retirement.org.nz

“I was naive and easily sucked in. It seemed like everyone had a credit card so I thought it was a pretty normal thing to do,” said Raeanna.

After going on sorted.org.nz, Raeanna’s focus is now on paying off her credit card debts as quickly as possible to minimise the amount of interest.

“Some people pay off their card each month and avoid paying interest at all, but if like me, you don’t pay it all off monthly, the accumulating debt can become overwhelming.

“I was shocked when I used the credit card calculator on Sorted and discovered that if I continued paying my debt at the current rate, the interest I’ll have paid will be nearly the same amount as the original debt.

“I think fewer people would get into debt with their credit cards if they did the math beforehand. If you defer the purchase until you have done the credit card calculations on Sorted, you might decide to save for the goods or even go without,” said Raeanna.

Retirement Commissioner Diana Crossan says that’s where the other tools on Sorted can help.

“If you have set your financial goals, and are using a budget you will know if the purchase is part of the plan or a spur of the moment desire. It’s not about denying yourself something – it’s about making good spending decisions which won’t derail your plans for a more secure financial future.

“We know that the recession is hitting many New Zealanders quite hard and that the temptation to cope by borrowing is very real. But debt can have long term implications - if it adds up it can limit your choices.

“If you do use a credit card follow the tips on sorted.org.nz,” said Diana Crossan.

Raeanna used the Sorted Credit card calculator:
www.sorted.org.nz/calculators/credit-card/

Sorted’s free booklets can be ordered from the Sorted website at www.sorted.org.nz/ordering/ or by calling 0800 SORT MONEY (767 866).

For more information contact:

Catriona Robertson
Senior Communications Adviser
Retirement Commission
T: 04 494 6243
M: 021 242 7936
E: catriona.robertson@retirement.org.nz

Tips for wise use of your credit card

Shop around for the best deal
Credit cards come with varying interest rates, fees, and rewards programmes. Take the time to select the credit card that best suits your circumstances.

Know the interest rate you're paying on your credit card
Many credit cards charge around 20% interest. Do you know your card's current interest rate?

Review your credit card limit
Base your credit card limit on how much you can afford, not how much you might spend. If you think you will have trouble paying it back, decrease your limit.

Pay the balance off in full each month
You can only take advantage of interest-free days if you pay the balance in full at the end of the month. If you can't afford to pay the balance in full, try to pay more than the minimum repayment.

Don't use your credit card to withdraw cash
Don't withdraw cash from your credit card - banks charge high fees for this.

Be wary of accepting a higher limit or additional card
If you let your bank raise your credit limit, or give you another credit card, you increase the risk that you'll end up paying lots of interest. Plus credit cards usually have an annual fee, so the more cards you have, the more fees you pay.

Avoid temptation
If you can't resist the temptation to spend more than you can afford, leave your card at home.

If you're in trouble, talk to your bank
If your credit card is getting out of control, talk to your bank about options for clearing your credit card debt. You may be able to take out a loan to pay off your credit card and pay off the loan at a lower interest rate.