12 tips to stay on top of credit card spending

By Nick Gelling

Product Test Journalist | Kaipūrongo Whakamātautau Hautaonga

Some of us are prone to overspending on our credit cards. The lure of “buy now, pay later” is hard to resist – but getting stuck in a debt cycle can be extremely stressful. We’re here with a dozen ideas – some obvious, some not – that could help you improve your credit hygiene.

If you’re a disciplined spender and pay off your bill every month, you can take your pick of the best credit cards and rewards programmes. Compare interest rates and fees on more than 30 cards with our guide to credit cards. You can also use our calculator to find the rewards programme that best suits your level of spending.

But, if you’re one of the many New Zealanders who find it hard to stay on top of their credit card bill, these 12 tips can help.

Day-to-day basics

Pay in full whenever you can. If you don’t pay off your card each month, you’re throwing away money in interest and fees, quickly outweighing any rewards you get from the card. Minimum payments are designed to benefit the bank – not you!
Pay by direct debit. Clear your whole debt by direct debit every month and you don’t have to remember a thing. Set up an automatic payment with your bank.
Work out a budget. Setting yourself some rules can free up extra money to pay off your card. If you need expert help, local financial mentors can assist you for free. Visit your local Citizens Advice Bureau or the MoneyTalks helpline for more information.
Avoid excessive payment surcharges. Stores pay a fee to Visa or Mastercard when they accept a credit card payment, which some choose to recover through a surcharge on customers. But the surcharge shouldn’t be higher than what the store pays, which is about 1%. If a surcharge is 2% or more, pay by cash or EFTPOS if you can, or consider shopping elsewhere.
Watch out for credit creep. Banks can automatically raise your credit limit (i.e. your maximum debt level) unless you opt out. If you’re not careful, you could end up with a limit you can’t pay off on time, resulting in added interest. If you don’t want a limit increase, make sure you’re prepared to say no.

Tips for travel

Avoid cash advances. When you use a credit card to withdraw money, the card’s interest-free period doesn’t apply. You’ll pay interest beginning on the day you withdraw, making it a very expensive way to get cash. Cash advance interest rates are 10% p.a. at minimum, and both ANZ and BNZ charge more than 20% p.a. on their cards. Use a debit card instead, if you have one.
Be careful with advance deposits. Some hotels and car hire companies charge your card as soon as you make a reservation, even if your trip is months away. That’s fine, so long as you’re prepared to pay it off now, rather than waiting till your travel date. If you give your credit card details to a hotel as security, ask if they’ll put a hold on some of your credit and, if so, how much. It might be a partial deposit or the entire fee. If necessary, you should be able to find a competitor that will charge you at check-in.
Use a dedicated travel card to get cheaper foreign currency. Some cards can give you much better exchange rates than your everyday credit card. We’ve crunched the numbers on the best debit and credit cards to use while travelling.
Don’t pay in the wrong currency. Some overseas merchants let you pay in New Zealand dollars. The best rule of thumb is to always pay in the currency of the country you are in, so your bank’s currency conversion fee will apply. Otherwise, the merchant will convert the money instead, and often at a worse rate. In some cases, merchants might charge lower fees, so it’s a good idea to know your bank’s currency conversion rate before you travel.

Getting out of debt

Switch to a low-rate card if you have card debt. You may not need to change banks.
Consider a balance transfer card. You can move your debt to a new bank under a “balance transfer” offer. Balance transfer credit cards come with very low interest rates for a short time – often 0% for the first 6 months. If you’re serious about paying off your debt, they can be an excellent opportunity to reset. However, remember that banks are willing to make these offers because they think they can make a profit from your debt after the low-interest period ends. Do your best to prove them wrong!
If you don’t feel in control, stop using your card straight away. Use a debit or EFTPOS card for your spending and cut up your credit card if you need to. Don’t be embarrassed – getting stuck in a credit trap is more common than you think.

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Day-to-day basics

Pay in full whenever you can. If you don’t pay off your card each month, you’re throwing away money in interest and fees, quickly outweighing any rewards you get from the card. Minimum payments are designed to benefit the bank – not you!

Pay by direct debit. Clear your whole debt by direct debit every month and you don’t have to remember a thing. Set up an automatic payment with your bank.

Work out a budget. Setting yourself some rules can free up extra money to pay off your card. If you need expert help, local financial mentors can assist you for free. Visit your local Citizens Advice Bureau or the MoneyTalks helpline for more information.

Avoid excessive payment surcharges. Stores pay a fee to Visa or Mastercard when they accept a credit card payment, which some choose to recover through a surcharge on customers. But the surcharge shouldn’t be higher than what the store pays, which is about 1%. If a surcharge is 2% or more, pay by cash or EFTPOS if you can, or consider shopping elsewhere.

Watch out for credit creep. Banks can automatically raise your credit limit (i.e. your maximum debt level) unless you opt out. If you’re not careful, you could end up with a limit you can’t pay off on time, resulting in added interest. If you don’t want a limit increase, make sure you’re prepared to say no.

Tips for travel

Avoid cash advances. When you use a credit card to withdraw money, the card’s interest-free period doesn’t apply. You’ll pay interest beginning on the day you withdraw, making it a very expensive way to get cash. Cash advance interest rates are 10% p.a. at minimum, and both ANZ and BNZ charge more than 20% p.a. on their cards. Use a debit card instead, if you have one.

Be careful with advance deposits. Some hotels and car hire companies charge your card as soon as you make a reservation, even if your trip is months away. That’s fine, so long as you’re prepared to pay it off now, rather than waiting till your travel date. If you give your credit card details to a hotel as security, ask if they’ll put a hold on some of your credit and, if so, how much. It might be a partial deposit or the entire fee. If necessary, you should be able to find a competitor that will charge you at check-in.

Use a dedicated travel card to get cheaper foreign currency. Some cards can give you much better exchange rates than your everyday credit card. We’ve crunched the numbers on the best debit and credit cards to use while travelling.

Don’t pay in the wrong currency. Some overseas merchants let you pay in New Zealand dollars. The best rule of thumb is to always pay in the currency of the country you are in, so your bank’s currency conversion fee will apply. Otherwise, the merchant will convert the money instead, and often at a worse rate. In some cases, merchants might charge lower fees, so it’s a good idea to know your bank’s currency conversion rate before you travel.

Getting out of debt

Switch to a low-rate card if you have card debt. You may not need to change banks.

Consider a balance transfer card. You can move your debt to a new bank under a “balance transfer” offer. Balance transfer credit cards come with very low interest rates for a short time – often 0% for the first 6 months. If you’re serious about paying off your debt, they can be an excellent opportunity to reset. However, remember that banks are willing to make these offers because they think they can make a profit from your debt after the low-interest period ends. Do your best to prove them wrong!

If you don’t feel in control, stop using your card straight away. Use a debit or EFTPOS card for your spending and cut up your credit card if you need to. Don’t be embarrassed – getting stuck in a credit trap is more common than you think.