Financial management 101
So you are starting to think its time to “get ahead” financially and wondering what to do first? Should you buy property, contribute to super, maybe buy some shares? Bad news is its none of these, if you have a credit card then pay it off and close it! Simple, boring yet true…
I know the bank “gave it to you free” or if you are really luck maybe you might even have 2 or 2 “free” credit cards with all the rewards and everything exciting attached – the thing is these cards are not really free. The minimum repayment on a $20,000 credit card is currently around $600 pm or around $7000 per year. This is a lot of money, you could for example take out a mortgage of around $150,000 at today’s interest rates for the same amount of money. This could be used to buy a house, investment property or buy some shares.
Now i hear people say to me all the time – “but I don’t owe anything” the bad news if you owe nothing on your credit card the banks will still treat the card as though it is maxed out if you go for a home loan, thus reducing the amount you can borrow! Just close the card, some people suggest having a card of $1000 or so to cover emergencies and hire cars, hotels etc and i guess this does make sense but if you are following this strategy then keep you limit and low as you possibly can.
A boring tip but one a lot of people ignore
Author Alan Maddick 3rd Aug 2015
