Once you have your credit card and you've started to make purchases with it, you'll also have to make payments in order to avoid large amounts of interest.
Your due date for payments is usually two weeks or so after your statement arrives. Ideally, you should pay more than the minimum amount stipulated on this statement to help you to clear your balance sooner. Whatever you pay, however, must be in by the due date or you might end up with a late payment fee and may even a negative listing on your credit file.
One way to avoid late payments is to get organised before you start, which usually involves an app!
Ways to make it easy to pay your card
Thankfully, there's lots of ways to pay your monthly card bill. You can make online credit card payments, which is probably the easiest way of all.
If you use internet banking then all you need to do is link your credit card to your transaction account so that you can make your monthly payments with a few swipes (or clicks). Using this method also makes it easier to sweep a couple of extra dollars off your balance each month.
You can also set up a direct debit from your everyday transaction banking account to your credit card account. You can also do this online or probably on your phone with many bank mobile apps.
It's also possible to pay your credit card with BPAY. You'll find the -Make BPAY payment-- widget in your internet banking; all you have to do is enter your credit card number, your BPAY biller code and the amount you're paying.
The old-fashioned methods
If you want to go retro, you could drop into your bank branch (if your credit card provider is the same as your bank) and deposit cash or even a cheque. Yes it's true these things still happen.
Use snail-mail if you really want to step back in time. There'll be a postal address on your paper or online credit card statement and you can mail your cheque to it. Be aware, though, that if there's a hold-up in the postal service, your cheque may not be processed in time to clear the funds before your due date. This could result in a late fee, so if you're planning to use this method, send your cheque in plenty of time.
About your due date...
Most payments need at least a couple of days for processing. If you're making a BPAY payment, you should try to make the payment two working days before the due date so it's in on time. Late fees are annoying and are, essentially money that could be used to pay down your balance instead.
There are two types of payment you can make each month
There's your full closing balance; this is the ideal scenario, but not everyone manages this.
You can also pay the minimum amount, which is listed on your statement; the minimum balance is usually two or three per cent of your total balance and isn't the best way of dealing with your debt. You can use a credit card repayment calculator to see how many years this will take you and how much total interest you will pay.
There's also the option of a set amount each month that exceeds your minimum balance. Use a budget planner to work out how much you can afford, then set your direct debit for this amount. This is where internet banking comes in handy as you can also transfer that $2.21 you saved on your groceries last week to chip away at your balance.
Handling your credit card effectively
Use a budget calculator so you can factor your credit card bill into your monthly expenditure. In this way you'll be able to make sure you're not paying more than you can afford, but you're also paying enough to pay the balance down.
It's important to avoid the minimum payment trap. Paying just the minimum each month will mean you are paying interest for many years, probably more than you think. (this link takes you to a UK site, so you can have a laugh at the poms).
Making a budget is also very helpful if you're finding your credit card bills hard to cope with each month. It may turn out that your commute-cake-coffee habit is costing you a small fortune without you ever giving it a second thought. If you can treat yourself every second day instead of every day, then you'll have more to pay down your debt with.
Alternatively, visit a comparison site to look for a balance transfer to one of the many no interest or no fee credit cards out there.
You can also change your payment date
Even if you have one of the best credit cards going, if your payment date falls a couple of weeks after payday, then you'll always have the risk of temptation. If the money is lingering in your account for a while, then it may just wander off... Well, you may spend it.
To avoid this risk, change your payment date to just after payday so you're closing the window of temptation. Psychologically, it's always best to pay your bills out of a larger amount of money than it is to pay them out of a dwindling amount. Once they're done, all the rest of the money is yours.
Alternatively, you could start paying your bill every fortnight instead of every month. This is especially handy if you're paid every fortnight and what's even better is the fact that, as interest is calculated daily on credit cards (although it's applied monthly), the second half of each month will be calculated on a lower balance. This means a lower annual spend on interest.
Use your internet banking services and apps to their full extent
That's what they're there for, to help you! If you spend an hour or so setting up calendar alerts and fine-tuning your online banking apps you can avoid a lot of hassle, missed payments and late charges. Include all your payment dates for every bill and utility and arrange alerts for a few days before they're due. If some of your payments are automated, then that's even better.
The information contained on this web site is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser. If you or someone you know is in financial stress, contact the National Debt Helpline on 1800 007 007.
