Credit cards – pay more than the minimum
Minimum monthly credit card repayment levels vary from card to card, ranging from 1.5 per cent to 5 per cent a month but most commonly are 2 per cent of the total outstanding balance.
According to the Australian Securities and Investments Commission credit card calculator (at fido.gov.au), if you pay just the minimum 2 per cent each month on a $10,000 credit card debt without extra spending, it will take 62 years and 8 months to clear the debt, at the cost of $32,457 in interest.
Making slightly larger repayments can dramatically improve the equation for card holders. If you make your minimum repayment $250 instead of $200 you can pay the card debt of $10,000 off in five years and four months.
Merchant surcharges on credit card payments can also hurt card holders in the long run. Consumer group Choice says airlines have particularly high fees.
Qantas charges $7.70 for credit card payment for a domestic or New Zealand flight and $25 for all other international tickets, while Tiger imposes a credit card “convenience fee” of $6 a passenger.
Source: Sydney Morning Herald