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Saving On Credit

Unfair or discriminatory as it might seem, requiring details of a person’s viability is recognised practice and necessary for the safety of all concerned. Most institutions who run these card schemes judge suitability based on similar guidelines. An applicant has to earn so much a year and be able to support a manageable debt level. Qualifying for one will probably mean that others are worth a try. Here’s where the prospective customer wins back some advantage. There will be different costs, annual fees and interest rates in particular. The payment-due dates may vary, as could the period of grace before interest is added. Some will offer bonus-points schemes – rewards, frequent-flier and so on. These are very important details which can make one card better than another.

In order to simplify what appears to be a very complex issue, I’ll explain how we decided which credit cards to use. We have three, all with major Australian banks. The bulk of our monthly purchases are divided between two cards. Both have a rewards scheme, the points from which have been directed to our frequent-flier accounts. This is a handy extra because we fly to Melbourne annually. The Gold card has the most bells and whistles so, understandably, the yearly fee is relatively high, but it has a longer interest-free period than the other. Bear in mind, however, that this applies from the date of purchase, NOT the statement date. Even so, provided we pay the statement before the due date, it will not cost us a cent in interest. The third card is used solely for Internet and overseas purchases. It is no-frills, no rewards, low fee and has a long interest-free period. We also requested a reduced limit, to minimise the risk of loss by fraud.

Here is a handy adaptation which can be employed by those people who find it hard to control their spending and stay within their budget. Lowering the available credit to a more affordable level might put high-price goods out of reach, but overall debt will be easier to control. A word of caution, though: some banks may let the total go past the limit and they will charge, just as they do for overdrafts. Keeping an eye on spending will prevent this. Another warning (a minefield, isn’t it?) – cash withdrawals by credit card generally incur interest from the time of the transaction, not the statement date.

Practices and legalities may differ from country to country, but the basics rarely change. And the glow of satisfaction on coming out a winner is the same in any language. In a bid to help you live now and not pay through the nose later, following is a short list of considerations when applying for and using credit:

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