Credit Cards are they worth it?

hctan on 19/03/2013 - 21:40

Hey guys, I just entered the rat race and have been working close to two years. I have not applied for any credit cards as my CBA debit mastercard more than helps me out, if I need to pay any speeding infringements (used too :)

Is a credit card worth my while? I am a careful spender and always do heaps of research before spending money. So my card would be more for getting rewards eg (free wine or overseas insurance)

Any ideas and tips as I would be seriously looking to buy a house/apartment in a few years time once I have saved enough.

Thanks all!

Financial

Comments

  • retiredfeline on 19/03/2013 - 21:51

    If you don't feel the need for it then leave it be.

    Personally I don't care about points since I don't spend enough to be worth my while to chase. Cards are useful to me for online shopping and travel. Also essential for some things like renting cars.

  • narbe on 19/03/2013 - 22:04
    +2

    Depends on your spend.
    Most reward programs require you to spend at least 20-30k before its worth your while.
    As in you will break even with an 80-100$ annual fee.

    For eg. if you spend 30k with say a woolworths card $1= 1 qantas point
    that's 30,000 points thats a domestic flight.

    That can be valued between 80-150$ with qantas or more depending.
    I'd say thats the best use of reward programs
    ;
    some like to go with gift cards programs.

    Other credit cards are for online transactions with no fee and good exchange rates
    eg. 28 degrees

    $ 0 annual fee , great for buying stuff using other currencies.
    Eg. amazon, ebay ect cetera
    Very good exchange similar to online XE exchange rates

    This all assumes your good with your financials and pay off your credit card every single month completely without fail.

    The usual disclaimer applies, my advise is not professional financial advise.

  • scotty on 19/03/2013 - 23:56
    +1

    If you spend a bit of time on OzBargain — get at least the 28Degrees Master card which saves on international transaction fee (+ zero annual fee). They do add up when you start shopping at Amazon, TheHunt, BookDepository, etc. Having a credit card also helps you build up your credit history.

    • JoJoker on 22/03/2013 - 00:52

      Hi scotty. I'm in much the same position as hctan and I'm thinking about getting the 28degrees card. I have no credit rating at all so that is the main reason I'd be getting it. I'm a student with good self control so there won't be a lot of money going through it, however. Can you run through the pros and cons and ins and outs of the card? Is there absolutely no chance of fees provided I pay off the card as I buy (or monthly, whichever)?

      Cheers

      • scotty on 22/03/2013 - 10:26

        Not too sure about students — it would be easier if you have working history or has previously owned a credit card.

        As of pro & con, pros:

        • Fee-free international transaction
        • No annual fee
        • You can get Shopper's Protection Insurance — for "free" if you can pay off your balance before the statement is generated (otherwise 0.5% of the monthly closing balance, something you need to opt in)

        Cons:

        • No reward
        • Internet banking is a bit primitive
        • JoJoker on 22/03/2013 - 10:40

          Thanks. I suppose the only way to find out is to apply. Would I have any luck bargaining with them? Like, set a $500 monthly limit for the first few months as a trial? Or is it likely a system and not a person that I'll be contacting?

        • retiredfeline on 22/03/2013 - 10:44

          There's probably a formula based on the info (income, debts, assets, existing lines of credit) that you supply them.

  • hctan on 20/03/2013 - 08:40

    thanks guys. I am looking at the cards that give you an extended warranty of 12 months of items you purchase from Australia!

    http://www.creditcardfinder.com.au/bankwest-zero-platinum-ma…

    hopefully they approve me! does anyone know the requirements?

    So if I pay off the amount before the interest period, I dont get charged any interest right?

    Cheers!

    • scotty on 20/03/2013 - 09:03

      Yes that's correct. As long as you pay off the full amount on the due date of the statement there will not be any interest rate charge.

    • YadaYadaYada on 20/03/2013 - 21:27

      You need to be eligible for an 8K minimum credit limit for this one.

  • DrStinge on 20/03/2013 - 08:49

    I use my credit card to make all my normal purchases which allows me to collect the interest on the balance for an extra month..

    I only recommend one if you have enough to pay it off each month, never use one to get into debt.. CC interest destroys savings.

  • rewardscompared on 20/03/2013 - 09:25

    They are definitely worthwhile if you are disciplined (pay on due date so you don't pay any interest) and budget accordingly. Plug in your spending estimates here http://rewardscompared.com/cards and you can get an idea on which card will be the most 'rewarding'.

    Most banks should let you setup an automatic direct debit to pay off the amount required so you don't pay any interest.

  • c64 on 20/03/2013 - 10:00

    Is a credit card worth my while?

    if you are getting one for rewards then no. if you are getting one to manage debt then no.

  • siraitken on 20/03/2013 - 10:22
    +4

    Credit cards can be an amazing tool for managing cash flow but they can also be abused.

    At no point in your life should you ever pay interest on a credit card.
    If you do then you couldn't afford the purchase in the first place.

  • danield on 20/03/2013 - 10:30
    +1

    I use my Card for absolutley every purchase I possibly can. Grocery, Petrol, movies, bills etc….
    Then at the end of the month I get a itemised staement of all my expenditure for the month, so much easier to track your spending then with cash. Makes it easier to budget to. As long as its paid on time every month (this is a non-negtioable - must be paid in full on time)then no interest is paid and maximum points are earned. Don't bother counting the points, just let them accumlate over time eventually you can something back. Despite the annual fee it costs me nothing and every 12-18months Ive been able to get a free ipod, vacuum cleanerm, $300 Myer gift cards etc… Look for a card that doesnt expire points, that way you arent restricted by the time it takes to get them.
    BTW: Ive been using Westpac Altitude for the past 10 years. Been good with lots of rewards options, however they have just decided to cap the amounts of points you can earn in 1 month to 5000. probably won't effect you as that equates to around $4000-%5000 spending in a month.

    • hctan on 20/03/2013 - 11:27

      My monthly expenditure including food, groceries and other stuff would be around 600-700 or so.

      If I go for holidays would be around 1-2k.

      Can I use my credit card to pay rent? Than monthly costs would be 2k or so.

      Would the rewards matter?

      • retiredfeline on 20/03/2013 - 11:32

        Some merchants levy a surcharge for credit card payment. Also bodies like strata agents and councils. The extra cost may not be worth the points or the interest you gain. Also if using a credit card means you choose to go to Coolies instead of say Aldi, then you also lose on the cost of groceries. Weigh it up.

  • c64 on 20/03/2013 - 10:36

    Then at the end of the month I get a itemised staement of all my expenditure for the month, so much easier to track your spending then with cash.

    isn't that usually referred to as a bank statement?

    Makes it easier to budget to

    except when you discover at the end of the month you don't have enough to pay off your card.

    • danield on 20/03/2013 - 11:44
      +1

      "isn't that usually referred to as a bank statement?"

      Nah, bank staement tells me Ive withdrawn $100 Amount from here on this day.. etc..No idea where it went.
      Credit card statement tells me I spend $20 at JBHifi on BluRay, $20 on Chinese Food for dinner $60 Petrol. Can easily track where I spent that $100. Thats the itemised part of it. No need to keep recipts are whatever as Credit Card statements can be used for tax returns, warranty claims etc…

      "except when you discover at the end of the month you don't have enough to pay off your card."

      Well this is where you have to be disciplined, its not a free license to shop and buy just cause you can, you still are aware of what you are buying and what your budgets are. I know what I earn, and roughly what expenditure on mortgage and bills will be. Thats the budgeting part of it.

      And when I rented I could only pay by transfer. Also to pay my current body corportate that charge a % for paying by card, so I pay cash whenever there is a surcharge.

      • Gaz1 on 20/03/2013 - 12:26

        I didn't think a credit card statement would be sufficient for a warranty claim (or the tax office for that matter) - is this true?

        • danield on 20/03/2013 - 12:43

          Proof of purchase, it hard for anyone to refuse it.

          As for the tax, my accountant prefers the statements to all the loose and annoying reciepts. As long as my taxable purchases appear on the card statement she is satisfied.

          Don't forget the shopper protection added with 28 degrees. If you purchase with the card and the price drops then they will refund the difference.

      • rewardscompared on 20/03/2013 - 12:48

        anzmoneymanager.com is a good tool to help you budget. It pulls in your credit card transactions and itemises them (groceries, utilities, entertainment, restaurants, etc). You can set budgets and see how you're tracking each month.

        You don't need to be an ANZ customer to use the tool too

        • danield on 20/03/2013 - 14:05

          Looks interesting, will bookmark this and have a look at after I return from holidays.

        • c64 on 21/03/2013 - 12:24

          i'd be cautious about giving out your banking login credentials to a third party. it is probably against the t&cs of most banks. you might find yourself liable for losses if your account gets hacked.

  • AlanHB on 20/03/2013 - 15:35

    I was wary of credit cards too until I got one. I also decided that I needed a credit rating to prospectively purchase a home in a couple of years.

    With my new card I quickly learnt that it's very easy to spend more money than you have. I still have a good credit rating rating, but yes, it's easy to fall into the "I need it now I buy it now" mentality with a credit card, which allows you to do exactly that.

    However I've heard that this is no issue for people whom still live at home, don't pay rent, gas, electricity etc. I wouldn't personally know about that.

    • danield on 20/03/2013 - 17:07

      I would've thought people living out of home and being responsible for rent, gas, bills in general would make make you more responsible and controlled with spending.

      Think it comes down to personal attitudes with spending in general, Ive never looked at a credit card then being anything more than me spending my cash. So if I don't have the cash, I don't make the purchase.

      • AlanHB on 20/03/2013 - 22:02

        Obviously the counter argument is that if you dont have expenses, you have more money.

        But if youve managed to pay off all your credit card expenditures immediately all the more power to you.

        • danield on 21/03/2013 - 14:00

          More money doesn't/shouldn't mean more spending.

          Its like the difference between NET and Gross profit. Sure I might get $1000 a week from my paycheck, but I have to take away my expenses first… whats left over is spending money.

          No expenses = more spending money
          More expenses = less spending money.

          I worked for many years at a job where I was paid monthly, that got me used to knowing what expenses and costs were expected each month, allocated to the side, and then could spend the rest. old habbits die hard.

        • AlanHB on 22/03/2013 - 15:05
          -1

          I am unsure why you are continuing on pursuing a line of arguing with me, I obviously hit a nerve somewhere.

          The average Australian credit card holder is $4,900 in debt https://www.moneysmart.gov.au/borrowing-and-credit/credit-ca…

          Obviously not you. That's cool. Perhaps it's because you may still live at home, and you get $1,000/week after tax and if you still are living with your parents (which is the only reason I can see this line of argument continuing, having taken my initial post as a personal insult) you are managing to not lose 1/4-1/2 of this to rent, then you are not slammed by electricity bills etc. Hey you may even get free food and a car out of it too!

          Realistically 100% of your income could be what the average person living out of home call "spending money".

          If not, I have no idea why you are pushing this point. I've acknowledged your argument.

        • Aneurism on 22/03/2013 - 23:38

          The points daniel makes are valid. However its best not to assume judge peoples personal circumstances. The reality is some are more fortunate than others

          Peoples circumstances are different. I have a mortgage that i pay myself and pay my cc in full each month on an average income. I dont drink smoke or gamble.

          I am single now. If i had a gf or wife that didnt work or kids or what not id probably have a lot harder time paying the cc in full.

  • rewardscompared on 20/03/2013 - 15:41
    +1

    Interesting article yesterday http://www.smh.com.au/business/visa-amex-comply-over-crackdo… on how Visa and Amex are trying to crack down on the surcharge some retailers charge for using a credit card. They aren't trying to eliminate the fee completely, but make sure retailers charge appropriately.

    From the article:

    "Reserve Bank data shows the average cost for retailers accepting Visa and MasterCard is about 0.87 per cent, and about 1.84 per cent for American Express."

    Spending around $30k on a credit card each year, you can get back around 1% of your purchases in supermarket vouchers (source: http://rewardscompared.com/cards - enter $30k yearly spend (0% Amex), Coles Mastercard returns $251).

    If Coles are being charged 0.87% from Mastercard, they are making a loss by providing a 1% return to cardholders (though presumably they're banking on the fact you'll be shopping at Coles, plus some people may not redeem rewards)

  • Merapi on 20/03/2013 - 17:14

    I recently signed up for Qantas Amex with $0 annual fee which allows me to earn Qantas FF points for every $1 I spend on the card.

    I use it to buy the Woolworth gift cards from the Entertainment Book link which gives me 5% off ($5 off per $100 gift card purchase - free delivery). So when I make Woolies purchases using gift cards I also scan my Everyday Rewards card to earn extra FF points (for any purchases over $30).

    With my FF points I get to redeem more Woolies gift cards.

    I think I manage to save 5%+ on my groceries bill (I still go to Aldi though cos some stuff are cheaper). Sometimes I'm thinking whether it's worth all of the effort :P

    Note: I always pay the balance of the Amex, so I don't pay interest at all.

  • Shwayne on 20/03/2013 - 18:47

    Short answer yes.

    Long answer, yes but they can bite you in the back, at the end of the day it depends if you can trust yourself.

    They can be used to defer interest withheld from you when you spend money, hence they have the potential to help you make money.

    If this fact, or the existence of awards points makes you spend your money irrationally and unlike you normally would, then it is inadvisable to trust yourself with a credit card.

    The benefits are plentiful if you can pay your bills on time, and do not attempt to spend money you are not guaranteed to have before you can pay it off. (General rule of thumb is to never spend money you don't have.)

  • hctan on 20/03/2013 - 19:53

    Thanks heaps guys.

    Will look through online for a good card that gives me same benefits as the bank west platinum zero fees card but with a reward system with Qantas/Woolworth.

    I also love the extension of 12 month warranty on products purchased.

    Anyone have any suggestions?

  • Aneurism on 20/03/2013 - 22:22

    The secret to credit card use is to spend only if you have the cash equivalent. Pay off the full amount of the card each month.

    • retiredfeline on 21/03/2013 - 14:09

      Indeed. I pretend that a CC is like a card to get money from an ATM to pay for the goods, only without the physical withdrawal. Therefore if I wouldn't be willing to take that cash out my account, I don't buy. But this takes discipline.

      • gummibears on 21/03/2013 - 15:11

        So why a do you prefer a credit card over a debit card?

        • retiredfeline on 21/03/2013 - 15:16
          +1

          For the float and also because DCs require you to have the money in the account first and if you are making a big purchase transferring the money is an additional step you have to do before the purchase, if you don't want to keep a lot of money in the account.

          Also I think you have more recourse in case of dispute with the merchant with a CC.

        • danield on 21/03/2013 - 15:26
          +1

          Also Credit Cards have the extras, rewards and insurance etc that I don't believe debit cards have.
          Also I get the extra set of cards for the Mrs. (yes I trust her that much) again not sure Debit cards have this.

          Also Debit Cards weren't even around when I got my credit cards. Back in the day you couldn't get an internet account with an ISP without a credit card.

        • gummibears on 22/03/2013 - 10:49

          Okay thanks guys. I only have ever used a debit card. Sometimes this gets me into trouble when hotels require a credit card once you get there. They usually get me to surrender my debit card and a cash amount.

        • retiredfeline on 22/03/2013 - 10:52

          Yes, they can't take out more from a DC than you have in the account, but they can claim a purchase up to your limit (less any credit already used) on a CC, which is why a DC is a bit safer in that way.

        • Aneurism on 22/03/2013 - 23:06

          Because if money goes missing from a debit card via dodgy transactions, its your money that goes missing and it may take months to get your stolen money back.

          This happened to a friend of mine. They had to go through their bank statements and highlight all the transactions that were dodgy.. Then they had to wait a few months to get their money back.

          With a credit card, if there are dodgy transactions..well you'd think the banks would respond faster to try to recover money back from the dodgy transactions..

          Secondly I have a credit card linked to an offset account and a home loan. I store as much money as i can in the offset account, and pretty much pay for most things with the credit (I only buy what I can afford in cash apart from the house).

          At the end of the month I shift the money from the offset account to pay off the credit card in full. Effectively, I say paying interest on the home loan for as long as possible, then I pay the CC in full meaning I pay 0 CC interest and get rewards for using the CC. The reward reimbursment is usually enough to pay off the cost of the yearly home loan service and credit card fee..

          Can't do that with a debit card.. Obviously I pay more on interest to have an account with an offset, but there are reasons why I need that flexibility.

          Once again, having a CC should come with responsible use and not defaulting to using it to bail you out of bad situations. The fact is you should not put yourself in a bad situation in the first place. If you are the type that often gets into bad financial situations requiring bail outs.. don't even go near a CC..

  • Craze on 21/03/2013 - 17:16

    I'm pretty much on the same boat as OP, been using a debit mastercard since I started working 2 years ago. I'd rate myself a careful spender too hence there wasn't a need for a credit card. I found it interesting someone mentioned credit rating- do you really need a credit card as proof for good credit rating? If you survived without a credit card isn't that evidence enough that you're self sufficient with your cash flow/income with no real need for a credit card?

    • hctan on 21/03/2013 - 21:59

      Would be good to know this as well!

      • flyingtrapeze on 22/03/2013 - 17:29
        +1

        Credit is an interesting beast.
        If you need it, you can't have it, if you don't need it, you can have lots of it.
        Take a telco for instance, when they run a credit check on you, they will need either one of the two things.
        1) birthday and driver lic.
        2) passport
        Credit agencies keep your files under one of the above. If you apply for a credit card, it will show. If you never leave digital trail, when you apply for home loan, then it gets difficult,the way around this, is to put your regular pay check into a bank account. Say you have a savings account with anz and when you go to anz for home loan a couple of years later, they will have two years of your earning/wages history. Credit agency on the other hand keep a list of how many time you have to borrow. Hence, the more cards you apply, the more marks you have against your file.

        In the event, you go broke, bankruptcy will show. That's when some people use their passport instead of driving lic and start another credit file maybe in a different state etc.

        Banks love to lend you money when you don't need any.

  • hctan on 27/03/2013 - 22:38

    Hey Guys, I am applying for a credit card now. Any particular ones I should go for?

    I am currently on a bridging visa to PR and may have some limitations but I am working full time.

    Looking for a good card that gives me same benefits as the bank west platinum zero fees card but with a reward system with Qantas/Woolworth.

    I also love the extension of 12 month warranty on products purchased.

    Anyone have any suggestions?

  • freemoneyhunter on 30/03/2013 - 18:43

    Look for $100 cash back for opening. Use interest free 55 day purchases and pay off each money.

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