My Credit Union

Credit card pitfalls – what to look out for


It may be the season of giving and for a lot of us that means the season of spending. As credit card balances are increasingly drawn upon around this time of the year, SERVICE ONE’s General Manager of Banking, Tony Brown, looks at some of the more common pitfalls consumers can get stung by.

If you’re using a credit card balance transfer offer, are you going to be able to pay off the transferred balance by the time the balance transfer offer ends? Do you know what interest rate will be applied on any outstanding transferred debt after the offer ends? Are there any other penalties that will apply? Regulations for credit card issuers have been tightened to better look after the interests of cardholders but this shouldn’t stop you from asking the right questions and understanding the fine print that relates to your credit card.

Many cards on the market charge a higher rate of interest on cash advances than the rate applied on purchases – if you take cash out using your credit card, do you know what interest applies to this transaction. Some cash advance rates can be 5 – 10% higher than the rate that applies on purchases.

If you like having access to a rewards program, have you actually sat down to work out how you can access rewards and what they will actually cost you in terms of volume of purchases? Is it worth paying a higher interest rate and larger annual fee? Offering rewards programs costs the card issuer money so they need to recoup this somehow and to varying levels.

If you have a higher interest rate credit card and you continue to carry a sizeable outstanding balance (and paying interest), have you considered refinancing this debt using a personal loan? For instance, if your credit card interest is 20% or more, there are personal loan options available for half of this and as a personal loan has a specific term (unlike a credit card which is revolving debt), you will pay this debt off over the loan term.

Of course, SERVICE ONE lenders are available to discuss our credit card in more detail and can do some preliminary estimates of whether paying out a credit card facility with a personal loan will be beneficial to you.