prepaid credit card Archives

Being sensible with Buy Now Pay Later this silly season

7 December, 20221 December, 2022 Updated on1 December, 2022 Budgeting

Move over debit and credit cards; consumers are flocking to Buy Now Pay Later (BNPL) services. Afterpay, Zip Pay and several similar payment solutions allow shoppers to take home their goodies now while paying them off via a few weekly, fortnightly or monthly payments. There’s no interest payable as such, although fees are charged for late payments. A survey by Mozo reveals that 30% of Australian adults have one or more BNPL accounts and we’re not afraid to use them. Afterpay, our most popular BNPL service, achieved sales of $4.3 billion across Australia and New Zealand in the 2019 financial year, nearly double its sales of the previous year. With the nation set to splurge around $27 billion on Christmas, it’s a safe bet that plenty of that spend will be by BNPL. But with 60% of those surveyed by Mozo admitting that BNPL lead them to buy things that they wouldn’t have otherwise, it begs the question: how to use this payment option sensibly during the silly season? 1. Set your limits Make sure you have a budget for your Christmas spend, and use it to help resist the temptation of impulse purchases. 2. Track your spending Don’t just track your BNPL spending. Make sure you review credit and debit card purchases, too. Are you staying within budget across all your spending methods? 3. Avoid fees Around one third of BNPL users have missed at least one payment. While late fees may seem modest, they can add up. 4. Don’t repay BNPL loans with a credit card If you don’t pay off your entire credit card bill within the interest-free period, adding your BNPL repayments to the card may see you paying a high rate of interest on your purchases. Better to use a debit card or direct debit from your bank account, and making sure there’s enough money in the account to meet payments. 5. Avoid BNPL if you’re saving for a home loan Lenders may look at your use of BNPL as a sign that you don’t have significant savings and are living from payday to payday. The lower your debt, of all types, the easier it will be to get a mortgage. 6. Have a happy festive season Used wisely, BNPL can help you jingle your bells and put the merry in your Christmas. Just make sure you know what you’re signing up for and that you can meet all of the regular payments. Take care, and you’ll be able to enjoy the start of the New Year without a financial hangover. For further budgeting tips and financial advice, talk to us. We’re here to help. The information provided in this article is general in nature only and does not constitute personal financial advice.

“Tap and go” and then what?

2 March, 202224 February, 2022 Updated on24 February, 2022 Budgeting

Talk about hammering the plastic. In November 2021, Australia’s 13.2 million credit card accounts were used to make over 292 million transactions with a total value of $31.9 billion. Card holders who don’t pay their balances in full every month are currently paying interest on more than $18 billion worth of credit card debt. Interest rates range from 10% to 22% per annum so that adds up to billions of interest owing – and growing! It’s not just the easy money that cards provide; it’s the easy form of delivery via “tap and go” that’s pushing our debt to extraordinary levels. The quicker the transaction, the less thought or planning required. Pay now and think about it (and deal with it) later. Don’t become a statistic – here are some things to look out for plus a few tips. Traps Over 40% of credit card spending goes on groceries and utilities. While this isn’t a problem if you pay off your card balance in full each month, if you’re paying interest just so you can buy the necessities of life, it’s a real danger sign that you may be living beyond your means. Most credit limits are well beyond cardholder needs. On average, Australians only use about a third of their available credit limits each month. However, by giving you a higher credit limit card issuers hope temptation will get the better of you. If that means you can’t pay off your entire balance each month you’ll end up paying them lots of interest. Tips Financial institutions can only offer to increase your credit limit if you specifically ‘opt in’. This can be done in writing or over the phone. However, it’s prudent to withhold this permission to keep your limit under control. You can always apply for a once-off increase if you really need to. Switch to a reloadable (prepaid) credit card. Like a debit card it means you are using your own money with the added advantages that you can pre-set a limit on your spending and reduce the risks associated with buying online. Prepaid cards are available from banks, other financial institutions, and Australia Post. Make sure you check any fees and charges before buying one. If you sign up for a new card for an interest-free purchase, pay it off during the interest-free period then cancel the card before the renewal fee is automatically charged. There is no point paying an annual fee if you’re not going to use the card. And a myth Many people think that it is only lower income earners who are susceptible to the siren call of easy credit. But like the Sirens of Greek folklore themselves, it’s a myth. In fact, higher income earners also rack up huge balances on gold, platinum and diamond cards, and can experience real difficulty in paying them off. If your credit cards are more an enemy than a friend, a financial adviser will be able to suggest a range of solutions to get you back on track. The information provided in this article is general in nature only and does not constitute personal financial advice.