Hopefully you caught my first Smart Money topic where I ran you through the importance of owning insurance and knowing when and how to use it (catch up here if you missed it).  This week we’re going to talk credit cards, which can surprisingly, be almost as divisive as the Trump/Clinton debates were!

Some people love their plastic, some swear they’ll never have a credit card (again!) or will never shop using credit in the first place.  I can only assume but I think such a hard-line stance on credit cards often comes from our parents. Back in the eighties purchasing everything on credit was as common as putting your kids to sleep every night with a hearty dose of Phenergan – or Knock-Out Drops as it was known in our house lol.  Buying household items on ‘tick’ or throwing down a high interest credit card used to be standard procedure but, perhaps learning from the financial stress of our parents before us, it seems we have moved into a period of much more conservative credit use, sometimes to our detriment!

Learning how to use credit cards wisely is an awesome financial skill that leaves more money in my pocket each month.  As such, I think there is definitely room to flip how we as a generation generally think about credit cards in general.  If we focus on how to make them work FOR us rather than the more common misconception that credit cards are a means to encourage irresponsible spending, we can add a valuable tool to our day-to-day financial acumen.

With a mortgage in place (a couple to be exact), one of which uses revolving credit, it makes sense for our family to keep as much cash IN our bank accounts as possible, thus minimising the amount of interest charged on our mortgage lending.  We do that by using our credit card for all day-to-day purchases and then paying this off in full each month to avoid interest.  This system takes a couple of months to implement as you get your cashflow in sync with your spending but it can make a big difference when aiming to reduce interest costs.

The added benefit of using your credit card in this way is being able to maximise your potential to earn reward points.  Warehouse Money offers two credit cards, one of which, the Warehouse Money Purple Visa Card, offers reward points (called Purple Dollars) on every dollar you spend.  Accruing reward points all year is a great way to help spread the financial load at Christmas time by spending your Purple Dollars in-store at The Warehouse.  That’s SMART shopping!

Four Things you NEED to understand about getting smart with Credit Cards

Keep in mind, I’m no financial advisor, however I’ve been using credit cards effectively for 20 years now and we run ALL our household and day-to-day expenses on our CC – because: reward points and cash in the bank!

• Fees – Know what your credit cards will cost you each year.  My bank credit card charges $65 per year + $15 per year for a secondary card, another credit card we have charges $52 per year plus a $55 establishment fee!  Both cards available from Warehouse Money have NO annual fee, no establishment fee and no additional cardholder fee. 
• Interest – How and when is it calculated? So I thought I knew how credit card interest was calculated but I was wrong. If you pay your total balance each month, sweet as.  No interest for you.  If you pay your minimum balance each month ie you don’t pay the full closing balance, you’ll pay interest on all transactions and some charges left on your account at the applicable interest rate, PLUS, you’ll also need to pay interest on any new charges that have been made since the statement period.  That’s a big deal guys and something you need to re-read if it’s news to you. 
• How does your credit cards reward system work? Rewards are the awesome part of responsible spending on your credit card, I LOVE banking my rewards and using them throughout the year to help spread the financial pressure around birthdays or Christmas time.  Kiwis LOVE reward points as The Warehouse Money Matters Survey discovered this year with 42% of respondents who have a credit card saying they use their card to collects reward points/air points.
  Warehouse Money offers two great credit card options ;  Warehouse Money Visa Card holders will be rewarded with 5% off their shopping both instore and online at The Warehouse every day and that’s on top of sale items (some exclusions apply), so this is a reward you can benefit from every day.  Their Purple Visa cardholders earn 2 Purple Dollars for every $150 spent at The Warehouse and 1 Purple Dollar for every $150 spent anywhere else Visa is accepted. 

• Why is building a credit history important? Being credit adverse may help you avoid interest charges and late payment penalties if you’re worried about your financial discipline – which is a good thing.  However, ignoring your credit history can make things a little trickier further down the track when you actually require finance – rather than simply choosing to use it.  Potential lenders will always check an applicant’s credit history, looking for payment history, amounts owed, length of credit history, the variety of credit used.  In terms of securing manageable levels of lending and credit resources, it’s advantageous to you and your future financial assets to start earning some A+ grades when it comes to managing your credit. 

For more information check out the Citizens Advice Bureau, where there’s heaps of great info on managing credit and how to check your credit history.

Opening a line of credit can be a scary feeling and may fly in the face of everything a financially conservative background has taught you.  Get comfortable and informed about the product you are considering – ie do your homework, and align your money with a brand you trust and are familiar with.  If you’re considering a new card or your very first credit card, check out Warehouse Money and the two products they are offering kiwis.  Both are great choices, offer benefits other credit cards don’t and come from a brand New Zealand knows, loves and trusts.

This post was sponsored by Warehouse Money and was an awesome opportunity for me to get stuck in and learn about how my credit cards really work.