How do credit cards work?

stickyfingers on 13/06/2015 - 20:07

So I've been seeing all the benefits on having a credit card (insurance, etc) but I don't really understand them?

I currently have a Debit Mastercard however I'm not really getting any rewards out of using it, but there's no fees for me so that's good.

What I'd like to know is this;
Assuming I'm using a 0% annual fee card like the 28 DEGREES PLATINUM MASTERCARD
with credit cards most have an interest free period, so if you buy something on credit for lets say, $100 then you straight away (well, during the interest free peirod) pay it back from your own money, will I be charged anything? So in theory, could I use it like a debit card?

Financial Credit Card

Comments

  • retiredfeline on 13/06/2015 - 20:10
    +1

    Nope, no interest if you pay before due date.

    They make money off mugscustomers who rack up large debts and don't pay off on time.

    One difference from a debit card. FOr DCs the max you can draw is what's in the backing account, unless there is some kind of overdraft facility. For CCs the max you can draw is the credit limit. There are cases where the former is useful.

    • stickyfingers on 13/06/2015 - 20:13
      +2

      So if I got this card, was smart about my money, only spent what I already have and paid it off before the due date it would be a debit card with benefits?

      • retiredfeline on 13/06/2015 - 20:17
        +1

        Just be careful to pay it all off on time, perhaps with a couple of days of safety margin. If you are even one cent short due to say a typo you lose the interest free period. If you are prone to dyslexia entering transfer amounts on web forms, e.g. entering $123.68 instead of $123.86, then round up the payment to the next dollar to have a bit of safety margin.

        You can also apply to get them to automatically take payment from your bank account, check for a form for that.

        • stickyfingers on 13/06/2015 - 20:43

          Ah okay awesome!
          I'm currently with Commonwealth for most of my finances, who would you recommend for getting an AMEX card with?

        • Pterodactyl on 13/06/2015 - 21:58

          @Jakiejake: you can go with Commonwealth which will let you easily review all your money together in Netbank (I find it handy), or you can go with a different card if you like their benefits better. Note that your income and past credit history will influence what card you can be approved for. Usually you start small and work up to a bigger limit if wanted.

          I set my credit card to automatically pay the full amount each month. Much easier and I recommend it if using it like a debit card (which I do).

  • SydStrand on 13/06/2015 - 20:45
    +1

    Depends on card. People use CC because 1) rewards, 2) credit rating (more important in the USA than it is here, though), 3) some cards like 28 Degrees offer better foreign exchange rates. If you're doing just fine with your current debit mastercard, just research which card gives what benefits.

    • stickyfingers on 13/06/2015 - 20:48

      Okay great!
      Thanks so much for your help so far by the way guys, I really appreciate it.

      With the stuff like Price Protection and Merchandise Protection on the 28 Degrees card, it sounds too good to be true. Is this really a thing?

      • nocure on 13/06/2015 - 20:52

        I think a lot of the cards have that feature now days…I use the Coles MasterCard which definitely does.

      • retiredfeline on 13/06/2015 - 21:20
        +1

        Note that the protection is only free if you pay off before the statement date, which is earlier than the due date. Read the fine print.

  • insular on 13/06/2015 - 20:47
    +1

    i missed a payment once, called up and got charges reversed only to have charges applied AGAIN the following month. why? apparently even if you pay your balance in full afterwards they charge interest for 2 months not 1.

    NEVER miss a payment with 28degress, free international transactions, how else you think they will make a profit?

  • mskeggs on 13/06/2015 - 21:09

    Note that you can withdraw money from a credit card (called a cash advance) at EFTPOS or at an ATM. This gives you the cash, but attracts no interest free period. You pay interest from the day you withdraw.
    I was surprised when I used a credit card to deposit some money at Centrebet it handled it as a cash advance and I had to pay (a couple of dollars, relax) interest for the few weeks until I realised and paid my monthly bill.
    So avoid cash advances!
    On the other hand. When we bought our last house we needed $5000 moved from one account to another to finalise the settlement, and being able to rock up to the bank and instantly deposit the $5k from my credit card was very useful, as the interbank transfer via 'pay anyone' would have taken time we didn't have.

    • elusive on 13/06/2015 - 21:37

      Also gotta be careful when you make "cash equivalent" purchases like gift cards, even on eBay. I got caught out with that 20% off sale.

      I always use the debit card for gift card purchases now.

      • hal9000 on 14/08/2015 - 04:38

        why is that?

        • elusive on 14/08/2015 - 14:15
          +1

          They can be counted as a cash advance, and you can be hit with a flat fee plus the cash advance interest starting immediately.

        • hal9000 on 14/08/2015 - 22:30

          @elusive:
          aah i see. thanks.

  • stickyfingers on 13/06/2015 - 21:54

    I've just been checking out the Coles Mastercard as I really want the purchase protection, but I can't find it "Purchase Protection" listed on their site anymore?

  • Davo1111 on 13/06/2015 - 22:26
    +1

    Generally the less annual fees, and the less rewards = higher interest rate if you don't pay the bill on time.

    i.e. $20 late fee + 20.99% interest

    People don't pay their cards off on time, and that's how they make their money.

    As per some of the benefits, some are ok, like flybuys/frequentflyers, some just send you a myer voucher every so often.

    I dont trust credit card insurances at all (flight/warranties etc), or any type of guarantee. I think you need to research people who have actually claimed on them.

  • cypher67 on 14/06/2015 - 01:16

    Credit cards are excellent if you use them with smart. I get around $500 worth of vouchers a year from my credit card and I've never paid a cent in interest, just bought stuff I would have bought anyway. Pay them off on time and be alert to some of the fee's some places attract, like when you purchase flights they hit you like $12 per person per flight … F that, that's when you do direct deposit. Only exception is overseas trips and my card also includes travel insurance. The insurance isn't as comprehensive as separate insurance but it covers you for all the common things and is more cost effective in the long run. Take into account how much you spend a year and what that would equate to in vouchers and compare it to the fee's on some cards. Its a balancing act and is what Davo1111 eluded to. Higher annual fee means more reward potential, but if you don't spend the dollars you will be worse off. I go through around $50k a year and use my Amex primarily which is triple points, well worth the $70 annual fee. Just remember a credit card is considered a debt regardless to if it is paid off in full and will impact your borrow potential, but you can always reduce your limit or cancel it when that time comes.

  • Bystander on 14/06/2015 - 19:50

    One thing that always used to frustrate me with credit cards was the payment date was different every month. If you're juggling your finances it's difficult to plan ahead and make a payment just in time.

    Once I called my bank and asked them for the payment dates for the coming months and they told me they didn't have that info to give out. Don't understand how a mortgage payment can be the same date every month but not a CC. Or is that a way for them to increase the chance of people missing a payment by a day or 2 and then being liable for the penalty?

    It annoyed me so much I stopped using CC's and just have debit cards now.

    • CyberMurning on 15/06/2015 - 06:48

      I never noticed that. Not the same date? Well one month isn't always 30 days so maybe this is the reason? Anyway use direct debit pay full balance this is easy. If you think you will not have enough cash to pay on due date, dont use CC!

  • Metamorphosis12 on 10/07/2015 - 11:08

    I was wondering, with credit cards, is it 30 days from when the purchase was made or is anything you buy in that month due at the end of that month? How do they calculate it?

    • stickyfingers on 13/08/2015 - 22:01

      You get a statement date and the interest free is until the time your statement is due.

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