Using Credit Wisely

12 Tips to remember when thinking about using credit

  1. Can I pay cash? This is the first question you should ask before purchasing anything. There are no credit charges associated with cash payments and the goods belong to you immediately. Lay-by may be another alternative. With a lay-by you pay a small amount each week (depending on store policy), without paying any interest and then you receive the goods once they are fully paid for.
  2. If you have to borrow money, pay the highest possible deposit on goods to lower repayments and overall cost.
  3. Pay off the loan as soon as possible. This way you pay less interest.
  4. Pay off your credit card balance in full each month. Paying only the monthly minimum payment could add thousands of dollars of interest over a few years.
  5. Try to buy only one item at a time on credit or lay-by. If you are paying off a few items then your budget may be stretched and you may not be able to meet all of the repayments.
  6. Carefully consider whether you should consolidate loans to purchase new items as you may be paying more interest over a longer period.
  7. Examine the goods before signing a contract to make sure they work and are in good condition. Understand your warranty rights Be wary of purchased and extended warranties as in many cases they are the same as the statutory warranty you are already entitled to. For further information contact the Office of Consumer and Business Affairs (details on back).
  8. Do not count on income you do not have or you do not receive regularly, such as overtime or casual earnings. Try to meet your commitments from a regular budget
  9. Be sure you can afford to meet each repayment. Include the repayments in your budget along with your rent and living expenses.
  10. If you are wanting credit to purchase a car allow for other expenses such as registration, insurance, stamp duty and transfer fees. Also consider running costs such as petrol, repairs and maintenance. A personal loan from a bank (unsecured) will have lower interest than finance through a car dealership.
  11. If you get into financial trouble contact your credit provider before the due date. Treat them fairly and they will do the same to you. You are likely to get a better response this way.
  12. Beware of 'interest free terms, with no payments for 6 months'. If the item is not fully paid off by the end of the 6 month period interest will be charged. Read contracts carefully and ask for a full explanation before signing them.