1. Read your credit card statement
This might not seem like such a big deal, but having ostrich-type tendencies, like pretending your credit card statement doesn’t exist, could be the start of a slippery slope.
The sight of an envelope or email from your bank might send your stomach into nervous spasms, but the best way to rid yourself of that nauseous feeling is to start dealing with your money issues.
If you don’t read your statement you won’t know how much you’ve spent, how much you need to pay back and when your payment due date is. Reading your statement will also alert you to any suspicious activity on your card, or transaction errors.
Take a deep breath, open your statement and start taking stock of your spending.
2. Make more than the minimum repayments
Although it’s probably quite tempting to skate by and just make the minimum repayments due each month, doing so will cost you a lot more money in the long run. Not only will it take a long time to pay off the debt, along the way you’ll end up paying a lot more in interest.
In an ideal world, you’d repay your credit card in full each month. If that’s not possible, then try to at least pay a little more than your minimum, that way you’ll chip away at your debt and reduce the total amount of interest you pay in the process.
Your bank will tell you the minimum amount you need pay off your credit card each month.
At Kiwibank, that’ll be either 5% of your outstanding balance as at the date of your statement, or $10, whichever is higher. Some other banks’ minimum repayments are calculated at less than 5% of your monthly balance – so if you switch to us from another bank you might find your monthly minimum payments are higher. We set the minimum higher because we want you to pay off your balance sooner.
3. Pay your credit card bill on time
If you miss your payment due date, you’ll not only rack up more interest, you’ll also be pinged with late payment fees. See credit card fees.
The easiest way to make sure you don’t miss a payment is to set up a regular direct debit.
4. Respect your limit
Don’t fall into the trap of treating your credit card limit as spending money. It’s important to remember that the money you spend on your credit card isn’t yours, you’re actually borrowing money each time you use it.
Be mindful of your spending. If you can’t afford to buy something from your everyday banking accounts, don’t blindly throw it on your credit card. If you find you are overspending, talk to your bank to see if you can lower your credit limit, or if your spending is completely out of control, consider cancelling your card. Talk to the credit card team on 0800 521 521.
5. Don't use it to get cash out
Avoid using your credit card to get cash out of an ATM. This is called a cash advance and it’s probably the most expensive credit card transaction you can make.
With a cash advance, you’re charged a fee each time you withdraw cash. There are also no interest-free periods when it comes to cash advances, interest is charged as soon as you take money out. Cash advance interest rates are generally higher than the rates charged when you use your card to make a purchase. See interest rates.
Instead of a cash advance, talk to your bank about whether you can get an overdraft or a personal loan might be a better way to cover any financial shortfalls. Don’t simply swap one form of debt for another though, work out a budget and see if there are areas you can cut back on spending and then increase debt repayments. Work towards building up an emergency fund, so if your car breaks down or you need to replace your washing machine you don’t have to dip into your credit card.
Need some help?
If you're falling behind and struggling to meet your repayments, get in touch with our financial hardship team to see if you qualify for financial hardship assistance. Or, if you want budgeting advice, visit MoneyTalks or The Citizens Advice Bureau.