How to use your credit card effectively during COVID-19

Ceyda Erem

29 Apr 2020


As the COVID-19 lockdown continues around the country, Aussie households have had to adjust to a new way of living. 

But unfortunately, monthly living expenses have not shared the same shift. This has left many cash-strapped Aussies struggling to pick up the bills, particularly when relying on their credit cards. 

Whether you’ve maintained or lost your job during the pandemic, a credit card can be handy in the case of emergencies. But how do you keep yourself from going overboard and winding up with a stack out debt?

There are different ways to maintain responsible spending during this unprecedented time, as not every household’s circumstances are the same. We’ve jotted down three common situations many Aussies may be in as well as some suggestions for keeping their credit in check. 

RELATED: Four credit card tips for financially strapped times

Who you are: Employed with the same income 

Your situation: You have remained employed during the pandemic and have a regular monthly salary. You’re also most likely to be working from home and are no longer having to travel to and from work. 

If you are currently employed and have a stable income, you might not be using your plastic as often as others. In this case, you may be in a financial position to avoid using your credit card altogether. Or depending your pay cycle, might use it in situations where you’re running low on cash but expect to be paid soon. 

It might be worth using a card this time to get on top of any debt you may have incurred prior to the pandemic. It might also be a good idea to make more than minimum repayments. For instance, using the money you would have spent on travel expenses. 

RELATED: Coronavirus credit card cuts: Which banks have slashed rates?

Who you are:  Employed with a reduced income 

Your situation: You are still employed during the lockdown, however, you have had your regular income reduced. This could be because you have had to take a wage cut or you no longer work the hours you used to. 

If your income has suffered a blow in the last few weeks, your first step should be to revisit your monthly budget. There are a few categories that would have changed and will need to be adjusted, such as travel, eating out and frivolous spending. Doing this can help keep you in control and provide you with an insight into the essential areas your money needs to go, like groceries and bills.

Depending on your circumstances, this approach could mean you can only make the minimum repayment on your credit card. It’s important to at least make this minimum amount each month, as skipping payments could land you a late payment fee and a mark on your credit history. 

Who you are: Employed, but receiving financial assistance

Your situation: Your place of employment has been severely affected by COVID-19 and you are receiving Centrelink of government financial assistance. 

If your job and income have been severely impacted due to COVID-19 and you haven’t got an emergency savings account to turn to, a credit card may feel like your only option. If this is your situation, get in touch with your credit card provider to figure out your next step. You may be able to have repayments deferred or paused, or be placed onto a financial hardship plan. You are also able to do this if you have a home loan you are repaying. 

Keep in mind that it’s best to avoid using your credit card to withdraw cash. Not only will you pay interest on the cash immediately, but cash advance rates are typically higher than purchase rates, so you may wind up paying more in interest over time. 

Mozo credit card tip: One final thing to remember is that if you do need to use your credit card during this time, it’s important to establish a repayment plan so you can repay your balance when your budget allows it. 

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