Why it’s time to cut up your credit card
SOPHIE ELSWORTH
DEBT TRAP:
HERE is a new year financial challenge for you: grab your wallet. Remove your credit card(s). Never let it leave your home again, and stop using it from now. Right now. Try it. Now see if you feel a little naked or suddenly insecure about your finances.
Don’t cheat, either – if you have your credit card sitting in an app on your phone for tap and pay, remove it.
Australians have arrived in 2019 rolling in mountains of card debt.
Latest Reserve Bank of Australia figures show Australians owe a massive $51.5 billion on plastic, with $31.7 billion accruing interest. We also threw $1.5 billion down the drain in the 2017/18 financial year by wasting it on credit card fees.
It’s time to get real with yourself. These are the reasons credit cards are hurting millions: ● CARD rates are often above 20 per cent. ● CUSTOMERS fail to pay them off in full each month. ● SHOPPERS make purchases they otherwise wouldn’t if they had to use their own money. ● REWARDS points are a farce. (In some cases you have to spend more than $50,000 to get a toaster worth $100.)
It’s time to bite the bullet and look at paying down your debt and then getting rid of the card. That way there’s no temptation to splurge.
I must confess I have a credit card, but it’s only for work expenses. I never pay interest or any fees.
But too often I see friends with credit cards buying crap they don’t need to make themselves feel better.
And, what does stun me is the number of credit card customers who can puff out their chests and say they have savings, yet are also saddled with a credit card debt.
This makes absolutely no sense. Why would you carry a card debt attracting an interest rate – often about 20 per cent – and pay interest every month, when you have savings in another account that is probably getting dismal interest returns of about 2-3 per cent? This is just plan stupidity. A friend told me she was doing this, so I encouraged her to use her savings to wipe the card debt so she could be free of it once and for all.
She said she couldn’t because the savings gave her “security”, knowing she had some cash in the bank. Gee, I bet her bank loves her.
As our credit card statements start to roll in during the coming weeks, for many cardholders they’ll be a rude shock when they see their balances owing.
That festive blowout always catches up with you.
There are plenty of credit card changes that just kicked in from January 1, making it tougher to get cards.
This includes proving you can pay back a card’s limit within a three-year period.
So get real with yourself and stop using credit once and for all.