Make these 6 big credit card mistakes and you’ll struggle to get out of debt, pay more fees, and miss out on awesome rewards. We share our tips on how to avoid them.

Mistake #1: Only ever making the minimum repayment

This is one of the biggest credit card mistakes you can make! 

Minimum repayments mainly cover the interest, they don’t make much of a dent in what you actually owe. This means you stay in debt longer while interest keeps stacking up,  

Let’s crunch the numbers on how long it will take to pay off your card making only the minimum repayments;

Outstanding balance: $1,523

Based on statistics from the Reserve Bank of Australia in November 2020, the average credit card balance accruing interest in Australia is $1,532.

Interest: 19.94% per annum

According to the RBA, the average standard credit card rate is 19.94% p.a.

Minimum repayment: $31 for the first month (and decreasing).

To pay the card off in full it would take 18 years and 5 months! 

In total, you’d pay $5,014 which is $3,491 in interest.

Instead, if you made $76 repayments each month, you'd pay the card off in 2 years and only pay $306 in total interest. 

Calculated using the Money Smart Credit Card Calculator.

Long term, it’s one of the most expensive credit card mistakes that will keep you stuck in a revolving door of debt.

Top tip to avoid the trap of minimum repayments

Plan to pay off the balance in full -  don’t just include the minimum amount in your budget. 

In financial trouble and struggling to make even the minimum repayment? Time to stop using the card.


Mistake #2: Missing out on big rewards

If you’re choosing a card without considering possible rewards, you might be missing out!

However, it could also be a mistake to choose a credit card only based on rewards without considering interest, annual fees, and other charges. 

The sweet spot is choosing a card that aligns with your spending habits, financial situation and lifestyle preferences.

Some of the most popular types of credit card rewards include:

  • Flight and travel rewards like travel insurance and travel credit.

  • Cash back rewards where a percentage of the amount you spend is paid back to you.

  • General ‘lifestyle’ rewards like discounts on movie tickets or dining out.

  • Instant rewards such as a discount at the point of sale.

Top tip to get your best reward deal

We let you easily compare offers with our credit card reward comparison tool. When deciding, consider the type of reward you’re most likely to use, annual fees, and how much you spend, on average, with credit each month. 


Mistake #3: Forgetting when 0% interest ends

Made a balance transfer to take advantage of a card’s low or zero purchase interest offer period? Don’t forget the date when the offer period ends and the new interest rate kicks in.

If you’ve made a large balance transfer, this is especially important as the adjusted interest rate can add up quickly.

Remember before picking a balance transfer offer to check its 'reverted interest rate' and for a purchase rate offer its 'annual purchase rate'. 

Top tip to keep track of offer expiration dates

Take note of the date interest rate will change. Set a reminder in your phone / calendar two months out, one month out, and then on the date for the change. 

Staggered reminders give you plenty of time to adjust your budget to the increase in interest.

It’s also a smart idea to create a plan to have the balance paid off, or at least significantly reduced, by the date. 


Mistake #4: Relying on cash advances

Taking a cash advance might be tempting if you’re short on money, but think it through. 

It is one of the credit card mistakes that will wallop you with extra interest and fees that usually won’t be worth it in the long run.

Cash advances are charged at a higher interest rate than standard purchases and there’s no grace period - interest kicks in immediately. Unless you can pack back the full amount of a cash advance fast it’s easy to get into trouble. 

Top tip for avoiding cash advances

Decide if the purchase is really necessary? Cash advances are a terrible idea for non-essential items and services. If it’s a necessity, see if you can borrow the money from family or friends. 


Mistake #5: Not checking your credit card statements

We know reviewing your credit card statement is probably not the most thrilling thing on your to-do list.

However, taking just a few minutes each month to review transactions can help you;

  • Identify any unusual activity. Small, fraudulent amounts can otherwise slip by unnoticed.

  • Save money in fees. When you see what certain transactions are costing, you can change your spending habits or shop around for a better deal.

Top tip to keep on top of your statements

Switch from paper statements to online statements. When you’ve got a few minutes spare, instead of scrolling through Insta, check out transaction history on your phone. 


Mistake #6: Losing track of small daily expenses 

With the right card, using credit for daily expenses can be a great way to accumulate rewards points. 

It can also be a slippery slope into a big balance if you don’t keep spending in check. It’s easy to buy a little extra at the supermarket or charge *another* takeaway lunch when your card is handy.

You figure these purchases are “essential” daily expenses and they're small amounts; so what’s the harm? 

They add up! One month your credit card balance is manageable but a few months later it’s uncomfortably high.

Top tip to keep on top of your daily expenses

All daily expenses you charge to the card should already be in your pre-planned budget. 

For example, you might allocate $100 per month from your income to spend on takeaway. Charge those meals to your card but keep track of your spending. Once you’ve spent $100, no more takeaway! You get the rewards and keep your budget on track. Winning. 

We hope this list of epic credit card mistakes to avoid can help keep your credit card working for you - not against you!


Check out other similar articles:

Credit Card Hacks: If You Don’t Know Now You Know!

5 Cool Credit Card Benefits You Probably Didn’t Know Exist

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