(03) 9020 2905It’s time to lay the (credit) cards on the table. We’ve had a national “sorry” day. I believe it’s now time for a national, annual, “thankyou” day.
And today is perfect! One week after April Fool’s Day!
Australia’s credit card “fools” need some recognition. They shout the rest of us, who use credit cards properly, hundreds of dollars in free perks every year.
Who is thanking whom? On “Thankyou Day”, credit card “transactors” are handing out free hugs to “revolvers”. Bless you!
Transactors pay off their credit cards each month. They never pay interest. Like Dire Straits, they get “money for nothing” by way of rewards points. They pay off their credit cards from their offset accounts on the last day.
Revolvers don’t pay off their credit cards each month. Most months, they pay interest. At up to 25 per cent.
By paying exhorbitant interest rates, revolvers pay for the entire system, including all of the free points, and holidays, enjoyed by transactors.
Sure, revolvers get points too. But if you pay interest on your card, understand that the interest rate is not only ridiculous, but means you’re also shouting person sitting next to you.
Rewards points, on average, are worth about 0.5 per cent of a purchase. Spend $1000 and the points you earn are worth, roughly, $5.
Given the above, it’s pretty simple.
If you pay off your credit card IN FULL every month, take interest free days and rewards programs.
If you don’t, then get a card with the lowest fees and interest rate you can find.
Happy “Thankyou Credit Card Fools’ Day” everyone.
Bruce Brammall is the author of Debt Man Walking (www.debtman.com.au) and principal adviser with Castellan Financial Consulting.