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She's on the Money, She's on the Money.
Hello, and welcome to She's on the Money the podcast Millennials who Want Financial Freedom. My name is Jessica Ricky and today, of course I'm here with Queen Victoria Divine.
Queen Victoria Divine, I can get used to that.
Oh, I know everybody bout down. But today VD we are talking about credit cards, ill spicy topics.
Idea was this?
You know?
Communities?
Absolutely? Did you know that As of June twenty twenty two, there are thirteen million, one hundred and sixty one thousand, four hundred and forty credit cards in Australia, netting a national debt occurring interest of eighteen point two billion. That's billion with a B dollars. And since the COVID nineteen pandemic began in twenty twenty, Australians collectively paid off four point two billion dollars of credit card debt.
Ill And you know fun fact that I didn't write down for you in this script is that our current population as of Monday, the twelfth of September twenty twenty two is twenty six million people. So that's a lot of credit cards. Population. Half the preduclation has a credit card.
I think about how many of the people in that poplation are too young?
So you are giving me the ick Oh my gosh, all right, Jesse GOURRICHI speaking of young I feel like this is going to be a really relatable piece of content because I know it didn't happen to just me. When I turned eighteen, I got a credit card offer as a birthday present in the mail from my at that time bank, and to me at the time, it was like a green flag. I think I had some like color blindness glasses on and I must have not seen the red but it definitely was real green to
me because I took them up on that. I was like, yeah, of course I want a credit card. I am an adult. Let me add that. I think I had a five hundred dollar limit at the very start, because obviously that's quite responsible of the bank to not give me too higher of a limit. But after six months of having that, I remember getting a second letter I could increase my minimum, so I did that. I think it went up to fifteen hundred, then two thousand dollars, and then I know,
I can't remember how old I was. I know I ended up with a credit card balance of more than five thousand dollars at some point because hot girl stuff. You know, obviously I was really good at money. Did you ever get that?
I don't think I did. But honestly, I can't remember I got a credit card when I was in my late teens. It was after I had turned eighteen. I don't think it was supplied for it yourself.
Yeah, you give.
Anything a come, I must just beend it because I wasn't great with opening my mail.
Yeah, look neither. I don't know why I opened that one, And to be honest, I can't even remember why I remember this? It seemed like such a mundane piece of mail at the time that now I'm like, why do I remember that? And now I'm like, oh, it's because subconsciously I should have known that was a red flag
and I ignored it. But just for many Australians, managing credit and debt through credit cards is actually a really common element of their day to day money habits, while others a few bad mistakes have actually resulted in a downward debt spiral. But just like everything, there are people at all ends of the spectrum of how they use
credit cards, and we know this from our community. We know that there are people who are actually wizards at it, like how many people have slid into our dms, And like Victoria, you shouldn't be crucifying credit cards as much as you do. They are absolutely not the devil's plastic. They are a very good tool. Look at how many points I have I never pay for flights?
Cool And that's why on today show we are going to be looking at the stats on who exactly uses them, what for and how much they cost. Some good users for credit cards if that is something that might work for you, and what to do if you're in debt with them. But before we get straight into the thick of all the juicy deets, VD, I've got some fun stats for you.
Come on stat scal Usually Georgia King is the stat scale, but you're having a turn this week.
I'm going to give it a crack. So the average balance per credit card is two nine hundred and thirty eight dollars, just below three grand. Weariness is a lot of money. The average balance costing interest per credit card is one three hundred and eighty dollars. So I assume that's taking into account interest free cards and things of that nature, so that maybe not every dollar that's accounted for on credit is a caring interest. It might be
a caring fees or something else in the background. The average number of purchases per credit card per month is twenty two, which seems like a lot.
If you us a lot of purchase.
Wait, thirty thirty one days in an average month and twenty two purchases, so you're putting something on your card twenty two tar often, then you're that's a lot. Absolutely. The average credit card purchase is one hundred and nine dollars and seventy two percent of people reported that they could manage their finances without a credit card, they were just electing to use one, while the remaining twenty eight percent could not.
Why am I so negative about this? I feel like I'm so negative about this because I just see the financial implications for our community too often to not feel ick about it. Like you're right, Jess, there are so many people in our community who do do good things with credit cards. However, I feel like when something is a really big red flag for a lot of people, it's better to just avoid it entirely. Is that a bad thing?
I know what you mean, but I think and this is where we see those conversations happening a lot is people saying, well, what if you do use it responsibly? And absolutely you can. I found it really interesting that seventy two percent of people said that they could manage without a credit card, but they elected to have one. Do you have any idea of why they might be looking to use them or Jess.
I was looking at an article from Finder about why Australians actually take out credit cards and they had some interesting stats. So the biggest one, which I don't think will be a surprise to anybody, is forty one percent of people said they took out a credit card for emergencies. I feel like that's relatable content. I know I've lent
on one like that in the past. Thirty eight percent, though didn't see this coming, or you might have because you're a flying queen, but thirty eight percent of people got it for frequent fly points or the rewards associated with it. I did not think that that would be it. I genuinely thought that the second one would actually be you know, budget and cash flow, which unsurprisingly doesn't actually
feature in this list of topics. The next is twenty one percent of people got a credit card to make a big purchase eighteen percent, which I really don't like this one at all, Jess, because as we know, in Australia, you don't need a credit card to create a credit score. But eighteen percent of people getting credit cards in Australia said that they were getting them to establish their credit.
Oh my goodness, they clearly haven't listened to our episode or about credit scores.
And if you will, literally go back to our episode on credit scores, because if you've gotten a credit card to establish your credit, it's mistake nor I mean, we're not allowed to tell people they did the wrong thing. But I mean, I definitely don't think you did the right thing in that circumstance. Because in Australia, the best way to establish a credit score is actually just pay your bills on time and make sure you don't default on any loans or any bills that are due. It's
actually not about having a credit card. That's a very American way of thinking of things, because the American money
system works completely differently to ours. The next reason people would have got a credit card in Australia is eleven percent of people get them Jessica Ricci to do a balance transfer or pay off debt, which is interesting because they think this is a really valid reason to get a new credit card because often a lot of times they'll offer like, oh, for six months, it's zero percent
interest rate, and you go, that's really good. However, that can actually get people in a little bit of a sticky position because just say you have a credit card nineteen percent, you're like, oh my gosh, this is getting, you know, way too overwhelming. You know what, I'm going to do a balance transferred to another credit card because
I'll get six months of interest repayments. That sounds like a money win, except if you haven't done your budget or your cash flow after that six month period, you might end up with an interest rate of twenty two percent, and you actually end up further behind than you would go forward if you haven't actually worked out how to pay that debt off within that period of time. So definitely have a look at that before making that decision.
And then eight percent of people said that they got a credit card to help them manage a drop in income, So that makes sense. But at the same time, why are we leaning on credit if your income overall has decreased. That's actually probably really establishing some negative money behaviors from my perspective. All right, Jess, I know historically you've had a credit card. Am I right in saying that you've gotten rid of it completely?
Yeah?
I did it was actually I did it when I was listening to the show.
Paid Off the Money Ogfan.
I know, throwback to Poor Jess like three years ago, but I originally got it. And it's really interesting looking at this list because I see a lot of my thought patterns in it, and I would imagine that these responses are what the initial catalyst for someone was to get the card, because in my experience, the reason you do get a card and the reason you keep a card very different. Yeah, it can often be very different things. And so my first card that I ever got was
an interest free card. It was when I moved out of home for the first time, and it was a little bit unexpected, and I just didn't have the finances to get everything in order that I needed to do.
That makes sense, Yeah.
So it felt like a little bit of an emergency. I was having a bit changed and I needed to buy some furniture, and so I got like my bed and my mattress and stuff, and I put it on an interest free card, which worked really well for me. But I wasn't educated enough because in hindsight, I was paying a monthly fee which I think was about twelve bucks, which is.
Not not much, but also it is a lot. It's not then your end all.
I had I think maybe two or so thousand dollars on there with like the mattress and the few bits of furniture that I had.
So like, did that change what ma interest? Some furniture you picked because you felt like, oh, I've got more to spend.
No, it didn't. I knew what I wanted and it was just a matter of I didn't have the cash there. I was like, that's the best option, and in my head, I was like, oh, interest free, amazing, That's way better than paying interest. Didn't even think about the monthly or annual fees associated and I paid it off really slowly. I was only paying the minimum because I was like, oh, I'm not paying interest on it again, not thinking about
the monthly or annual fee. And then I got a second credit card because I something went wrong with my car and it was going to be like four thousand dollars to fix, and again I didn't have the cash, and I was just about to go overseas for a trip that I'd already paid for. It was like three days before I went away or something ridiculous. So I was like, I can't pull the money out because of course I'm respundable. And I was just like, well, I don't know what to do. So I got a card
and I put that on there. But then I like would pay it off or pay off a substantial amount, and then I would just tap it because I'd be like, I'm saving money and I don't want to see money coming out of my account.
Yeah, toxic.
I don't keep money in the account associated with my bank card. We've spoken about this before because you've had to pay all me out a few times, but I.
Don't keep feel like you need to find a better system.
But I don't keep money in there because I lose things, and I have historically lost my bank card, and I'm afraid that if I keep money there, of course you start tapping, have a great time. So I don't keep money there. And so they've been times in the past where I've been like, oh, I need to transfer money over, but I have no internet reception.
Literally just got back from America, have it.
So like that would happen, I'd be like, oh, I'll just pop it on the credit card, because the credit card's always there. So like, yeah, the reason I got it and the reason that I used it or maintained it were two very different things. So I can see in this list where people perhaps are taking things out for the right reason. They want the rewards points, or they're just making one off, big purchase. But even if that's the reason you've got it, that's not necessarily the
reason that you kept it. And I think that's where the element of danger kind of comes into it.
Can completely agree with that. We've spoken about it a million times on the podcast before. Nobody gets credit card to go into debt, right, like all of these reasons, like for an emergency to make a big purchase, like we do them with the best of intentions. Like you sign up for a credit card, Jess, because in your circumstance, you're like, I'm moving out of home really unexpected, didn't have time to save. I need to go buy these things.
I'll just pay it off really quickly. Yeah, you wouldn't have ever thought, you know what I'm going to do. I'm going to drag these payments out and put myself in debt and you know, sacrifice future use financial security Like no one does that. However, if we aren't going into it fully educated, those are the circumstances we can
find ourselves in way too easily, Jess. You said before that thirteen point one million Australians have credit cards, which is that's a big number from my perspective, especially because of the reasons people are getting them right like that means it's pretty common for people to want to lean on a credit card for an emergency circumstance, which means we need to, from my perspective, be doing a shitload
more around financial literacy education. That aside, a lot of people have actually run into issues when applying for them and maybe been declined. So let's talk through a couple of those reasons as to why people might not get them. And this is, honest to god, one of the most frustrating things ever, because a lot of people in our community are freelancers or artists, or work in areas where they don't have a consistent income. Therefore, they might be way more likely to try and rely on a credit
card to get from paycheck to paycheck. But the biggest reason people are declined when applying for credit cards is unsteady income at thirty six percent according to Finder. And then it's followed by having too much debt, which from my perspective it doesn't sound good, but I'm actually glad that people who are applying for credit cards who already
have too much debt aren't getting further into debt. And then the third reason why people are being declined when they apply for credit cards at twenty one percent, Miss jessic Ricci, is having a bad credit score.
Yeah, I think, like you said, ultimately, that's not the worst thing in the world, because I guess you want lenders to be lending responsibly.
That's why we went through an entire royal commit like responsibility is so important. However, do you think that this makes people mad? I think so.
But then I guess the thing to casitic heat would also be I guess additional factors. For example, if I'm a freelancer and I'm applying for a credit card with a thirty thousand dollar limit help me run my business, potentially the banks looking at me and going, oh, well, you don't necessarily have the cety income to service that, but we will give you one for ten thousand dollars. So it makes me kind of happy personally to know
that on some level people are being rejected. I mean, we don't know, you know, how many people who apply are getting that, or how many people are being sent those birthday letters like what you got, But it makes me kind of glad to know that it's being looked at, because you know, some other kinds of debt like buy now, pay later, aren't regulated that heavily, and I think it's important that they are.
Yeah, and do you know what. That makes me so mad because people are seeing it so differently. They're looking at buy now, pay later in credit cards as completely separate products.
But Vie, do you know how long it takes people to actually pay off that debt once they have it?
Okay, So I did some research and it really ticked me off. Just creach, you tell me what because if you look at the statistics from Finders credit Card Statistics, they have an entire web page on this right, which I find really interesting because I think it gives us some really good insight, but it doesn't give the context
I would like it to give. So on that website, it says that it'll take female six point nine months to pay off a credit card debt and it takes male six point two months, which I think is totally fine, makes sense. There's not actually that much difference between the average for a male and a female. It obviously skews to male's being able to pay off a credit card debt quicker, which we're not surprised about when there is the gender pay gap in every other pay gap under
the sun. However, Jess, I feel like that makes it seem a lot softer, like six.
Months a long time. That's not what my experience was either.
Yeah, yeah, no, it wasn't my experience either. I was literally in credit card debt for years. So to take it another step further and really contextualize it and go, all right, well, how long does it take to pay
off credit card debt? I think that's six month average is just when someone might have put a couple of debts on there and they're like, at a couple of one hundred dollars and it actually didn't massively impact their cash flow, right, Like, let's say you had a really well paying job and you got that credit card in the same way you did historically Jess, just for like the bed and a few pieces of furniture, and you
had a really well paid job. You just smash it off six months, easy done, wam bam, Thank you, ma'am. And there are going to be people in our community who are like, well, that's how I use my credit card. It's fine, But I've got an example for you. So we know that the average credit card debt in Australia is just over two thousand dollars. However, the amount that I always struggled with because I had a limit of six thousand dollars on my credit card when I was
younger and I earned like maybe fifty grand. That is a lot of your income that's able to be you know, lean out in credit. So let's go with an average balance of about you know, five two hundred dollars. Let's pretend that's how much debt you have on a credit card, Jess. That then means that your monthly repayment is about fifty two dollars per month, and you go, all right, new problems. So each and every single month, you're going to get an email or a letter. If you do still get letters,
please turn them off. It's tell it bad for the environment. But you're going to get an email from your bank or your credit facility to say, hey, Jess, your minimumory payment is due. You're going to go log in, pay your fifty two dollars and be like, oh my gosh, thank god, that's over. Like I've paid my credit card
this month, I'm sitting pretty right. However, if you only make that minimum of payment of fifty two dollars each and every single month, yes, that's going to take you twenty three years to pay off, and it will end up costing you eleven, four hundred and thirty three dollars.
Oh my gosh, that's crazy. What interest rate is that?
So that's a nineteen percent interest rate, which is pretty standard. Most credit cards sit anywhere between fourteen to about twenty five percent, which is wild. However, if you upped that and you said, all right, I've got five two hundred is dollars on my credit card, I'm going to pay one hundred and eighty two dollars each and every single month instead of that fifty two bucks, which jess at
the time, I hated doing that. If you got like such a waste of money when I put additional cash onto my credit card, I'd be like, but I only had to pay fifty two dollars, Like, I'm not that much further out of debt. I could have used that one hundred bucks or that you know, one hundred and thirty bucks to go out for drinks or live my life.
But one hundred and eighty two dollars on a five thousand, two hundred dollars debt will mean that you're out of debt in three years as opposed to twenty three years, and the total will only cost you six thousand, five hundred and sixty four dollars as opposed to more than eleven thousand dollars. That is insane, that's crazy, right, So if you pay that off within that three years, you're saving more than four and a half thousand dollars, Like, that's so much money that you could have invested or
saved or put towards an entire holiday. Like four and a half grand goes a really long way. So I think when we go back to that question that you asked before, and I'm sorry, I have gone on a little bit of a rant or a tangent of how long it takes to pay off a credit card. If we just look at the stats, they're not that scary. But if we look at the reality of our community and how I used to be and arguably how you
used to be. You just look at the minimum repayment, do you, and you go, all right, well, i'll pay that and I've got a life to live, or I'll do this, and it makes the most sense for me. So to say it only takes us sixi ish months, I think is just a little bit too flippant for me, because I go, well, that means that it doesn't sound so scary. However, if that's your experience money we in, six months of credit card debt is not that long.
And usually if you're in a little bit of a financial pickle and you have relied on credit card debt, getting out of it in six months is a great position to be in. I think my main takeaway, or the takeaway I want you guys to have here, is that if you do use a credit card, we have
to be always aware. We have to be on top of our payments, we have to be on top of what we're putting on there, and not do the Victoria Devine special of like, oh, I'll just tap it because I don't want to think about that, or I'll just pop it on my credit card because I know I've got room on the card. I'll just do that. Does that make sense?
Yeah?
Absolutely. And we know from those stats that we share before that forty one percent of people who do get a credit card do so for emergencies. Some recent statistics from find art share that only half of OSSI's who find themselves in out of control credit card debt would be able to dig themselves out if they got into it.
It's actually so scary. I remember sitting down with someone from our community, and I'm not going to get too much into the semantics because it's their story and their story alone to be shared. However, I sat down with them and they were in more than one hundred and thirty thousand dollars worth of credit card debt. I think I've shared this story on the pod before. One hundred and thirty thousand dollars worth of credit card debt duwel income family, but they were living way beyond their means.
And when I sat her down and said, look, this is your get out of debt plan, because obviously that's something that I've always specialized in, they just didn't want to reset their lifestyle. They were like no, Like that means that I wouldn't be able to do abc DN, And it just was so shocking to me that they were choosing literally choosing to bury their heads in the sand and continue to go further into debt because they didn't want to compromise their lifestyle. Like, to me, that
was wild, and I always it's so strange. If I'm up at four am, that's what I'm thinking about. I'm like, I wonder what they're up to now, because there's no way. They haven't not gone bankrupt because that was the next step. Like, at the point in time that I saw them, they had the ability to create a strategic plan to get
out of it. It would never have been easy, however, because they've buried their heads in the sand, I just know that the situation they're in now is arguably even worse, and it honestly breaks my heart.
Yeah, And it seems like people really fall into two camps when it comes to credit cards. There's people who are using it efficiently and in a way to make sense, and there are people who are using it in a way that is a little bit more detrimental and maybe not putting themselves in the best possible position.
Which is what I used to do and having you know, you and I just recently went to America and we're talking to our friends who are also money podcasters and in that space, and they're like, oh, yeah, I used my credit card points to like get an upgrade to business.
And you and I are sitting in the back of the plane at economy and I'm like, maybe we should revisit this, But I'm also so scared to get another credit card because I'm like, I don't know if I can be trusted even though I have a better education now. So it's just such an interesting position to be in.
So when people find themselves in that hole where they are in a truckload of debt, they need to dig themselves out, I've got a little list here for you of the different ways that they might approach that. So fifty three percent of people said that they would utilize their emergency savings, which arguably, emergency savings are there to get you out of an emergency, so glad to see that's up the top. Eighteen percent of people would ask
friends or family to help them out. Eighteen percent of people would also call their bank provider or issuer for help, which I think is a really great thing. That's something we say on the podcast all the time is if you do find yourself in a tough spot, definitely reach out to somebody to see if they can help you. It's a little bit of leeway on your repayments, or a little bit of extra wiggle room on your due
dates and things like that. Five percent of people said they would just miss the payment, which is really that burying the head in the sands that you were talking about before. And three percent of people said they would take out a small personal loan to cover it. And I feel like some of the things on that list are really perhaps not the most ideal situation.
So it's just what other people are doing though, right, It's not actually advice of like, oh hey, here are some hot tips on how to get out of credit card debt. It's just I guess some insight on what people are doing in their own circumstances, because sometimes you are backed into a corner and you're like, well, I can't get out of this credit card debt. I'm going to have to go down the route of finding a personal loan to cover me for that period of time.
Like this definitely is an advice because I think that some of those things can be really bad. But I think the number one thing I would do is literally call my band called Product Issue Are for some advice and some help, or even reach out to a team like our friends at Wiser Jess who can actually point you in the right direction, or as we've always talked about on the show, call the National Debt Helpline. Honestly,
they are there for any debt, big or small. You don't have to be in the biggest financial pickle in the entire world to lean on their services. They exist to help.
So what are some good sets that people can take if they do find themselves getting into debt.
So I think the first thing that you need to be doing is really looking at your money story and what your take on credit card debt actually is. I think looking for the solution immediately doesn't address the underlying problem of why we are leaning on credit card debt in the first place. It could be a shopping addiction.
It could literally be a situation like yours, Jess, where it's actually got nothing to do with your money abilities and everything to do with, oh my gosh, I need to move out and I don't actually have access to instant cash to be able to put a bed in the house, which at the end of the day is
a hygiene factor. We need to address this. So I think having a talk to yourself about how you got in this particular circumstance is, from my perspective, the most important thing that you do, because if we address that, we can make sure one we don't slip back into it, but two we can create a plan to get out of it that addresses that at the same time. So from there, I would then look up a credit card repayment calculator to work out a payment plan that actually
becomes affordable to you. We discuss the difference of making a fifty two dollars minute repayment versus one hundred and eighty two dollar minum room repayment, but you might go VI, I just can't afford that, Like, what are the options in between? I think it would be about really looking at your budget and cash flow and what's a little bit shiftable. We've spoken about it before. You can get rid of some of your streaming services in the interim, you can get rid of some things that are allowed
to come back once you're completely out of debt. But what can we do in the short term that puts you in a position to turbocharge your debt reduction. I would then obviously really recommend spending within your means. Credit cards aren't free money, so be really careful with your spending habits and avoid purchasing things that we don't really need. Jess, we say it all the time on the podcast and in real life, and you posted about it on Instagram
the other day. What's the other thing that she's on the money usually says.
Put twenty four hours between you and your purchases.
At a minimum, but Bingo, I think that that can really put you in control. But I think it also puts you in a position where you go, oh, do I really need this or not? In the heat of the moment, Guys, I'm really impulsive want to buy it. But if I put twenty four hours between me and my spending, especially if it's online spending, Jess, I look at it and I go, oh, my gosh, I completely forgot. I wasn't even intending on purchasing that. So that's kind
of helpful. But I think at the end of the day, we need to create a really solid budget and cash flow plan that makes sense for us and strip back all of those things that are not hygiene factors in your budget. So obviously we don't have a lot of say on our rent and our bills and what we're spending on food, But what are those discretionary costs that we could potentially cut back on in the short term to put ourselves long term in a better financial position.
Okay, I know it seems like we're bashing on credit cards, but I promise you that's not what we're doing here today's episode only a little bit, so come back after the break because we're going to talk through what some of the benefits might be. Don't go anywhere, Welcome back today. We are talking all about the ins and outs of credit cards FD. Let's talk through some benefits because I know people think that we really do just think they're
the devil incarnate, which they're not. It can be used responsibly, so can you.
Tell peoples plastic devul's plastic? No, there are a number of benefits associated with credit cards that it would be silly of us to completely dismiss because at the end of the day, we've spoken about how detrimental they can be, and I do think we need to really weigh up the pros and cons. However, there is literally a long list which I have written down, and Jess, you and I are going to go through them with you now.
But there is a long list of benefits associated with having a credit card, and when used constructively, sometimes people actually make money. So it would be silly of us to not address it. However, from my perspective, if you are a little bit like me, and you are a little bit impulsive, even though these benefits can look really sexy, Jess. If you're anything like me and you are really impulsive, it does not mean that a credit card is right
for you, no matter how good the benefit looks. Because I know that even if we go, all right, well, there's cash back, or there's rewards points, or there's all these other frequent flyer miles that we could add to your account, I just know that as somebody who has as we've spoken about before, I have ADHD. I love a good gamification, love a good dopamine. Here I'll be like rewards points, frequent flyer miles, how many can I get?
And Jess, you have seen me do it with my frequent flyer miles without a credit card, so I don't know how it would go with a credit card. Let's be brutally honest.
Yeah, absolutely so big thata caveat on the front that just because there is something shiny attached to the credit card doesn't necessarily mean it's a good choice. But with that being said, V run me through your.
Lists, all right. The first thing on the list, Miss Jesscarci is one time bonuses. So often credit cards offer cash bonuses in exchange for spending a certain amount in the first several months of the account being open. So other cards often enticed applicants with bonus reward points or miles that could be redeemed for travel or gift cards, or merchandise or a whole heap of other things. Jess we've all seen it. I feel like that's a pretty good no brainer one. The next is cash back, So
you guys know, we love shot back. You don't even need a credit card to use shot backs, so maybe that's a very good alternative if cash back is of interest to you. But the cash back credit card is another really popular incentive. Some cards now offer two or three percent, or even as much as six percent back on selected purchases. Then number three on my least, Jessica,
is rewards points. So many rewards credit cards provide bonus points for certain categories of spending, like restaurants or groceries, or spending on fuel. When certain earning thresholds are reached, points can be redeemed for travel or gift cards from retailers or restaurants, or for merchandise items through a credit card company's online rewards portal. So think back, jess you
love a good Flybys point. Oh, my god, Yes, no credit card necessary with that one, but you literally banked up all of your fly buys points and what you get.
I got a kitchen age.
You've got a whole damn kitchen egg for free. Literally it is wild. And I think the trick to rewards points is to actually work out what best suits your spending patterns, as opposed to just looking at the shiniest option. Because for you, Jess, you just tap your fly every time you're at the grocery store and you're getting these bonuses and it doesn't even include a credit card. But if there's something that is going to really work for you, maybe that's when you lean into it.
Before we get into the rest of the list. I would personally group those first three into like a little subset because I think, interestingly, when you look at it critically, they're all aimed at establishing spending habits, Like, yeah, all of these things aim at encouraging you to use your credit card regularly so you get, you know, your one time bonus if you spend five thousand dollars in the first three months, or you get rewards points if you
spend on your fuel or your groceries. All the things that you buy all the time. And I think that's really a little bit sneaky by the credit card companies because.
They've been trying because it keeps you at clients, yeah, and.
They're trying to put you in a position where you are relying on these purchases regularly and they're using those points to entice you to do so. So like they're absolutely, as you said, great if it works for you in your lifestyle. But I would also encourage people to be conscious of what new habits you're forming, because that's when you maybe are going to slip into something that's a little bit less sustainable for you.
Yeah, And I think that it's a really good point to bring up. It's kind of like if something is free, there's a reason for it. Like there's no such thing as a free lunch. It's not just an American thing. Like I was talking to Glenn James a couple of days ago actually about this, and it's if something is free and you can't work out why you're the product. And I think that that's really interesting to bring up because so many times people are like, oh my god,
it's free. I just added my email, like cool, they're probably selling your email address and all of your information. So just be really careful about what that means. Because when something is free, you're the product. But if it's free and it's a service, it's usually to keep you engaged and keep you spending beyond the means that you
usually would have set up for yourself. Right, Like, this is so important that as much as they're going, oh, cash back that's so sexy, Oh my gosh, one time bonus is fantastic, rewards points, it's actually so that you stay in their ecosystem and spend more. Because Jesse, if I sat you down earlier, you gave me a statistic that said that the average credit card purchase was one hundred and nine dollars. I would argue that my average purchase is not one hundred and nine dollars, Like, most
of my purchases are far below that. I'd be interested to look into. I guess the psychology around what type of spending patterns we are establishing on credit cards, because that's significantly higher than I'd say, yours or my average spend.
Yeah, one hundred percent. Tell me what else have you got on your list? All right?
So, Glenn James, special it is the frequent flyer miles. So many frequent flyer cards are made way more valuable by their mileage based introductory bonuses. So these are often enough to put you fifty or even one hundred percent of the way towards a bonus flight after meeting a card's initial spending requirements. So if you're going on a holiday or you're traveling a lot, that could be something that really plays into it. Something that our community really
likes is the safety. So number five I've written down is safety, and that is because when you pay with a credit card, it is often easier to avoid losses from fraud. So when your debit card is used by a thief, the money is often just missing from your account immediately. However, when you use a credit card, it
works a little bit differently. The money is not missing immediately, and sometimes a transaction can be completely canceled or it can be skipped, and it's far more likely to be acknowledged by a credit card system because they are looking for it on a more regular basis than your bank
is with your debit card. Right, so if you know another one hundred bucks goes out on your debit card, they're going to be like oh, Jess is probably just spending, whereas there's a lot more data with a credit card transaction that they're able to trace and go, oh, I don't know if this was Jess, because this is a very different system. I've also heard that they're more flexible with chargebacks as well. It's chargeback the right works. I think it's like cash back or charge back.
It's like if someone steals your card and they, you know, spend five hundred dollars on the Iconic and you go to them, oh, like, my card's been stolen. I've heard and this is my personal experience, but credit cards are much more quick to go, oh my gosh, we're so sorry and charge it back somebody comes back to your card, whereas banks it can be a little bit more of a strenuous process.
Yeah, and I'm sure that you guys have heard our money diarists before. We've had people who this has happened too, and I think it's really valid. But I also think it plays into your larger financial plan, right, and how your banking system works, because going back to Jess, Jess, your banking system is such that you don't actually have a debit card that gives you immediate access to your lump sum of cash. So if some scammer got hold of Jess's card, good luck, you can probably buy a Starbucks.
And that's basically it. If you're lucky, you're lucky. So number six on my list Jess is insurance. And this is another one that our community goes wild for and they're like, oh my gosh. Insurance is such a big thing with credit cards. It's a money when I would argue that you need to read the terms and conditions of the policy because most of the time, me being cynical, me the insurance on a credit card does not stack
up when compared to a different type of insurance policy. So, for example, Jess, you and I had to buy travel insurance recently, and we bought standalone policies. They are great policies, but I know that a policy with a credit card that came for free would not have been as comprehensive or had as high a level of cover. But most credit cards automatically come with a number of different consumer
protections that people just don't even realize they have. So it could be rental car insurance, or it could be travel insurance or product warranties. That might exceed the manufacturer's warranty.
And the important thing to do here is actually one understand what they are, but to make sure that you're not just relying on it because you heard, oh my gosh, well I have you know rental car insurance, like, understand what that actually means, because sometimes putting yourself in the best position actually looks like going and getting a standalone policy. The other caveat there, Jess, is it's not just hey, I got rental car insurance. You actually have to use
that card to book that rental card. Otherwise you're not cut, which makes sense. Another selling point of a credit card. Number seven I've written down is universal acceptance. So when you want to rent a car or stay in a hotel room, you'll almost certainly have an easier time if you have a credit card. In saying that, not to bring up the fact that we've been overseas so many times this year. Again, every hotel that I have stayed in, I have put down a debit card, not a credit
card on our room and had absolutely no issue. So I think that this is more of a historical issue.
In saying that a lot of people feel a lot more comfortable having it there, and often rental car companies and hotels actually want customers to pay with credit cards because it makes it easier to charge customers for any damage that they cause to like a room or a car, and it just actually makes the job easier for the hotel because it's easier to put cash onto a credit card than it is to authorize the transaction to a
debit card. It just makes sense. So, Jess, that wraps up my hot list of reasons you could and should. I can't believe I'm saying this, should get a credit card?
Yeah, probably not should, but for sure I feel like the TLDR of that is, if you are getting a credit card for the first time, you know, there's kind of the two camps. There's credit cards on the market with you know, low interest rates or no interest rates potentially as well, but make sure if you are looking at those, you look into the monthly and annual fees that might be associated and then obviously credit cards that
come with rewards. Both potentially might be a good option for you, but they're definitely aimed at servicing very different people, and I guess it's probably worth people considering if they are wanting to get a credit card, maybe starting with something a little bit more basic with a really low interest rate, and seeing if you use it successfully, because if you've never had one before, you don't know what your interactions or habits are going to be like once you've got that card.
I totally agree. I'm still so negative on it, and would argue that if you don't need one, it wouldn't be getting one. I can see the safety aspect of it, like, you know, having traveled and been able to put things on debit card. Every time I approach that reception desk, I'm not entirely sure if they going to accept that, So I can understand wanting to have it because you
feel more safe traveling with it. Right However, I would still would, if possible, steer clear of things like that, because, as we mentioned through that entire list, there are so many different cash rewards programs or fly bys points that you can get without even needing to have a credit card. So if you're rewards driven, why not look for options that don't include having to have a credit card? Is probably where I would sway when it comes to advice.
Jessica, Yeah, and one little tip from me from my personal experience is you can lower your maximum spend on your cards, so all ot of the time they'll come in like one thousand, five thousand, ten thousand dollar limits,
and it's just very standard and very basic. But you can actually generally get in contact with your credit card provider if you are wanting to get a card for the first time, or if you do know that you're a little bit spendy and say hi, like I'd actually like to drop my limit to five hundred dollars or one thousand dollars, and they will usually have a minimum
that they want it to sit at. But that's something that I did when I was weaning myself off my card, is I just kept dropping my amount and dropping my amount and my amount to make sure that I couldn't actually overspend on it.
All right, Jess, I think that that is probably a really good place to leave it. Again, if you're listening to this and you are in debt, there are a number of different places that you can go to help. We always, always always recommend our friends at the National Debt Helpline who have tons of free resources and you can call and speak to them too. We'll obviously link them in the show. Notes. But Jess Grici, it is now time to wrap the boring but important stuff. Take it away, my love.
Don't forget guys. The advice shed on Cheese on the Money is general in nature and does not consider your individual circumstances. Cheese on the Money exists purely for educational purposes and should not be relied upon to make an investment or a financial decision. And we promise Victoria Divine and Cheese on the Money are authorized representatives of Infocused Securities Australia Proprietary Limited ABN four seven oh nine seven seven nine seven four nine AFSL two three six five two three.
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Bye,