If you are not disciplined and find your credit card too tempting, then you might be better off cutting it up. Credit cards can get you into financial trouble, particularly if you are an impulse buyer. And of course, if you already owe money on your credit card, then paying it off should be your top priority.
According to MoneySmart’s debt clock, Australians have currently racked up nearly $32 billion in debt, with an average of $4,200 per cardholder and interest payments of more than $700 per year. That’s a lot of debt!
But it’s not all doom and gloom – credit cards are not the source of all financial evil.
If you do have the self-discipline to manage your spending, there can be some great advantages to using a credit card. Here are 13 ways credit cards can make your life easier.
1. Rewards programs
There are many credit cards that have great reward programs, but they need to work for you. There is no point overspending or buying things you don’t need just to get points. So, think about how you use your credit card and then choose which program would benefit you most. You can spend credit card rewards points on all sorts of things, from flights and car hires to petrol and grocery shopping.
Also, check if there is an annual fee for the card. Sometimes these can be paid for with points but you need to make sure you would earn enough points in the year to pay off the fee and get something with the leftover points.
2. Frequent Flyer miles
If your lifestyle is one that involves a lot of travel and time spent in airport lounges, then a Frequent Flyer credit card might be the right option for you.
These cards are very similar to rewards cards in that you earn points by making purchases, but they are made with the purpose of spending said points on flights, lounges and concierge services. You can also spend points to upgrade your existing economy seat to business and first class.
However, if you like spending points on things like gift cards and everyday stuff, then a Frequent Flyer card probably isn’t right for you, as the rates for these purchases tend to be comparatively poor.
You can compare Frequent Flyer cards on the market with Canstar, by using the comparison button below or by following the links in the table.
3. Signup bonuses
Many credit cards offer attractive bonuses that reward you for signing up with them, such as large amounts of bonus points, complimentary flights, low or nonexistent fees and other long-term perks, such as promotional and reduced interest rates.
However, not all cards with a signup bonus are good value, so you need to have a close look at the terms and conditions before applying. Chances are, there will be certain requirements that need to be met, such a minimum expenditure in the first few months. If these requirements are in line with your spending habits, then a credit card with a signup bonus can be excellent value.
As opposed to Rewards cards, which earn you points for spending money on certain things, cashback cards pay the money back into your account. These cards will save you money based on your monthly expenses, and the amount you’ll get back will depend on the credit card’s cashback rate. The right card will earn anywhere from 1% to 5% back on your purchases. Depending on where you shop, certain places will even give higher rates of up to 10% for certain purchases during bonus periods.
5. Complimentary travel insurance
Most credit cards come with a number of consumer protections, including rental car insurance, purchase protection insurance, extended warranty insurance and even travel insurance. According to Canstar data, more than one in five visitors to our site look for cards with travel insurance attached, making it one of the most in-demand features around.
These complementary extras can save you a great deal of time and money as well as peace of mind, so it might be worth looking for credit cards that offer travel insurance.
6. Price protection insurance and purchase protection insurance
As well as travel insurance, popular features that come with credit cards are price protection insurance and purchase protection insurance.
Price protection insurance is a form of insurance that, if you can show proof, will pay the difference to your credit card account if a product you bought has dropped in price. This type of insurance does not cover purchases made outside of Australia, and terms and conditions will apply based on each different lender.
Purchase protection insurance, on the other hand, covers new items that you buy against theft and accidental damage for up to six months from the date of purchase. So say, for example, if you buy a new iPhone and drop it in the sink, you can make a claim for the amount that it cost so you can buy yourself a new one.
As with price protection insurance, terms and conditions apply.
7. Fraud protection
With the wealth of scams and phishing attacks that are occurring today, it is reassuring to know that the vast majority of credit cards on the market cover security and fraud protection, keeping your money safe from fraudulent purchases.
For example, Visa credit cards have the ‘Verified by Visa’ technology in them, which instantly monitors your account for suspicious purchases. If your card is used fraudulently, you can simply notify your credit card company. Doing so means you won’t have to pay for that transaction while they sort out a new card for you.
8. Convenient and safe online shopping
Not only are credit cards convenient to use for daily point-of-purchase shopping, but they’re also much easier to use online. As mentioned above, most credit cards now come with several layers of security and fraud protection, so you’re at little risk of losing your money when making online purchases. Most sites also give the added benefit of saving your credit card details. If you’re using a reputable website that you trust, this can be a great way to save time on future shops.