With more than 26.5 billion dollars being spent on credit cards each month, it can get you trouble if you use them incorrectly. When it comes to credit cards, here’s what you can do if you find yourself in an ugly position with too much debt.
With great power, comes great responsibility
It goes without saying that any tool use badly can be costly. The average interest rate on Aussie credit cards sit around the 19% mark. However, as host Andrew Baxter points out – credit cards can be amazing tool given that you use them correctly. Differing from debit cards where money being spent yours, credit cards can feel like “free money”. They have the ability to spend beyond your means for the 55-day interest-free period can be extremely exciting.
The notion of borrowing money in a convenient fashion is more important in today’s society as COVID-19 wreaks havoc and Aussie economy drift recession. You can use the money to pay bills and rack up some frequency flyer along the way. Needless to say, with great power comes great responsibility.
The temptation is two-fold when it comes to credit cards. Number one, using your credit card for things you don’t need. In an economic recession when typically financially tough for most Aussie households, do you really need to buy those new Nike runners right now? Chances are, you’ll still want more after the first purchase, maxing your limit that you don’t need.
The second – making monthly minimum payments only. This’s a common trap to fall into, you realize as you only pay the least amount each month your interest is compounding higher each time. It means you end up paying more than what you initially anticipated. If you don’t get caught making minimum monthly repayments, don’t buy things you don’t need so. Truth be told, the cycle is deadly.
A Credit card horror story – beware the beast
We have all hear about people rack up debt on their credit cards, and subsequently have their house or car has taken off them by the Bank, dependent upon how much they have actually spent. Host Andrew Baxter tells a horror story regarding one of his former clients who managed to find themselves in a 7-figure amount of credit card debt. WOW, that’s a lot of taps on the card machine. Although this client’s partner ratcheted up the bill, this kind of spending habit – highlighting psychological and financial danger person’s true frivolity.
There are no bad credit cards, but there are bad credit card owners – beware the beast. Lucky for this particular client of Andrew’s, they’re able to reach out to his financial planning team to arrange with his various other lenders by leveraging off his asset base. By admitting the mistake and being up-front and honest, was able to reduce their compounded interest payments over $200,000 and save themselves from bankruptcy.
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A side hustle – your solution to cash flow
If you’re like most Australians, you’ve found yourself challenging credit card debt, spending habits, or cash flow to live the lifestyle you desire.
Host Andrew Baxter has never been firmer on the inherent need to have a side hustle. Especially in these current economic conditions. You can’t rely on the source of income wanting make-up or bags, using a credit card doesn’t count free ticket. Getting a side hustle brings in enough cash flow for you to support yourself. Reach out to Andrews team at Australian Investment Education to learn how to create tomorrow’s wealth, today.