The Courier-Mail

TIPS TO GET RID OF YOUR CARD DEBT

How credit card lenders lure you in – and how to dodge them, by Emma Blake and So­phie Elsworth

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1. IN­TER­EST-FREE DAYS

Trick: Usu­ally 55 in­ter­est-free days but some cards can of­fer up to 62. But pur­chases are charged dif­fer­ently to cash ad­vances.

Tip: In­ter­est-free cy­cles vary from card to card. They usu­ally be­gin on a sim­i­lar day each month. Pay your bill off in full ev­ery month or your in­ter­est-free days won’t ap­ply.

2. IN­TER­EST RATES

Trick: Lenders will lure you in with rates rang­ing from as lit­tle as zero per cent but this of­ten only ap­plies for a “hon­ey­moon pe­riod” and not ev­ery­thing.

Tip: Rates vary on pur­chases, bal­ance trans­fers and cash ad­vances. Some card pur­chase rates are as low as 9 per cent so, if you are pay­ing more than this, shop around for a bet­ter deal.

3. MIN­I­MUM PAY­MENT

Trick: If you only ever pay the min­i­mum on your card ev­ery month it’s un­likely you’ll ever pay it off. It is usu­ally 2 per cent of the debt, so could take decades and cost a for­tune in in­ter­est .

Tip: If you can’t pay your debt in full each month try to pay more than the min­i­mum or switch to a bal­ance trans­fer deal that has a zero per cent pe­riod and use it to pay it off.

4. RE­WARDS POINTS

Trick:Don’t be fooled by the glitz and glam­our of flight up­grades and other “gifts”. You usu­ally have to pay a fee and spend a min­i­mum amount to qual­ify.

Tip: Only sign up to a re­wards pro­gram if you pay off your card in full each month or you are prob­a­bly los­ing money in in­ter­est charges which over­ride any re­wards.

5. BONUS POINTS

Trick: Lenders use bonus points and in­tro­duc­tory in­ter­est-free pe­ri­ods as their bait. They rely on you to spend up on the card with­out pay­ing it off in full.

Tip:Don’t be en­ticed by new deals. Look be­yond the mar­ket­ing tac­tics and work out if the card will suit you. If you are pay­ing your debt in in­stal­ments find one with the low­est rate to save money.

6. BAL­ANCE TRANS­FER

Trick: A great way to pay off your card if you make the most of the zero per cent pe­riod. But you may lose the ben­e­fit of in­ter­est-free days if you spend up.

Tip: If you take out a bal­ance-trans­fer deal hide or de­stroy your new card so you make no new pur­chases.

7. HON­EY­MOON OVER

Trick: Once this ends on a bal­ance-trans­fer the card’s in­ter­est rate will nor­mally jump up of­ten to more than 20 per cent

Tip: Pay off your bal­ance trans­fer debt in the in­ter­est free pe­riod by di­vid­ing the debt by the num­ber of in­ter­est free months and make no new pur­chases.

8. OVER­SEAS

Trick: Think care­fully be­fore us­ing your credit card over­seas, es­pe­cially for with­draw­ing cash, as hefty rates and fees ap­ply.

Tip: Re­duce your card limit to keep your debt lev­els down. And even if you never spend up to your limit, the full amount is counted as debt when you ap­ply for loans such as a mort­gage.

9. CASH AD­VANCES

Trick: Just be­cause you have a $5000 credit limit doesn’t mean you should spend it as cash. Hefty in­ter­est rate charges ap­ply the minute you make a cash ad­vance and will cost you dearly.

Tip: Never use your card to take cash out as you’ll be stung in­stantly. There are no in­ter­est free days for cash ad­vances and the rate is of­ten much higher than for buy­ing.

10. FEES

Trick: An­nual fees and charges for go­ing over your limit of­ten ap­ply so read the fine print.

Tip: Choose a card with no an­nual fee but don’t go over your limit or you will likely be charged.

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