The COVID-19 outbreak has taken the world by storm and has left many Aussies unemployed with little to no income, prompting them to cut back on spending while looking for alternative ways to pay, like their credit cards.
Under normal circumstances, your credit card is a financial tool that can be used to your benefit, whether that’s for earning rewards, helping build your credit score or enjoying interest free spending.
But times have changed within the last few weeks and for the Aussies who don’t have an emergency fund, their credit card may be their only option.
To keep your debt in check and your credit score intact, here are four tips to help manage your spending during this extraordinary time.
Switch to a lower rate card
If you own a credit card with a high purchase rate, get in touch with your provider and ask them to switch you to a lower rate card. This will keep your credit card bill from skyrocketing by reducing the amount of interest you’ll pay. Credit card purchase rates range from as little as 7.99% to as high as 21.99%, so you’re bound to find an option that’s right for your budget.
Don’t skip repayments
Priorities have changed over the last few weeks for many households, as they look to do what's needed to make ends meet. However, you’ll still need to remember the importance of making your credit card repayment on time. If you skip a payment without any explanation, you might end up with a mark on your credit score, and get lumped with a late payment fee, which will only add to your financial woes.
Get in touch with your provider and be upfront about your current circumstances. This way, they may be able to place you onto a hardship policy and provide assistance through their relief packages. For instance, CommBank will be refunding any fees or interest incurred during March, while NAB will lower the minimum repayment amount threshold for customers.
Don’t use your card for cash withdrawals
If you are having to use your credit card for day to day essentials, just make sure you avoid withdrawing cash with your card. Not only do you pay interest on cash withdrawals instantly, but cash advances on most cards have tend to have higher interest rates than purchase rates, so you’ll be paying an extra premium as well.
In this case, it’s important to keep spending to a minimum and only use your plastic when absolutely necessary to ensure you don’t go overboard. If you can, keep using your debit card to withdraw cash (if you need it).
Use available rewards if possible
It’s no secret amongst rewards lovers that the trick to scoring big with a rewards credit card is to play the long game. But since it looks like no one will be travelling or hitting up Westfields anytime soon, now may be the time to get more down to earth with your rewards card.
If you are finding yourself short on cash, it might be worth looking into redeeming your rewards points for cash back or gift cards you can use at supermarkets. This can help take the pressure out of having to pick up groceries or smaller bills with your credit card.
A final note…
It’s worth mentioning that should you start to use your credit card on a daily basis, you will need to establish a repayment plan so you can aggressively pay back the debt when your budget allows it.
And again, unless the situation warrants it, try to only use your credit card if you absolutely have to.