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Debt Consolidation
But What About My Credit Card Reward Points?
Debt ConsolidationCredit card debt is a growing problem in Australia, but for many credit card holders, the thought of cutting up their plastic poses a bit of a problem. What about my reward points?
You may be building up your points to cash them in for a luxurious holiday one day, but have you thought about how much a free holiday might end up costing you?
All of the big banks now have some kind of reward programme associated with their credit card products. They're a great marketing innovation as far as the bank are concerned, encouraging customers to spend big on their credit cards on the promise of exchanging points for goods at some point in the distant future. Reward programmes help the banks increase their profits by increasing spending, then making interest on the debt, as well as the fees and charges they collect on the way. So from the banks point of view, credit card reward programmes are fantastic.
Unfortunately the reward programmes are not quite so fantastic for the credit card holders. You only need to look at the websites of any of the big banks ANZ, Commonwealth, National and Westpac for example to see that the ease of earning points is promoted everywhere, but information on the value of redeeming your points is harder to find.
Let's take Westpac's Altitude programme. With just a standard Altitude MasterCard, Westpac customers will earn one point for every dollar they spend on their card. To take just one example, Westpac customers can currently redeem points in exchange for department store vouchers. A $20 voucher will cost you 3,100 points. That means for the sake of a mere $20, you need to have spent a whopping $3,100.
ANZ have partnered with the Qantas Frequent Flyer programme and offer one point for every dollar spent up to $1,500, then only one point for every two dollars spent over $1,500. On top of this, points can only be earned on a maximum spend of $5,000 per month. It's not hard to see how these reward programmes work in the banks' favour, not to the advantage of the customers.
When you look at it this way, spending big to earn points is not the amazing deal that it may seem at first glance. Once you take into account the interest charges and fees you will need to pay on top of your credit card bill, a shopping voucher, overnight stay or free flight could end up costing you thousands.
Credit cards may be useful for emergency purchases, but generally you should avoid using them and save yourself the hassle of credit card bills and interest payments. Free yourself from the marketing hype surrounding rewards programmes and find out whether your bank offers a Visa or MasterCard debit card, which allows you to access your own money and say goodbye to credit card debt.
Financial Stress? You're Not Alone
Debt ConsolidationWith experts estimating that the average Australian spends 10% more than they earn, it's no wonder that debt-related stress is becoming more widespread.
Financial stress can be caused by a number of factors, from losing your job to the breakdown of a relationship or a snowballing credit card debt.
Studies have shown that financial stress can lead to a host of problems from fear and anxiety, to more serious medical conditions such as depression and blood pressure problems. These problems can lead to a vicious cycle of financial problems, as people under financial stress may make rushed or panicked decisions about how to manage their money.
Banish Credit Card Debt
Debt ConsolidationDoes your heart sink when you know you're about to get your credit card bill in the post? Or worse, do you have debt spread across so many credit cards that you're not even sure when the next bill is due to arrive?
If you're a home owner, chances are your home loan repayments are already enough of a financial commitment. Credit card balances that go unpaid are a drain on your finances, as cumulative interest charges mean you can end up paying thousands of dollars more than what your original purchase cost.
Feeling like your credit card debt is spiralling out of control? You're not alone. The average Australian owes over $2600 on each of their credit cards, and as interest rates rise, the amount of national credit card debt is likely to increase.
5 Things You Should Know About Debt
Debt Consolidation1. Australians are loaded with debt.
According to recent studies, the average Australian is spending 110% of what they earn every year. The average Australian owes over $2600 on each of their credit cards and over $200,000 on their mortgage. So if you're feeling plagued by debt, you're not alone.
2. There is good debt.
Unless you have an extremely high income, a generous inheritance or have won the lottery, you probably aren't likely to have the cash to pay for a home outright. This is where borrowing money makes sense as you are using debt to build an asset that is likely to increase in value.
Bad Credit? Rest Assured That It's Not As Bleak As It Seems
Debt ConsolidationIt's a fact.
Thousands of Australian consumers are struggling with the burden bad credit ratings as a result of difficult personal or job circumstances, a bad run of luck, bankcruptcy or adverse court judgements
And to make things even more bleak, there are reported to be millions of people who have low credit scores as a result of court judgements but who don't even realise they're in a bad credit spiral until they have their application for a standard mortgage turned down.
Surveys reveal that in many cases, court judgement black marks are received because the individual moved house without notifying credit or store card companies, and subsequently missed a few payments.
An End To Debt Stress Could Be Around The Corner
Debt ConsolidationWhether or not we like to confront the prospect, statistics suggest that most of us are likely to face financial hardship at some point in our lives.
If it happens to you, a low rate debt consolidation mortgage could be just the breath of fresh air you need.
You'll know if it's your time to consider remortgaging because the signs will suddenly be everywhere.
It'll be increasingly difficult to keep up with bill payments, and creditors will start to call. If times get really difficult, bailiffs could start to line up, and you could find that some of your debts reach the hands of collection agencies.
Keep Your Bank Account from Debt's Door
Debt ConsolidationIs your bank account being attacked from all angles? It has to deal with your mortgage, car repayments, credit card debts, not to mention living expenses it's no wonder some bank accounts resemble something being shot at in a Tarantino film.
If this scenario sounds familiar, and you are starting to feel like you might be minutes away from getting warning phone calls from collection agencies, don't despair. Debt consolidation may be the answer for you.
Credit History: Clean Up Your Act
Debt ConsolidationWhen applying for a home loan, you need more than just savings. Generally you will need to prove the stability of your employment and income, show your savings history, provide tax information and give details of your current financial commitments. On top of all of this, you will need to have a clean credit history.
Your credit history is a record of your credit activity, that is, all of the loans and other credit, such as credit cards, telephone accounts and utility bills, you have taken out over the last seven years.
