debt Archives - Credit Simple NZ

Don’t let your partner’s debt problems become your problems

Credit Simple — Sun, 23 Feb 2020 23:00:51 +0000

Romantic partnerships come in all shapes and sizes, from marriages to de facto relationships to casual relationships and everything in between.

No matter what the relationship, it’s possible to end up in the shallow end if your significant other (SO) is drowning in debt or has poor spending habits.

Here are some common ways your partner can burden you with their debt and how you might avoid it.

1. You try to take out a joint loan with your partner, but are denied because of your SO’s past debt issues.

The only real way to escape this fate is to avoid it in the first place. That means when sizing up potential long-term partners (you know, the kind you’d trust to open up joint accounts with), you’ll need to take their financial attractiveness into account.

That means being open and transparent up front about your financial goals and how you can reach those goals together.

If you talk about the prospect of owning a home together you may have to share some personal information, like how well you save and how healthy your credit report looks.

If you don’t know what your credit report looks like, Credit Simple lets you check your credit report and score for free, anytime, and without negatively impacting your score.

Get your free report and score here

2. Your partner asks you to take out a loan on their behalf.

This can impact anyone, whether you’re in a long-term commitment, or have only known each other for a few weeks.

If your partner doesn’t have the cash flow and/or the credit score to secure a loan, be wary of taking out a loan for them no matter how much they try to charm you or plead with you.

You’re responsible for any debts in your name, period.

If it’s to purchase a car, property or some other large asset – and you really do want to help – make sure to get a title for the asset and register it in your name.

You’ll still be responsible for the debt, but at least with a title, your SO can’t make off with the asset if the two of you happen to split.

It’s also a good idea to have your own personal savings account where you can stash away your own funds in case of such an emergency.

3. You open up a joint account with your partner, and they go on a spending spree.

There are a number of ways your partner can misuse a joint account and burden you with debt.

It could be a joint credit card where they spend a huge sum on gambling, buying shoes or whatever their fetish.

It could also be a joint savings account they drain in a similar vein, leaving you with nothing left to pay off your debts (personal and/or shared).

Another scenario is where you have a mortgage with someone, and they withdraw funds using the redraw facility (a feature on some accounts that lets you make extra payments in return for the ability to withdraw this extra cash later down the road).

If you’re worried about your partner’s spending habits, the best way to escape this fate is to avoid joint accounts altogether, or go for a joint account that requires each person’s authorisation for any withdrawals or purchases.

Bottom line

Like many aspects of a relationship, there’s a lot of shared responsibility when it comes to finances – especially as the relationship progresses.

The keys to keeping yourself safe from a reckless partner are to vet your potential partners at the outset of the relationship, let your finances intertangle only at a rate that feels appropriate to the relationship’s strength and put safeguards in place if you are happy to take on the lion’s share of financial responsibility.

The information in this blog post is general in nature and does not constitute personal financial or professional advice. It is not intended to address the circumstances of any particular individual. We do not guarantee the accuracy and completeness of the information and you should not rely on it. Before making any decisions, it is important for you to consider your personal situation, make independent enquiries and seek appropriate tax, legal and other professional advice.

The post Don’t let your partner’s debt problems become your problems appeared first on Credit Simple NZ.

What is a personal loan?

Credit Simple — Wed, 12 Feb 2020 07:10:51 +0000

A personal loan is a monetary loan you can get from a credit provider such as a bank, credit union or online lender – usually for a specific life purpose like renovating your home, paying for a holiday or consolidating several smaller loans. Lenders approve personal loans by evaluating your creditworthiness.

When you enter into a contract for a personal loan, you typically receive money in a lump sum and agree to repay the lender back the money in regular instalments over a specific length of time.

You also pay interest on the amount you borrow, and in some cases, fees and other charges. These interest rates, fees and charges can vary from lender to lender, loan to loan and borrower to borrower.

How do personal loans work?

If you’re considering a personal loan, you should become familiar with some of the details, including how much you can borrow, how to apply and how much they cost. Here are some of the main concepts to remember:

The amount you can borrow. Personal loan amounts can be very small or very large. We’ve seen lenders offer loans as little as $500 and as large as $70,000.
The application and approval process. You can apply for some personal loans online in a matter of minutes and be approved (or denied) just as quickly. With others, you may have to visit a branch and it may take days for the approval process to complete.
The cost. On top of requiring you to repay the loan amount, lenders make their money by charging you in a number of ways. These may include interest on the loan, as well as fees like an establishment fee, monthly fees, late payment fees and early discharge fees. Your specific combination of charges will be described in your contract.
The loan term. This is how long you’ll be paying off the loan. We’ve seen loan terms as short as 3 months or as long as 7 years.
The amount of repayments and when they are due. Your loan amount, interest rate and loan term will be set in advance, so it’s easy for the bank to calculate exactly what your regular payments will be and when they are due.

Types of personal loans

Here are the main types of personal loans you may encounter:

Unsecured personal loans. Your standard personal loan you can use toward various life projects like a holiday, home renovation or medical bill.
Car loans and other secured loans. A personal loan where you offer up an asset as collateral in case you can’t make your payments. This collateral is officially known as the security. Take for example a car loan, where the purchased car serves as security that the bank can repossess if you can’t make your payments
Debt consolidation loan. A special type of personal loan you would use to pay off several smaller loans.
Line of credit. A personal loan where a specific amount is available for you to borrow, but you don’t have to borrow it all. You only pay interest on the amount borrowed.
Quick cash loan. A personal loan that doesn’t have a strict acceptance criteria so that people with lower credit scores can get the loans they need. These often come with higher interest rates and fees.

How much do personal loans cost?

The cost of personal loans will differ from person to person and loan to loan. A large part of this comes down to your creditworthiness. For example, someone with a higher credit score and a more positive borrowing history will often pay less for the same loan than someone with lower marks.

Here are some factors that will determine how much you’ll pay:

Interest rate. This the percentage your debt will increase every year. Most personal loans will charge an interest rate. The Australian Securities & Investments Commission has capped interest rates at 48% but we’ve seen rates as low as 5.75%.
Fees. Many loans will also charge fees on top of the interest, such as a one-off establishment fee to set up the loan or even monthly fees. Some very small loans might do away with an interest rate altogether in favour of one set loan fee.
Comparison rate. This is simply a loan’s interest rate when fees are factored into it. Since not all loans charge the same fees, this comparison rate makes it easy for you to compare the loan cost of several loans side-by-side.
Length of loan. Since your interest rate adds to your balance each year, the longer you have your loan, the more you’ll end up paying in the long run (all else being equal).
Amount borrowed. Generally speaking, the more you borrow, the more you’ll end up paying for the loan.

How do you apply for a personal loan?

Decide how much you want to borrow. Work out how much money you need for your holiday, home renovations, debt consolidation or whatever personal project you need the funds for.
Work out how much you can afford for payments. Use a loan calculator to work out how long you’ll need to pay back the loan, based on how much you can afford to pay back per month.
Compare personal loan options. Identify a few lenders with loans that meet your criteria from the first two steps.
Gather your paperwork. Gather together any paperwork the lender asks for. This may include ID, bank statements and proof of address.
Apply. You can apply for most personal loans conveniently online.

Does applying for a personal loan affect your credit score?

When you apply for any loan, your credit score can dip slightly. However, with New Zealand’s Comprehensive Credit Reporting system, regular on-time payments can help your score go right back up.

Some lenders will advertise something along the lines of “free rate quote that won’t affect your credit score.” This means they will quote you a rate based off of basic info like your income and the amount you want to borrow – without doing a credit check.

But this is not the same as applying for the loan. If you want to apply for the loan based on the rate quoted to you, you will usually have to go through a credit check and your score may dip as a result.

Who should get a personal loan?

You should only get a personal loan if you have a specific purpose in mind for the money: to help pay for a special project, purchase or life event, or to help out in a time of emergency.

Taking out a lump sum without any real purpose for it could lead you to squander it and end up with a large debt with not much to show for it. For regular ongoing purchases you plan to pay off regularly, you could consider a credit card instead.

The information in this blog post is general in nature and does not constitute personal financial or professional advice. It is not intended to address the circumstances of any particular individual or business. We do not guarantee the accuracy and completeness of the information and you should not rely on it. Before making any decisions, it is important for you to consider your personal situation, make independent enquiries and seek appropriate tax, legal and other professional advice.

The post What is a personal loan? appeared first on Credit Simple NZ.

Avoid financial heartache this Valentine’s Day

Credit Simple — Wed, 12 Feb 2020 01:51:26 +0000

Valentine’s day is just around the corner. And you know what that means: candle-light dinners, romantic water-side strolls, mouth-watering chocolates, exquisitely arranged bouquets and… your beloved’s outstanding debt?

At first you’ll be enamoured by that special someone’s talents and strengths but there will come a day when you have to face their flaws. And no, we’re not talking about letting one rip in the middle of a Netflix special, because we all do that.

What we’re talking about here is the possibility that your loved one has poor financial habits – habits that could get you into trouble if you’re not careful.

We have an easy-to-follow guide to help you avoid becoming an unwitting victim to your partner’s illicit financial rendezvouses, but we just wanted to take this opportunity to offer a few reminders – so that this Valentine’s Day, you’re not seduced into a lifetime of financial betrayal.

How to avoid financial betrayal

Let’s just jump right in. Here are some ways you can protect yourself from your partner’s poor financial habits:

Be wary of going guarantor.

Going guarantor on your partner’s loan means they don’t have the financial capability or credit health to get the loan themselves. Instead, they need to leverage your good financial standing. If they default, it’s on you. No ifs, ands or buts.

Pay attention to your joint credit accounts.

In most cases, you’ll be just as responsible as your partner for any debts accrued on accounts you hold together. If they run up a huge bill on luxury bags or huge nights out with the boys, the lender and/or debt collections agencies can come after you.

Check your statement regularly and if you see dodgy transactions, talk to your partner about your concerns. Seek couples counselling if necessary.

You should also check your credit score to see what, if any, your partner’s financial habits are having on your score.

Seek legal advice

In the event of a divorce or separation, the combined debts that you and your partner accrued during the relationship will get deducted from the overall joint asset pool.

This includes debt from joint credit accounts AND credit accounts in each of your individual names. So if your partner ran up gargantuan debts, you’ll end up with fewer assets when it’s all said and done – even if you weren’t aware of the debts at all.

However, there may be a remedy. If you can prove to a court that your partner accrued these debts without your knowledge and it’s clear the debts were of sole benefit to your partner, you may be able to get a court order removing these unscrupulous debts from the asset pool.

Bottom line

We don’t want to put a damper on your Valentine’s Day, since it’s meant to be a celebration of the love and respect between you and your partner. But it’s also a time when we’re too quick to don those rose-coloured glasses that hinder our ability to see the whole person we’re dining with.

So by all means, enjoy your romantic day. Feast on that gourmet Italian cuisine, fine wine and luxury chocolates. Just make sure the one who is footing the bill can actually pay it off – or it could foreshadow a lifetime of financial heartache.

The post Avoid financial heartache this Valentine’s Day appeared first on Credit Simple NZ.

Debt consolidation loan vs. balance transfer credit card – which one to choose?

Credit Simple — Mon, 06 Jan 2020 05:19:46 +0000

When you consolidate your debt, you are essentially taking out one large loan and using that money to pay off two or more smaller debts.

The two major ways you can do this is by applying for a balance transfer (BT) credit card or taking out a debt consolidation loan.

This guide explores why you’d want to consolidate debt in the first place and then looks at your two options to help you determine which one is right for you.

Why would you want to consolidate debt?

Consolidating your debt offers several key benefits:

It streamlines your paperwork and payments. With one loan instead of several, you don’t have to keep track of multiple bills, due dates and fee schedules.
You could save on interest and fees. Consolidating gives you the opportunity to shop around for a loan offering better rates and fees than your current loans.
You could get a special deal. Many balance transfer credit cards will offer you a temporary interest-free period on the amount you’ve transferred from other loans.

What options are available to consolidate debt?

The following sections describe your two main options for consolidating debt: balance transfer credit cards and debt consolidation loans.

A balance transfer credit card

Balance transfer credit cards are cards you can use to pay off your other debts in full and then continue to use it just like any other credit card. They often come with an introductory offer that lets you pay 0% interest rate on your “transfers” for a period of time.

Other than the introductory offer, interest rates on balance transfer credit cards tend to be higher than those on debt consolidation. For the example above, that same card reverts to a 12.95% p.a. rate on balance transfers after the first 6 months. That’s the same rate the card charges on purchases.

That means this option is best suited to someone who is consolidating relatively small loans and plans to pay them off quickly (i.e. during the 0% introductory period).

Note:

Watch out for balance transfer fees. One card might offer a longer 0% introductory period but charge a balance transfer fee that would offset any extra savings.

A debt consolidation loan

A debt consolidation loan is a personal loan where the lender gives you cash, which you’ll then use to pay off your other loans. Then you’ll pay off your new loan over a set timeframe you and the lender agreed to.

Unlike a credit card, there probably won’t be a promotional introductory interest rate. However, interest rates in general are lower on debt consolidation loans than credit cards.

These loans work best for someone who is consolidating larger debts and needs more time to pay them off.

Balance transfer credit card and debt consolidation loans compared

Here is how the two options compare based on common factors like interest rates and fees.

	Balance transfer credit card	Debt consolidation loan
Interest rates	Generally offer a lower introductory rate perfect for small loans you can pay off quickly.	Generally offer lower ongoing rates anywhere from 3.99%. However, those with lower credit scores can pay up to 43% p.a .
Interest rates	Ongoing rates are usually anywhere from 11.99% p.a. to 20.99% p.a.	These work better for larger loans that take longer to pay off and for people with lower credit scores.
Fees	Anywhere from 0% to 5% of your transferred balance.	Generally no transfer fees, but you may incur an establishment fee of 1%-5% on the amount borrowed.
Loan term	Since you can keep a credit card open forever, there is no set time-frame to pay off your loan (although the 0% interest rate will revert to a higher interest rate after the promotion ends).	Anywhere from 1-7 years or more.
Impact on credit score	Requires a “hard pull” of your credit report, which will cause your score to dip temporarily. However, as you continue to make payments on time, your score should improve in the long run.	Requires a “hard pull” of your credit report, which will cause your score to dip temporarily. If it’s a quick cash/payday loan, your score may dip even more. However, your score can improve if you make your payments on time.
Perfect for:	– Someone with relatively small loans to consolidate – Someone who is after a new credit card anyway – Someone who diligently avoids interest by paying their balance off before interest accrues	– Someone with larger loans to consolidate and who needs more time to pay them off – Someone who usually carries a balance and therefore needs a lower ongoing interest rate – Someone with a lower credit score and who isn’t eligible for a credit card

Pros and cons of each

Here are the pros and cons of each option.

	Pros	Cons
Balance transfer credit card	You could end up paying 0% on your entire debt	You could see interest rates as high as 21% p.a. after the 0% balance transfer promotion ends
	You can use the card for ongoing additional purchases	There’s no deadline to pay off the loan, so you could end up paying on it for longer than you intended
	Your card may come with other rewards and perks like the travel rewards.	The ability to make ongoing purchases means you can allow your debt to snowball
	Pros	Cons
Debt consolidation loan	Usually a lower interest rate than a credit card after the card’s balance transfer promotion ends	You won’t get a 0% introductory offer on the debts you consolidate
	A defined loan term with regular repayments gives you a clear time-frame by which to pay off your loan	You may not be able to pay your loan off early without a penalty
	You can consolidate all types of other loans including credit cards, car loans, department store cards and more

Bottom line

Both of these options will meet the needs of most people looking to consolidate their loans. Both should do the job for small to medium-size loans, and the debt consolidation loan can handle debts that are a little larger.

The post Debt consolidation loan vs. balance transfer credit card – which one to choose? appeared first on Credit Simple NZ.

In debt? Here are some red flags that you are in too much debt and what you can do.

Credit Simple — Wed, 09 Jan 2019 03:51:57 +0000

Are you swimming in debt? Or even drowning? You’re not alone, thousands of Kiwis have that same feeling they are sinking financially.

Debt has its uses and can be used to spread out large or unforeseen expenses. Being in debt all the time, however, isn’t okay and you need to use credit, not let it use you.

But there is a way out. Debt can be whittled away one dollar at a time if you start today.

So what is “too much debt”? There are some real warning signs that indicate you’ve got too much. If two or more of the Red Flags below apply to you then face up to the fact: you have too much debt.

Do these red flags sound like you?

You view your overdraft or credit limit as your money when you’re spending it , not something you owe. That makes it too easy to spend up to the maximum every month. Over the past couple of generations we’ve changed from seeing debt as something to be embarrassed about to a normal everyday occurrence. Overdrafts, credit cards and HP should be there for emergencies, not used as a day to day way of getting cash that you can’t afford.
You get charged dishonour (or honour) fees most months. These fees add up quickly and help your debt spiral out of control. At the very least you need to do a serious reorganisation of your accounts so that your spending money is kept separate from money for essentials. That will help you avoid fees.
You have had credit denied. If banks or lenders refuse you credit it’s a real red flag that something is wrong with your finances. Sit up and take notice.
You lie to loved ones about your spending and debt. Lies can bring an apparently good relationship to a stop fast. If you’re lying regularly to your other half or even yourself, you need to change your ways.
You use cash advances on your credit card when you run out of ready cash. Cash advances are incredibly expensive because you’re charged fees as well as interest from day one. If you access credit this way then there is something wrong with the way you manage money.
You are late paying rent and other bills such as utilities and credit cards. If you receive overdue reminders month in month out then this is you. Those reminders should flag to you that you need to take back control of your finances.
You don’t know exactly how much you are in debt. Denial is common with serial debtors. Tot your debt up today and then you can start working out how to start reducing your debt mountain.
You don’t open letters or answer phone calls because you’re scared they will be from creditors. Budget advisers (AKA debt counsellors) see this every day. It’s a classic symptom of too much debt and is a real red flag that something needs to change.
You worry about your bills, lose sleep or drown your worries in alcohol or drugs. Worry and anxiety are not good for your overall well-being. Take the first step today by getting in touch with a free budget adviser or ask for an appointment at your bank. They’re happy to help customers sort out their finances.
You don’t have any savings at all. We all need some savings – even if it’s just an emergency fund to tide you over if you lose your job. If debt is getting in the way of this, you’ve got a problem.

There’s nothing like a good dose of honesty to turn your debt around. It’s no use thinking that the problem will go away. If these red flags apply to you, you need to take a dose of truth then make changes. Now.

If your attempts to change in the past haven’t worked then see a budget adviser. Virtually every town in New Zealand has one – and they’re free to visit. Look up “Budget Advice Services” on whitepages.co.nz, or find out about the New Zealand Federation of Family Budgeting Services.

Finally, debt counsellors can’t wave a magic wand and make your problems go away, Aladdin-style. It’s going to require hard work on your part. But you’re the one who will get the most out of this exercise.

The post In debt? Here are some red flags that you are in too much debt and what you can do. appeared first on Credit Simple NZ.

Got a Christmas debt hangover? We’ve got tips to help

Credit Simple — Wed, 09 Jan 2019 02:54:39 +0000

The post-Christmas season can be a tough one, and our data shows Kiwis are more likely to let their credit bills languish unpaid at this time of the year compared to any other. If you’re anything like the average New Zealander, you’re probably feeling the effects of spending up large in the lead-up to the festive season and in the wake of Boxing Day sales.

Usually around 6.4% of credit card accounts go past due without being paid, but in the January to March period, this jumps to 7.6%. It might not sound like much, but in a nation with $6.6 billion outstanding on credit cards, that little extra interest-incurring period adds up to millions in extra interest payments for consumers.

“It’s easy to get caught up in spending over Christmas, but if you’ve used credit to get through the holiday period, the next few months are crucial to ensuring your credit health,” says Credit Simple CEO David Scognamiglio.

“Late or missed payments on any borrowed funds will damage your credit score and could prevent you from getting credit again, so it’s crucial to make a plan to pay back and credit consistently and on time to keep your credit score healthy.”

And here’s what you’ve been waiting for: our five top tips for recovering from a post-Christmas debt hangover:

Shop around for a better deal on interest

Chances are you could be getting a better deal on any loans, credit cards, mortgages and even utilities, you just need to shop around. If you’ve been paying your bills on time and have a good credit score, credit providers will be eager to give you a handsome deal since you’re a good risk. Negotiate with your bank and current phone, power, insurance and internet providers to see if they can offer you better rates, and see what their competitors would be willing to offer you, too. You might be surprised at how much you could save in the long run in fees and interest.

Consolidate your debts

Debt consolidation is the process of rolling or “consolidating” a number of different debts into a single loan or credit card, often with a lower overall interest rate. This can help you manage your money better by paying off a single amount each month. Debt consolidation loans and Balance transfer or low rate credit cards are the most common way to do this.

Limit credit applications

Each time you apply for credit it leaves a record on your credit file, and this typically makes your score drop. If you applied for credit before Christmas and now you’re going back for more, it’s going to pull your score down. There’s nothing wrong with changing your credit providers – in fact it can save you money – just make sure you’ve done your research and only apply for the best deal, rather than applying for whatever you can and then deciding on which one you want later.

Pay high-interest debt first

Prioritise your loans and ease the pain of interest by paying off the debt that’s incurring the most interest first. It can save you a lot of money in the long run.

Consistency is key

Paying your bills consistently and on time is the best thing you can do to make sure your credit score stays healthy. Set up automatic payments to pay bills straight away and your score will thank you. Pay more than the minimum amount required on loans and credit cards if you can too.

Avoid a default

If you’re feeling under pressure to make debt repayments, talk to your credit provider, don’t just ignore it and miss payments – your credit score and file will suffer. You may find your credit provider can put you on a different payment plan, making it feasible to meet your repayment obligations.

The post Got a Christmas debt hangover? We’ve got tips to help appeared first on Credit Simple NZ.

Going from debt to building wealth: Your way to a richer future

Credit Simple — Wed, 02 Jan 2019 03:26:45 +0000

There’s no magic in becoming financially fit. But Credit Simple’s Four Pillars of Wealth approach can help you get there. Going from debt to building wealth is easier than you might think. We guarantee there are people around you earning no more than you do who are well on their way to wealth. Here’s how to become one of them:

Pillar one: spend less

Do you know your needs from your wants? It’s only you who suffers if you’re not honest with yourself. Start by kicking the porkies we all tell ourselves into touch. Do you find yourself saying: “I need it” when in fact you ‘want’ it. You don’t need it.

The first step to escaping the ‘needs’ versus ‘wants’ trap is to keep diary for a month and list every last cent you spend. Expect to be shocked when you analyse this diary. Most of us have no idea how much moolah we fritter away. While you’re in honest mode take a long hard look at your supermarket receipts. You’ll probably find that half of what’s in your trolley is a want, not a need.

Pillar two: earn more

By spending less you’re becoming richer. You can supercharge this by earning more.

Never say never. There are many ways to earn more. You can ask for a pay rise, get a promotion, find a new job, or moonlight. Make sure that you have a written career plan and you’re ticking off milestones to the next step up the rung that you can grow into.

If there really honestly isn’t any extra to be made at work, look for ways to make money on the side. That could be anything from selling stuff on TradeMe to babysitting or starting a part-time business from home.

When you get that extra money don’t let spending creep swallow your extra earnings. Make sure you bank a good chunk of your pay rise to benefit none other than your future self.

Pillar three: pay off debt

Carrying a balance is normal right? Well, no, not really …

But paying off the debt requires a plan. That’s probably to pay off those with the highest interest first. Some people, however, choose to clear the debts that give them biggest psychological boost to dispose of. Celebrate when you hit milestones in your journey to becoming debt free.

Shocking as it may sound, some people still wait until they have the money to buy what they want. If you can retrain your brain and think like this your debt will disappear a whole lot faster.

Pillar four: save and invest

Once you’ve freed up some spare cash and paid off your debt it time to start saving.

Don’t just leave your money in the bank. Good investments such as KiwiSaver, property, shares/managed funds, and bonds grow faster than inflation. According to the Morningstar, the average balanced KiwiSaver fund grew by 8.6 per cent in the five years from 2011 to 2016. That’s way higher than inflation even when pesky KiwiSaver fees are taken into account.

Providing you’re sensible, spread your risks and hold your investments for the long term, your money will buy far more for you in retirement than it could now.

Getting started:

At Credit Simple we know you can get ahead. But don’t chew off too much at once. Work your way through the four pillars one step at a time. Habits take time to change, but you can do it.

The post Going from debt to building wealth: Your way to a richer future appeared first on Credit Simple NZ.

7 steps to perfect credit card use

Credit Simple — Sun, 18 Nov 2018 22:01:38 +0000

New Zealand’s collective credit card debt was nearing $7.2 billion in June this year. Your contribution to this growing national burden may be miniscule, but it probably doesn’t feel that way when your credit card bill thuds ominously onto the welcome mat.

So, how can you avoid credit card debt in New Zealand? Many people believe using your credit card is always a bad idea. However, if you’re savvy and organised, paying on plastic doesn’t have to be the road to financial ruin.

Here are the best ways to use your credit card:

1. Pay off your card in full every month …

Any list detailing the best ways to use your credit card will tell you to clear all your charges every month. We’d love to throw a curve ball here and deliver a unique spin on this tip, but we can’t – it’s really that simple; you must try and clear your arrears before the interest starts kicking in. Anyone who always stick to this rule is already most of the way to perfect credit card use.

2. … Or at least avoid paying the minimums

If you simply can’t afford to pay off your card in full every month, try to at least pay more than the minimum charge. Depending on the size of your debt, the minimum could be even less than the monthly interest, so you could be making regular payments and still falling further behind financially.

3. Understand your interest rates

The average interest rate on credit cards is 17.8 per cent per annum, according to the Reserve Bank of New Zealand. But what does this mean? Put simply, you’d pay 17.8 per cent interest each year on any credit card borrowing. If your balance is $1,000, you’d theoretically pay $178 over 12 months.

4. Don’t take cash out with your credit card

Notice how we said ‘theoretically’ before? That’s because interest rates are rarely that simple, and you get charged differently depending on how you use your credit card. One thing is for certain though – taking cash out of an ATM with your card is a bad idea. We looked at one bank’s low rate Mastercard, which is 13.45 per cent for card purchases, but the cash advance rate is 22.95 per cent.

5. Be smart with rewards schemes

Rewards schemes may lure you in with luxury goods, cash-back offers and frequent flyer points, but are they worth it? The interest rates and annual fees are usually higher for rewards-based credit cards, so you’ll need to be receiving enough goodies to offset the charges. Unfortunately, research suggests that you may struggle to find a worthwhile scheme if you only charge up to $5,000 a year on your card, although they can benefit big spenders.

6. Compare different cards

Now that you know some of the best ways to use credit cards (and avoid debt) in New Zealand, you’re armed with the necessary knowledge to compare different offers and select one suited to your spending habits. Read the T&Cs for any mention of hidden fees, surcharges and interest rate hikes to prevent any unwelcome surprises.

7. Don’t over-rely on your credit card

Our tips may have you feeling like a credit card champ, but you should still try to only use your card in a crisis. Think of your card as a financial safety net rather than a pot of free cash. Debts may spiral out of control if you’re not careful, and missed payments can have long-term ramifications for your credit rating.

We understand that budgeting can be hard; our research shows 30 per cent of people live pay cheque to pay cheque. So why not sign up to Credit Simple and take a giant leap forward with your money management?

The post 7 steps to perfect credit card use appeared first on Credit Simple NZ.

Should you consolidate your debts? We weigh up the pros and cons

Credit Simple — Mon, 12 Nov 2018 00:34:39 +0000

Debt in New Zealand has been slowly increasing over the past few decades, and household debt is higher than it’s ever been in 2018. If you have a lot of debt, you may be considering debt consolidation, which has its benefits – as long as you’re aware of the risks.

Pros of consolidating your debt

If you pursue debt consolidation, you’ll be able to combine all of your debts into one loan, giving you just one payment to make each month instead of several. When consolidating, you can also negotiate a lower interest rate, which could save you money in the long run.

You will also be able to work with one lender of your choice rather than having multiple lines of credit. Aside from being a very convenient option as far as logistics, consolidation can help you pay off your loans faster and may end up being the most cost-efficient option for repayment.

Cons of consolidating your debt

There are a few risks if you are considering consolidating your debts. Your smaller debts will now be rolled into one larger loan, so keep in mind that you will be responsible for making one monthly payment that can be quite large if you retain the same loan term as before.

Some New Zealanders think that consolidation is a quick and easy fix to get lenders off their back, but remember that you are still responsible for making the new bigger payment on time.

Ensure that you are paying attention to the new interest rate, and whether or not it can change in the future. You don’t want to consolidate if your interest rate is going to be much higher than it was originally, as this will cost you more overall. And pay close attention to the term of the loan that you are agreeing to — keeping it shorter is better, since longer terms may cost you more in interest. Always read the new terms from your consolidation provider carefully to ensure that you aren’t overlooking any hidden fees or other strange requirements.

So should you consolidate your debts? There is no easy answer. Debt consolidation in New Zealand is a big decision that does have advantages and disadvantages, so you want to make sure you are fully prepared before committing to anything. To learn more about your credit history and your options, talk to our team at Credit Simple today.

The post Should you consolidate your debts? We weigh up the pros and cons appeared first on Credit Simple NZ.

Scared of your finances? 5 ways to get control over your money without looking through your fingers

Credit Simple — Wed, 24 Oct 2018 01:19:43 +0000

Money management can be a terrifying thing. Especially if you’ve got debt – seeing large sums go in and out of your bank account is enough to give anyone the willies, even if it’s ‘good’ debt (such as a home loan).

But there are strategies you can use to cope, and to not only manage your money but actually overcome those ghosts of spending past. Here’s five we’ve rounded up.

Know where your money is going. Knowledge is power, and having a good handle on what you’re spending is the first step to being able to do something about it. There are tons of spending trackers out there to help you track your expenses.

Get a budget and get ahead. Now that you’re tracking your spending, the next step is to set goals for your spending categories and limits. We’ve got tons of advice on our blog about budgeting and how to go about it. What’s more, there are free ways to sort your budget, such as the online tool at Sorted.org.nz, and help through the Citizens Advice Bureau.

Hack your grocery bill. No matter how much of a supermarket shopping ninja you are, there are always ways to trim it even further. Heard of aquafaba – chickpea juice as an egg white substitute? Tried changing up your protein to spend less per plate? Or run the ruler over your habits to see if you’re committing one of the seven deadly supermarket shopping sins?

Deal to your debt. Use debt, don’t let debt use you. If you’re taking out a line of credit, make sure it’s doing something beneficial for your finances long term. Are you dipping a toe in the debt pool, swimming in it – or drowning? It might be time to consider consolidating debt, or getting a balance transfer credit card to help you pay it off faster (more on that here). Remember, you can also get free expert advice on money issues, talk to a financial mentor instantly, or read up on your rights when it comes to debt collection.

Make a game out of saving money. The internet is littered with hacks on ways to save money and we’ve rounded up a bunch of strategies for becoming a complete cheapskate on our blog here. The rule for being a cheapskate is that there’s always a cheaper way, and (bonus) it’s often better for the environment and for your health.

The post Scared of your finances? 5 ways to get control over your money without looking through your fingers appeared first on Credit Simple NZ.