rate. Then think about how you expect to spend on your card.
From here it’s easy to look at the rewards available and get a rough idea of whether the program is good value for you, or whether you’ll ultimately just be paying to look like a baller with a platinum card.
Advanced players of the points game will research how to maximise the benefits they receive from their rewards program, whether that’s eating at certain restaurants or shopping at certain shops, or making the most of partner offers.
They’ll also keep an eye out for one-off deals, such as receiving a set amount of frequent flyer points for opening a credit card (and they’ll make sure to close them before they get stung by next year’s annual fee).
5. You can benefit from free insurance
If you’re paying to play with a premium card, chances are it will also offer free travel insurance and potentially purchase protection cover too.
Yes, their generic policies and may not suit your needs, and yes, you need to review the PDS carefully before you head off for a quick ski trip in Iran, but they’re there and they work. And if they are suitable for you, then they could save you money.
So, the root of all financial evil? Not if you block out the devil on your shoulder.
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