Credit Cards Basics 101

• 

  Pandakiwi on 23/11/2016 - 14:21

  +1

  Yes you get some interest by keeping the money in a savings account, but credit cards are about the rewards, in general 1 some sort of point per 1$, works out to be roughly 1% return.

  I would recommend set up direct debit to pay off the balance, you get the maximum time out of the money in savings account.

  ANZ cards (free first year, massive bonus) are the best for first timers.

• 

  danield on 23/11/2016 - 14:29

  +3

  So best to get yourself a card with a points system and use the card for everything you can. The only thing I use cash for is my morning coffee everything else, groceries, fuel, trains, bills, shopping, drinks, meals.. whatever all goes onto the card.
  Be sure to pay it by the statement date each month.
  Advantages are you maximize your interest on savings or offset account, you maximize your point earning and really it simplifies your budgeting, as essentially all your day to day expenses are wrapped up into one monthly bill, over time you only need to have a quick look at your monthly statements to determine what your average spending is. Also you can track back purchase dates and proof of purchase for warranty on big items saves trying to save and find the receipts.

  • 

    illumination on 23/11/2016 - 15:58

    +1

    I use cash for is my morning coffee

    You should use the Hey You app!
    … and I can give you a referral code if you want a free coffee (which I'll get too).. LOL

    saves trying to save and find the receipts.

    I think you usually still need the receipt. All the transaction proves is you made a purchase worth $X at this merchant but it doesn't show what you've purchased.

    As an example, think about a situation where you a banana and an apple from Coles. The transaction just comes up as $2 debit - it doesn't break it down into the apple and banana. You still need the receipt for that.

    • 

      Deridas on 24/11/2016 - 07:53

      Yeah, the one time I used Hey You app I was charged an additional 20c. Didn't use it anymore after that.

    • 

      danield on 26/11/2016 - 11:18

      Thats why I said "big items" Im referring to the $500 purcahse of a TV at JB as an example.
      Much easier to scan my credit card statements for JB-Hifi and find that I purchased something witihn the 12months, at least I won't waste time looking for a reciept that was out of warranty.

  • 

    StevenUniverse on 23/11/2016 - 18:35

    Oh thanks for the tips, but is the surcharge they add on and the fees worthwhile enough for the rewards? That's the part that I cant wrap my head around.

• 

  Skramit on 23/11/2016 - 14:45

  +1

  From what I understand, you spend on your credit card when possible to keep more money in your savings account, then pay it off at the end of the month, am I correct?

  100% Correct.

  Same applies for people with a mortgage offset account. Spend all on CC to maximise cash in offset account to reduce home loan interest.

  In your case maximise savings interest earned.

  • 

    jellykingdom on 23/11/2016 - 17:17

    +3

    A tip that might seem stupid to some but it was a question that I had when i first got my CC…

    You only pay off the CLOSING BALANCE. Not the total balance owing on the card, and definitely not the Minimum Payment. Because you get X number of interest free days, so you don't need to literally pay off the entire card each month

    • 

      StevenUniverse on 23/11/2016 - 18:37

      Haha I actually haven't a credit card before so that's pretty handy to know.

      So I receive an email with the closing balance, and have 'x' amount of days to pay it off?

      • 

        jellykingdom on 23/11/2016 - 18:44

        Correct. Closing Balance + Due Date

        That way you won't end up accidentally paying off the entire card and wasting money unnecessarily

      • 

        StevenUniverse on 23/11/2016 - 18:49

        @jellykingdom:

        Phew! Haha I was thinking I would have to stop spending a week before the end of the month to not underpay!

        Thanks for the not so stupid tip!

• 

  RockyRaccoon on 23/11/2016 - 15:18

  +4

  Just keep in mind, at best you will get 3% on your money on your savings.

  If you fail to make a payment or are late with a payment.then your credit card will sting you 20%

  So you MUST be very disciplined using your credit card, One late payment could wipe out any gains you make in the year.

  Plus you have to often pay annual fees on the credit card.

  Look I do this all the time, but now the interest rates are very low, the real gains arent there.

  And some stores/vendors charge a CC surcharge.

  So start slowly learn the traps first

  • 

    Skramit on 23/11/2016 - 15:40

    +1

    Direct debit payment for the full closing balance on due date is a must. This is easily set up with your bank.

  • 

    jellykingdom on 23/11/2016 - 17:19

    Yeah i wouldn't really worry about your <2% interest in the savings account. It gets taxed as earnings, and you'll lose most to inflation anyway

    However if you have an offset account, then you'll be making real savings when you keep maximum possible money in there. Because you'll essentially be saving (tax free) at 4% or whatever rate your home loan is at

• 

  vicosads on 23/11/2016 - 15:30

  Just started doing this, got a bankwest zero fee to start with to see if it works for me, going great so far just paid off first month. Might move to a rewards card after christmas if all goes well.

• 

  illumination on 23/11/2016 - 16:03

  +3

  Here are things you need to consider:

  • What's your salary? Your salary can make a huge difference to the type of credit card you'll be eligible for.
  • Do you have any specific long term goals in terms of flying? If not, you can still get "generically" good credit cards. If you do, it can help with deciding what type of card you should go for
  • To elaborate a little on the point above, how often do you fly, how flexible are you with flying (in terms of dates/advanced booking periods), and what's your appetite for flying in premium cabins (Premium Economy, Business Class, First Class)? This is also a fairly important question which can also help determine what card would be right for you.

  Also as a general rule of thumb, if a merchant surcharges you for card payment, then don't pay with it. Pay with cash. As you said, you're wiping out the savings by paying a surcharge so why would you do it?

  Once you get more experienced and familiar, you can then determine what percentage surcharge you'd be willing to pay such that the benefit you get out of the points you earn outweighs the value of the surcharge.

  What I've learnt from Ozbargain and Point Hacks, particularly over the last 2 years, is that American Express cards are much much more valuable than Visa/Mastercard. There is always of course the issue of acceptance, but I've come to realise that American Express cards are, as an overall, so much better than Visa/Mastercards.

  I would also say, as Pandakiwi said, the benefit is more about the rewards rather than the interest you earn. The interest you earn is certainly not nothing, but is much less significant than the rewards you earn. Other notable benefits would be stuff like Travel Insurance, Extended Manufacturer's Warranty, Price Protection.

  However, given you're just starting out, I see nothing wrong with you just seeing the money earning you interest for longer as being the primary motivation/benefit. That's fine for starting out.

  • 

    StevenUniverse on 23/11/2016 - 18:47

    Thanks for the detailed reply!

    A lot of good food for thought, I don't fly very often, one or two trips to New Zealand a year and a decent overseas one every 2-3. And I'm not fussed about which class I fly.

    I was actually thinking about getting the AmEx explorer deal I saw on here with 110K points.

    has this deal or something equivalent come up frequently in the past before?

    May I ask how you determine if the surcharge is worth paying for?

    And do places like supermarkets and petrol stations surcharge?

    Thanks again!

    • 

      Deridas on 24/11/2016 - 07:57

      Most supermarkets and petrol station don't have surcharge.

      Always ask before you pay regarding surcharge, they'll tell you. The other trick is to look at the screen to ensure there is no surcharge before doing tap and go. I don't hand my card over for them to tap and go before that doesn't allow me to see the screen of how they're deducting before it's too late.

    • 

      illumination on 24/11/2016 - 11:08

      +2

      1-2 trips/year to New Zealand? That counts for something. The rewards points you earn throughout the year(s) will/can be used to offset the cost of your airfare.

      I think the AMEX Explorer deal is probably the best deal around at the moment.

      I would say the ANZ Black Credit Cards (Frequent Flyer/Rewards) are second.

      Key call outs of the AMEX Explorer Card:

      • 110k Membership Rewards points (equivalent to 82.5k Velocity/Asia Miles/KrisFlyer - the equivalent of 10x SYD-MEL one-ways excluding tax on Virgin Australia)
      • $400 Travel Credit (there is a $395 annual fee - the cost of which is essentially offset by this) usable on Car Hire, Flights, Hotels
      • Travel Insurance
      • 2pts/$ ongoing earn rate (equivalent to 1.5 Velocity/KrisFlyer/Asia Miles)
      • 2 Entries per calendar year to the AMEX lounge at Sydney International Airport (attached to the card so can't be resold)

      Smaller supermarkets/petrol stations may surcharge. The big ones don't.

      You determine whether the surcharge is worth paying for by figuring out what kind of value you'd potentially get out of using your points. Although in my first paragraph, I mentioned that you could use your points to fly to New Zealand. Whether you actually should or not is another matter.

      What you want to look at from here is:

      • How much is it if I have to pay cash for the equivalent an airfare?
      • Am I picky with airline? If no, look at the lowest price (and factor in any extras you'll need to pay for)
      • What time do I need/want to fly?

      If you have no real concrete plans, there is no real logic to it because it varies depending on the routes you look at. My general rule of thumb for myself is I will not pay the surcharge if it is greater than 1%.

      As an example, it would be somewhat silly to use points something like a SYD-MEL on Wednesday at 1pm because the cash cost would probably be cheaper than the points. On the other hand, using poits on a SYD-MEL on Fri/Sun night would be better value. Of course the trade off is that it's less likely to be available.

      All this logic is possible because the points system of Qantas and Virgin (and most "good" airline loyalty programs) have fixed points costs which do not fluctuate like the cash tickets.

      Do note we're only scraping the surface and there's a lot more to it, but if I elaborate it'll be too much to read.

• 

  Gooddeal21 on 24/11/2016 - 08:58

  Instead of the ANZ travel adventure you should go for the ANZ black which is free for the first year and you ll cancel it before a year and get another free one. Then you ll have time to see how you go with cc.