make credit cards work for you

How To Make Credit Cards Work For You

Credit cards are a tricky thing. They are convenient and easy to use. It’s usually fairly easy to get approved for one, and spending is a breeze when there is no physical exchange of money to deter you. But they can end up costing you hundreds… or worse, every year in interest. But relax, it doesn’t have to be that way if you are smart with how you use your credit cards so you can pay off credit card debt fast and make your credit cards work for you.

By making your credit cards work for you, it’s possible to manage your debt in a way that costs you nothing or very little. It is all about being active with your debt management and keeping close track.

So many people end up in unmanageable debt relying on credit cards. The credit limits may be beyond their means. Paying the minimum per month gets you no where towards clearing debt. And interest rates can be nasty. So how do you work around this?

First things first, set up a system to track your credit card balances. I find excel spreadsheets are fabulous for this as you can set up basic calculations to keep track of total debts. List all your credit cards (in case there is more than 1) and how much is owing on each. You may even want to track repayment amounts and due dates.

Now take a close look at your credit card features. Do they offer low interest rates? Reward points? Special features? Is there an annual fee? Now think carefully, do you really need the extra benefits of a fancy card? Let’s face it… Credit card reward schemes are rarely that good.

Research low interest no annual fee credit cards. Already a better option as they cost you less in the long run. Consider switching.

Back around the time of our wedding, I managed to pay off around $12,000 in credit card debt over 18 months (a combination of wedding, honeymoon and pre-wedding trip to Europe) by using the methods described below.

Now here’s how to get extra smart with credit. Have you heard of an interest free period? Many credit cards offer this as a way to entice you to sign up. It may be 6 months at zero interest on existing balance transfers for example. This means if you transfer your balance from another credit card, you won’t pay interest on that amount for the 6 months. Only on new purchases. Nice!

Take up an interest free balance transfer offer and cancel the existing credit card account. Already a start to saving yourself some dollars, so long as you avoid using this card for day to day purchases.

Now do up a budget on all your expenses, income and debts. Work out how much you can afford to pay towards your credit card debt each week or month. Make sure you don’t cut yourself too short. The last thing you want is to rely on credit again when you’re trying to get out of debt. Grab my printable budget template available to help you.

Repay more than the minimum monthly repayment. It’s the only way you will make any progress.

If your balance transfer period is almost up, consider switching to another card that offers a similar interest free period. It’s a bit of work but reduces what you pay in the long run.

Also, as an extra tip, always pay off the smallest debt first. It seems more logical to go for the big one first but all the while, both are costing you interest so knock over the smaller balance ASAP so you can focus all your efforts on the bigger debt sooner. I think this may be referred to as the ‘snowball method’.

There you have it, your credit cards are now working for you and you are taking advantage of the competitive nature of credit card providers. You will now be able to pay off credit card debt sooner. Now here is a quick summary of those tips:

  • Create a budget and credit card tracking system
  • Shop around for competitive credit card offers and rates
  • Take out interest free balance transfer period and move your debts across
  • Make monthly payments that are higher than the minimum repayment
  • Work out how much extra you can afford to pay each month
  • Don’t be tempted to use credit for purchases
  • Pay the smallest debt first and work your way up
  • Keep track of transfer periods and switch to new deals if needed
  • Use extra cash like tax return and bonuses to pay off quicker
  • Stay on top of it & the hard work will pay off (pardon the pun)
  • In future, always try and pay off credit cards in full each month

Do you use credit cards? Any tips or methods that work for you?

12 thoughts on “How To Make Credit Cards Work For You”

  1. Hey Chloe this is great advice and I have had a friend who has done this before and it worked great for him! I also know a couple of people who spend their allocated budget on their credit card (with the most rewards) and pay that off each month. Requires a little more dedication but it works for them! Kate, Wondrous

    1. If you’re on top of it, it’s definitely a nice little bonus. We do cash day to day but anything bigger or online I do the same to get those reward points and pay off so it works in our favour too.

  2. Love the tips for managing credit cards. I love my Qantas points credit card I haven’t had to pay for flights in a long time and since I have to spend the money I might as well get something for it. I do always though replace the money immediately that is used on the card unless it is unexpected emergency then I pay it off as quick as possible.

    1. Thanks Sam. My Virgin credit card is great for earning flight rewards too. Saving for a big family US trip in a few years :)

  3. Malinda @mybrownpaperpackages

    I only use credit cards for convenience and always know that I will have the money there to pay the amount off before it starts accumulating interest. Great tips for those that let it get out of control though.

      1. Just want to mention that it may not be recommended to keep moving your credit card provider too often as it affects your credit rating. Especially if one declines you, its on your record.

        1. That’s a good tip. Generally once or twice should be enough hopefully to get the credit card debt under control or sometimes existing cards offer new balance transfer offers too.

  4. Belle | Parties, Pearls and Being Precious

    Some really great tips there Holly! It’s a great idea to move to another interest free option as one expires to help reduce the costs of repayments! xo Belle

  5. Oh I really need to sort my credit cards out! When I was on maternity leave I became a bit too reliant on them, and even after being back at work for A YEAR they are still hanging over my head… thanks for the reminder, I’m going to sit down this weekend and work out a plan to get them back under control!

    1. It can be tough like that without a stable income. That has been my reality for a few months plus maternity leave soon. Fingers crossed you get organised to eliminate them ASAP and hopefully some of these tips help. Good luck :)

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