Your Credit Card - Know It Like It s Your Best Friend
Below is a MRR and PLR article in category Finance -> subcategory Credit.
Your Credit Card: Know It Like Your Best Friend
Introduction
In Australia, credit card usage is soaring, possibly due to a robust economy that instills confidence. However, do people truly understand how to manage this debt or how much it could end up costing them?
According to the Reserve Bank of Australia, Australians owe $32 billion in credit card debt, a figure some experts suggest could surge to nearly $50 billion by 2009. This rise is evident, with Baycorp Advantage, a credit information provider, reporting an 11% increase in credit card applications last year, reaching 875,000 applications during October, November, and December.
Rising Costs and Concerns
Just seven years ago, the fees on credit cards were $136 million, a number that has now escalated to $787 million. This increase partially stems from a rise in late payment fees from $20 to $29. Analysts estimate it would take five years of minimum repayments to clear the average credit card debt of $2,399, as reported by the Reserve Bank in December. The average credit limit has also increased to $6,754.
This issue isn't unique to Australia; similar trends are seen in other countries. There's a clear lack of awareness on how to use credit effectively and safely, accompanied by insufficient research into the card's terms and fees. Marketing strategies focusing on bonus point systems often shift consumer attention from 'terms and conditions' to 'rewards.'
Calls for Reforms
Consumer groups are pushing for reforms to the Uniform Credit Code to prevent banks from promoting unsolicited credit limit increases. They also advocate for clear warnings on how long it will take to repay the debt at current interest rates.
The Benefits of Credit Cards
Credit cards have their advantages. They offer convenience and safety over cash, provide rewards or cash back on purchases, and can help build a good credit rating. However, sensible and disciplined use is crucial, along with understanding each card’s specific charges and selecting the right one for you.
Factors to Consider
When applying for and using a credit card, it's important to ask yourself questions such as, "Do I need a credit card?" and "Can I afford the payments within my budget?"
Key Considerations
When choosing the right card, review the following:
- Interest Rate: Look beyond the appealing introductory rate to what follows.
- Interest-Free Period: This varies from card to card.
- Interest Calculation: Is it calculated from the purchase date or the statement date?
- Annual Fee: Sometimes rewards are offset by this fee.
- Administration Fees: Are there any, and what are they?
- Late Payment & Over Limit Fees: When do these apply, and how much are they?
- Additional Charges: What else should you be aware of?
- Cash Advances: Understand the conditions and costs involved.
Conclusion
Credit cards offer buyer protection, convenience, and are essential for travelers. Success lies in thoughtful research and disciplined use.
You can find the original non-AI version of this article here: Your Credit Card - Know It Like It s Your Best Friend.
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