Interest free doesn’t mean cost free

Tempted to buy that new lounge, home theatre system or television but don’t have enough money to pay for it right now?

Before you sign on the dotted line for in-store interest free finance, think carefully and read the fine print. More importantly, do your research! Well… we have done this for you!

Many retail stores offer interest free payment terms, especially during the end of financial year sales. But beware! These ‘interest free’ deals that allow you to take your goods home and pay them off over time aren’t always cost free!

Choices, choices, choices

Not only can you get ‘interest free’ store purchases, there are ‘interest free’ credit cards and ‘interest free’ loans – well ‘interest free’ within a certain timeframe that is.

They all have their own features, benefits and pitfalls.

Usually with in-store interest free deals, you are provided with a store card or credit card with a credit limit to cover the cost of your new purchases. These deals typically have a higher limit than the goods you are purchasing.

It is not uncommon for stores to offer various interest free deals as they really want your business. Their range of options attracts different clientele. We have seen the mega chain store giant, Harvey Norman, offering seven different interest free options at one time!

And of course there are the buy-now-pay-later options with Afterpay, Zip Pay and the like (that’s a whole other topic) that have very similar features. However these options also require thorough consideration before taking action.

Did you say 29% interest rate?!

Retailers have different offerings and their payment terms will vary, so it is important you read all the conditions for each loan option as they will differ.

For example, the interest rate you will be charged if you haven’t repaid the balance by the end of the interest free period can be as high as 29%. That is even higher than most credit cards!

Make sure you calculate your regular payments to ensure the balance is paid off before the end of the interest free period. It is wise to set up automatic direct debits so you don’t miss any payments. This case study by ASIC’s MoneySmart shows you why.

Case study: Ron and Maya compare interest free deals

A young couple, (Ron and Maya) discussing interest free deals, both got interest free deals but for different amounts.

The interest free deal worked out well for Ron as he increased his repayments to pay off the deal in time.

But Maya just left her repayments at the minimum amount and ended up being charged 29% interest and still owed a lot at the end of the interest free period.

Details:

Purchase $2,000 couch

Interest free period – 12 months

Repayments – $200 monthly

After 12 months – Fully paid off

Outcome – Happy with the deal

Maya’s deal

Purchase – $1,500 fridge

Interest Free Period – 12 months

Repayments – Minimum repayment

After 12 months – Paying 29% interest on a $1,000

Outcome – Stressed with more debt

If your interest free deal comes with a credit card – BEWARE! Additional purchases won’t necessarily be on the interest free terms and you could end up paying high interest rates on those additional products immediately. Plus, there is always the temptation to buy ‘something else’ with the remaining credit available.

Nothing to pay! No deposit! No interest?

Sounds too good to be true? Well it usually is. These catchy headlines may draw you in-store or online but there are fees associated with your shopping that may include application, processing or account keeping fees.

Interest free finance arrangements can be a great way to reward yourself with some of the finer things in life – or even practical purchases like appliances when you are home making. But these arrangements are only beneficial for those who are regular on-time payers. Otherwise you may find yourself just like Maya and stressed with more debt – and of course we don’t want that!

Remember: every credit application, loan, credit card AND interest free deal you have will go on your credit report and can affect your future borrowing power. Many Australians take out interest free finance without realising it is actually a loan and the penalties in the end can be high.

We leave you with two key thoughts on interest free shopping:

1. You have to be able to afford the repayments and ideally pay the item off before the interest free period expires. You don’t want to put extra pressure on your cash flow.

2. If you only pay the minimum monthly repayment you won’t have your purchase paid off by the end of the interest free term and you will be slugged with high interest and more fees.

If you are one of the 1.6 million Australians who already have 3 or more credit cards, perhaps another interest free deal isn’t for you! Saving or the good old fashioned lay-by may be the answer.

Before you are tempted into interest free shopping, please call us, even for those new small debts. We can help you make the right decision to reward yourself now and in the future.

Top 11 Disciplines for Financial Success

  • Spend less than you earn

champagne taste on a beer budget?

  • Pay down non-deductible debt first

Any debt that doesn’t make you money or create your wealth should be paid down first. Start repaying your store and credit cards and personal loans then your home loan BEFORE your investment debt. For every $5,000 racked up on your credit card, you are affecting your property borrowing capacity sometimes by about $30,000 or more.

  • Pay off your highest interest bearing credit card fast

Paying off a credit card with a 27% interest rate will allow you to feel awesome. When you apply your existing payment that was previously used to pay off the high interest rate card to another card debt, watch the balance drop significantly in a much shorter time frame.

  • Think carefully before taking on any new (or bad) debt

(including credit cards, Afterpay/Zip Pay, personal or car loans). Not every 0% interest (or low interest) rate is what it seems. Always check with your financial adviser (us) first, BEFORE taking on any new debt. If you start to shop around yourself, you could very well damage your credit rating and end up not being able to borrow at all for a longer period of time.

  • Spread your indulgences over a longer time frame

Yes, you need to be rewarded for your hard work and discipline. So when you DO indulge, spread it across the year or over several months to take advantage of maintaining your budget, cash flow and to reduce any more financial damage.

  • Revisit the way you are using and spending your money often

Sometimes we drop out of good habits. Don’t beat yourself up, just jump back into the flow and get cracking again.
Invest in good quality objects/clothing that will last as opposed to grabbing possessions in sales that you will only use on a few occasions or perhaps never use at all. Quality over quantity is a good mindset to have in the world of saving, finance and investing.

  • Invest in good quality objects/clothing that will last

as opposed to grabbing possessions in sales that you will only use on a few occasions or perhaps never use at all. Quality over quantity is a good mindset to have in the world of saving, finance and investing.

  • Prepare for life’s unexpected financial events.

Have a rainy day account to avoid upsetting your plans. You don’t need any excuses to stop your progress and results.

  • Don’t be afraid to ask for help.

BUT – be careful who you listen to Sometimes those who give us advice are the ones not following their own advice or have little knowledge and/or success themselves. Remember, we are only a phone call away.

  • Be positive about the future

What we think about comes about, so be careful what you focus on. Looking at your debt will bring more debt. Look at your equity and asset growth instead!
Educate yourself, then take massive action “To know and not do is really to not know.” Stephen Covey. There is a lot to do to achieve financial success. Don’t try it alone.

Call us to arrange a catch up. We can discuss your personal needs and help you get on track financially.

Technology has changed the way we use and value money.

Apart from all the physical, emotional and family effects, mobile technology has changed the way we use and value money.

We live in a world where we don’t see physical money often. Online purchases are made and cards are tapped or swiped.

Data from comparison site finder.com.au reveals if current trends continue, physical cash could vanish in Australia as soon as 2026.

Children’s games on tablets are purchased online without a hint of any notes or coins being exchanged.

How do they learn to check change or even add up their bills?

How will children learn the real value of money without seeing, touching or paying with it?

Children lack the connection between themselves and the day to day essentials to live in this world.

How will they form an understanding of life skills?

Guiding money-wise kids

Here are a few tips to help your kids to be money-wise:

1. Explain ATMs – how and where the money comes from

2. School banking – if your school has a banking program, open an account, contribute money as a reward and set an end of year goal to withdraw

3. Explain debit and credit cards – that they have to be paid off, topped up with money and that purchases are not free

4. Pay pocket money electronically – set up an online bank account and contribute money for chores and homework. Once they are old enough to manage their own bank account, transfer the money over and teach them how to use ATMs (if they are still around), and to read and check receipts

5. Start educating them about the world of finance from a young age – start with the simple money jar or piggy bank

And for the teenagers, check out the show on ABC ‘Teenage Boss’ hosted by mathematics teacher Eddie Woo.

It follows fifteen teenagers from across Australia as they take control of the family finances for a month, with some surprising and not so surprising results.

Being money-wise is important to us. We can help guide you on the right budgets and investment decisions for a successful financial future – and one to teach your children and grandchildren.

Contact the office today for a confidential discussion if you or your young adult children need help with managing their finances.

Australians’ love affair with property

Why people DO it

Around 20% of Australians invest in property for:

• potential capital growth

• rental income

• tax benefits

They tend to consider property one of the more solid, less volatile forms of investment because you can actually touch bricks and mortar.

They like the feeling of getting ahead financially.

They don’t want to be one of the 80% of Australians who have to rely on the aged pension when they retire

Why others DON’T

They:

• need more information to take the first step

• don’t know how to ensure their investment is not threatened by interest rate rises or unreliable tenants

• aren’t sure about how to pick appealing properties for good rental return

• don’t realise they can probably afford it – even if they don’t have a big salary

• think all debt is ‘bad’ and haven’t realised that an investment property could make them money and even pay for itself

Here are some time-tested strategies to help overcome common initial jitters about investing in property. Getting an education from people who are investors themselves is the fastest way – go to those ‘in the know’.

1. Being comfortable with your debt level and being able to afford the repayments

Borrowing to purchase income-producing assets such as investment properties is considered by financial experts as ‘good debt’. Rental income is generally used to pay the mortgage and expenses whilst the owner benefits from any capital growth in the value of the property. Bank guidelines also reduce your risk because they simply won’t lend to you if they don’t believe you can repay the debt (and they also allow for interest rate rises).

2. How to keep making payments on your investment property if you lose your job

Positive cash flow property – This is where your rental income exceeds the mortgage payments and property expenses. Direct the excess rental income into your offset account and hold it there as your ‘rainy day account’ to cover loan repayments if you find yourself unexpectedly unemployed or financially strained.

Negative cash flow property – Negatively geared property is when the mortgage needs ‘topping up’ from your income.

Your property deductions/out of pocket expenses may help you to secure a tax refund at the end of the financial year. Save your tax refund as a buffer. Alternatively, your accountant can help you request access to your tax refund for a reduction in your weekly tax. Put this extra amount aside each week and it will help accumulate a buffer to maintain the property in the unfortunate event that you lose your job or your income is reduced.

3. Risk of not securing a tenant

The best way to mitigate this risk is to carefully select a property with high rental appeal. Only buy in high rental areas where the vacancy rate is consistently less than 3%. It is also sensible to select a property manager before you settle so they can secure tenants immediately.

4. Possible problem with bad tenants

How do you pay the mortgage if the tenants don’t pay their rent? Or pay for repairs or damage caused if they ‘do a runner’? The answer is landlord insurance to cover any losses. The cost of this insurance is minimal when you consider the cost of not having it – and it is tax deductible as well.

5. Coping with interest rate increases

Changes to interest rates are a fact of life. If you are going to invest in property allow for interest rate increases and only purchase property that you can afford to hold onto even if rates rise.

6. An exit strategy is your ‘pull the pin’ plan

It is best to put this plan together in the cool light of day, before you buy, because doing it under pressure can lead to the wrong decision. An exit strategy gives you peace of mind and allows you to sleep at night.

Call our office today and make an appointment to discuss your property investment plans. You’ll need a clear idea of how much you can borrow before you start looking at properties.

Technology and Kids

A state of insufficiency

We all know that technology has become an increasing part of our everyday lives across all generations – and none more so than children.

In fact, Australian children as young as four and five years old are spending 2.2 hours each week day watching screens. Those numbers increase to 3.3 hours by age 12 and 13 and longer on weekends.

Effects of technology are long and varied

The long and varied list of the effects of technology include online addiction, access to inappropriate content, reduced physical activity, security, hacking, online predators, sleep difficulties and family conflict.

Amongst the problems cited above, technology can affect family wellbeing and harmony.

Television has been around since 1954 and in Australia since 1956. Back then those who were fortunate enough to have one often watched television as a whole family activity. But times have changed.

New technology offers children independence from their parents’ involvement in their social lives with social networking and messaging sites. Parents see it as a loss of connection – but it is not all the children’s fault.

Parents can be just as much consumed by technology as their offspring. In fact, if you have an iPhone, check out your daily and weekly screen time usage. It is alarming. As adults, we typically use our smartphones not just for communication but as an ‘escape’ to the online world of social media – seeing what others are doing, browsing and even reading books.

Most of us have our work and personal life all in one phone. That ‘ping’ we hear during family dinner time or even when we sleep may be an email from the office or calendar notification of some sort!

Children are born to learn

Children are born to learn, to socialise. We have known for decades that without social interaction and relationships, we are denied connection and bonds – a core part of being human – as explained in Maslow’s theory of a human’s basic needs.

Modern family life often consists of TV dinners and TV (or iPad) baby sitters which seem to be the way of life now. Yet we have all heard about the numerous studies and warnings on how harmful these are for our society and the impact this will have in generations to come. We are already seeing the scary evidence.

Effects on children’s learning

A former teacher and education and technology researcher, Kristy Goodwin, studied the effect of technology on children’s learning which was highlighted in an SBS Insights segment.

Although there are benefits to using devices to create digital content for storytelling, movie making, creating animations or coding, there are also many complaints.

Screen time causes myopia – a condition of the eye where light focuses in front of the retina instead of on the surface, resulting in blurred vision.

The research showed that the premature introduction of screens, before the eyes have time to develop, was a cause of the condition. Another common complaint when it comes to kids and technology is the way screens can captivate and hijack their attention. There are two main reasons why we all find it so hard to digitally disconnect.

The state of insufficiency

1. The brain releases neurotransmitter dopamine. Looking at social media will give our brain dopamine hits. Dopamine is associated with the pleasure system of the brain. This in turn motivates us to do, or continue to do, certain activities.

2. When we’re online, particularly on our phones, Goodwin says “…we enter something called the state of insufficiency. We never, ever feel done. We never, ever feel complete.”

We have all seen the trance like looks on children’s faces – the tantrums and those videos that have gone viral on social media showing children ‘losing the plot’ and having demonic screaming meltdowns due to the lack or removal of access to Wifi or their computer games.

Technology is here to stay. Be proactive and control it. Don’t fear it. Set boundaries, install parental controls and educate your children on the dangers of technology and appropriate information.

Consider how the online world is affecting the way we use our finances and the important lessons our children are missing out on as we move towards a cashless society.

3 Essential Behaviours for Financial Success

TOO MUCH OF THE MONTH LEFT AT THE END OF YOUR PAY?

Do you tend to overspend?

If so, you are not alone!

Did you know?…

• A staggering 86% of the Australian population don’t know how much money they are spending every month, although 90% think they have a good handle on their spending.

• With the convenience of alternative payment methods (ie tap and go), 63% of Australians have increased their spending in the last five years.

• 91% spend without thinking, and 86% lose track of their spending.

• About 70% of people believe that alternative payment methods make it easier to spend money that they would not spend otherwise.

As living expenses rise, but wage growth remains subdued, Australians increasingly overspend and dip into their savings – if they have any at all! In fact, more than one in five Australians have no cash savings.

Many of us are spending our hard earned salaries without tracking what we are doing with it and not ‘capping’ the different areas of expenditure.

Consequently most of us miss out on channelling that unnecessary spend into something more meaningful:

• a holiday

• extra superannuation payments

• future family commitments

• home renovations/upgrades

• new furniture/car/other

• future investments

Beware the money wasters

Here are some examples of what could happen when we are not paying attention to how we spend our earnings:

• Using ‘easier’ alternative payment methods that result in higher cost outcomes.

• Using credit cards for ‘tap and go’ (when we may not have the cash at hand) instead of debit cards (knowing the money is already in the account). • Overspending at social events such as drinks and meals when out with friends (46% of people admit that they have shouted a round of drinks that was not reciprocated).

• Overspending on special occasions (like birthdays and Christmas). Your budget should include all special occasions for both family and friends, AND stick to your limit!

• Bad online habits – especially teens and tweens who are blowing the family budget. Half of Australian parents of tweens and teens have covered the bills for unapproved online spending for mobile calls or data, in-game purchases, music, video streaming or apps.

Caught up in social media advertising and online shopping remarketing?

Let’s face it – technology makes online shopping easy and accessible. More sophisticated social media marketing is increasingly putting more products and services in front of consumers more often.

So what are the 3 essential behaviours for financial success?

1. DISCIPLINE

Disciplined saving and controlled spending WILL put more money in your pocket.

Consistent habits make a big difference when it comes to wealth building and financial success.

By regularly checking how you spend your money (if only say 30 minutes – once a month) will help maintain focus with where it is going.

There is no better feeling than accomplishing something financially – whether it’s paying off a bad debt (like that credit card), saving for a holiday, getting your super sorted and working for you or simply building up an emergency fund for times when the cost of living is so high.

If nothing else, it will take some of the stress away knowing that you will be able to access the funds that you have set aside when you need to, whatever the need may be.

2. PERSISTENCE

Nothing great ever happens overnight or typically without a constant and persistent approach.

While others may be appearing to be having all the fun, it is usually short lived and ends up as one faded memory running into another.

• Avoid tempting situations – If you’ve spent your budget for the month, avoid the shops (and jumping online) or cut back on your social outings.

• Maintain good money habits – Spend less than you earn and set automatic savings.

Get help – this is where we fit it in!

3. ADAPTABILITY

Inevitably you will encounter bumps and distractions along the way.

In most cases, what you start out to do, and what you end up with, are not always the same. Part of success with anything is to be prepared for a change in advance and be willing to take a few calculated risks along the way.

APPlying good money habits… There’s an app for that!

With so many cards, accounts and transactions, combined with less time and more financial stress, we’ve been racking our brain on how to help our clients track their spending better and help them take some financial accountability.

So we thought we’d share a few easy to use, low or no cost ways of helping you track and manage your finances.

There are easy smartphone ways to budget, save and invest that don’t require much effort by you.

Q. How do I know how much I am spending?

Many of the lenders we recommend to you offer great online tools to help you track and manage your spend.

When you log into your online banking next time have a look around to see what they offer.

Every lender is different but some of the useful tools are money or expense trackers allowing you to:

• set budget targets and savings goals

• view and categorise your transactions

• select time frames to achieve these goals

• display your spending as a graph

You will be surprised at how they already categorise and split your spending without you even knowing.

Some lenders allow you to add all your loyalty cards into their app. This keeps your wallet from exploding to ensure you don’t miss out on all those loyalty points.

BUT BEWARE – if you add these to your lender’s app they will know all of your spending habits intimately from Chemmart to Dan Murphy’s.

There are many apps outside of your lender that offer the same convenience for storing all your loyalty, store and other cards for ease of use and the goal of having a smaller wallet (like Stocard and Apple Wallet).

Have more than one bank account?

If you are like most people, you may not keep all your accounts with one bank.

Enter Pocketbook and Finch.

These are FREE Australian budgeting apps that collate multiple bank accounts and track your expenses.

They automatically sync and categorise data from your bank accounts daily. You can then set a monthly allowance for each category or types of spend. You can even set bill reminders and it can send notifications when you are nearing your limits.

Pocketbook was named best money management app in the 2018 Mozo Experts Choice Awards, however there are some critics who say it isn’t very user friendly.

Finch will allow you to:

• pay your friends directly if you owe them money

• split the dinner bill

• help you track your spending and money owing from housemates

• collect fees from your sports team and

• help you split travel expenses with your friends!

Q. How can I track all my other finances such as super, credit cards, investments and loans?

There is an app for that too!

MoneyBrilliant. It works much like the others. This FREE app allows you to track bank accounts. For a $9.90pm plan you can also connect your credit card, super, loans and investments in addition to all your assets and liabilities.

PLEASE NOTE – there are many, many applications available now to help you with your budgeting, savings goals and tracking features – too many to keep track of really. (Maybe there’s an app for that?)

THESE ARE NOT RECOMMENDATIONS FROM US TO YOU.

This is an awareness article to let you know there are tools, MANY tools, to help you track and manage your finances.

Have a look at your lender’s tools as a first place to start. You will be surprised at what is already there.

As with everything to do with your finances:

do your own research

read the terms and conditions

understand ALL the third parties who will now have access to everything that you do financially and the consequences of sharing your information

AND

• call us first if you are struggling to meet your daily or monthly commitments We are, after all, your finance specialist who (other than yourself) cares the most about your personal finances and financial wellbeing.

Look before you leap and plan ahead before you retire.

There is no end of financial advice on preparing for retirement: superannuation, investments, tax minimisation, age pension eligibility, funding your desired lifestyle – the list goes on. All these areas of advice highlight the importance of planning ahead – the sooner you start the better prepared you will be.
One of the biggest decisions for many retirees is whether to stay in the family home or purchase smaller or ‘retiree’ accommodation. It may be their most significant decision both financially and emotionally.

Is it better to plan ahead? In the years prior to retirement many homeowners find themselves with substantial equity in the family home and fewer expenses as kids (hopefully!) leave home. It’s an ideal time to consider using the equity in your home to buy that retirement property now. In the years leading up to your retirement, the rental income and possible tax benefits will help pay for your property.
With the potential benefit of positive movement in the housing market – and now having two properties – this may place you in a good position to increase your retirement nest egg if you choose to sell your family home when you downsize. Depending on your situation you may even be able to keep the family home as an investment.

Downsizing is on the move According to the Productivity Commission, approximately 20% of Australians aged 60 or over have sold their home and purchased a less expensive one since turning 501. It is expected this percentage will increase as more Baby Boomers move into retirement.
As a result, there has been increased demand for suitable housing for retirees such as villas, townhouses and units. Growing competition for limited stock in many established areas has increased prices – in some locations the cost of a villa can be as expensive as a three bedroom house. This trend may continue.
But beware – the reverse can happen in an off the plan situation. Some off the plan properties are valued lower than purchase price upon completion and lenders have restricted lending in certain areas.

Why downsize? The decision may be as simple as living in a property that is easier to maintain, closer to family or one that supports your lifestyle choice – many grey nomads LOVE being able to lock up their small pad and hit the road!
Selling could also release money for other investments that provide you with additional income in the future. This may give you more choices in retirement and avoid alternative equity raising options such as a reverse mortgage on your current property.

Look before you leap Before putting your home on the market you should consider the following:
Understand your reasons for selling. Don’t just consider short term needs – factor in potential long term needs.
Explore ALL the implications of selling your house – financial and otherwise.
What are the advantages to YOU? If you’re moving to be near family what will happen if they move elsewhere?

Smaller isn’t always cheaper. Explore all the costs of moving and maintaining a new home. Will you be ahead?
Have you sought financial advice? How will funds from the sale of your home affect your Centrelink assets and income tests? Will selling impact your Age Pension?
You may miss people, activities and services in your current area if you relocate to another region. Make plans to re-establish yourself or keep contact with your social circle.
You will need to cull a lifetime of possessions. ‘Letting go’ can be difficult. Try doing without items or living in a confined area of your house for a bit to see how you adjust to ‘smaller living’.
Ultimately, downsizing from your family home should provide you with a whole new way of life that is better than the one you left behind. With careful planning and a clear understanding of your future goals you could be well on the way to making it your best move yet!

Keeping your credit score healthy

Your credit file is one of your most important financial assets.  Safeguarding this file is an important part of the finance application process.

Your credit file contains credit applications, overdue credit accounts, payment defaults, clearouts (as a missing debtor), commercial credit information and public record information. You will have a credit score calculated from your credit file.
From September 2018, there is additional information about the credit products you hold on your credit report including:

• The type of credit products you have held in the last two years
• Your usual repayment amount
• How often you make your repayments and if you make them by the due date.

Did you know that a score of less than 500 will severely affect your ability to gain finance from many lenders?

Do you even know what your score is or how easily it can be affected?

What is your credit score?

Credit scoring is a mathematical assessment of the data included in your credit report. The credit score is calculated by the credit reporting agency using a number of complex formulas. The score shows the likelihood of an adverse event recorded in the next 12 months. Scores range from zero to 1,200.

The higher your credit score the lower the risk that you will default. A ‘good’ credit score is between 622 and 725.
Credit reporting
The credit report is the basis for your credit score. In Australia there are four credit reporting agencies: Equifax, Experian, Dunn & Bradstreet and Tasmanian Collection Service.
You can access a free copy of your personal credit report through the following online providers: Creditsavvy, Creditsimple, Finder, Getcreditscore and WisrCredit.

Your credit report is very important as it provides the information used to calculate your credit score.

You will have a credit report if you have applied for any form of credit.

This can include:
1. phone contracts
2. credit cards
3. residential or personal loans, or
4. hire purchase

So what affects my credit score?

There are some behaviours you can control that will affect your score:
1. late payments,
2. overuse of credit, and
3. limiting the number of credit applications

We have had clients lodge a loan application with us only to be rejected due to a poor credit score. When we investigated the cases we found there had been multiple credit enquiries listed in a short period of time. What the clients didn’t realise was that every time they were offered (and accepted) a new credit card (at their local grocery store and service station) these services were individually lodged as a credit enquiry.

Our clients had also sought pre-approval from various lenders while they were searching for a new home. These pre-approvals were also listed as a credit enquiry. When the time finally arrived to acquire their home loan, it appeared they had submitted many applications for a range of credit over a very short period. This history resulted in a low credit score and subsequent rejection by the lender.

Surely the lender can understand  what really happened?

Unfortunately many major lenders are now treating credit scores as a black and white decision. If your score is too low then the loan application will be rejected – no questions or discussion!

What should I be doing?

You need to be conscious of your credit report. Make sure you meet all your credit obligations. If you are considering refinancing in the next couple of years, be aware of all agreements, pre-approvals and enquiries you make (where you sign a privacy agreement) as these will generally result in an entry on your credit report. These entries  stay on your file for 5 years.

Is ‘free’ credit card travel insurance worth it?

Do your research and watch your spend!

‘Complimentary’ travel insurance is an increasingly used feature on many premium credit cards.

According to ASIC’s Money Smart, 20% of travel insurance is used through a credit card compared to 19% through a travel agent and 31% direct from an insurer.

Traveller beware Credit cards with complimentary travel insurance can be a great way to save money, but it is important to check the eligibility criteria and what the policy will cover.

Travel insurance that comes with credit cards may not in some cases cover as much as a stand alone travel insurance policy you buy separately.

There’s the old saying that nothing comes for free…

Complimentary travel insurance isn’t really ‘free’. The travel insurance premium is usually paid through the annual fee on the card. So you might as well take advantage of something you have already paid for – right?

Do your homework first!

As with all types of insurance, it is advisable to do your homework, compare policies and always read the terms and conditions.

Generally, travel insurance covers you for medical expenses, loss of luggage or personal items, disruptions to travel and theft. Always check the limits and exclusions before you buy.

A travel insurance policy included on a credit card offers varying levels of cover when travelling domestically and internationally.

In many cases, for the credit card travel insurance to kick in, you need to satisfy certain terms and conditions. For example, you may need to pay for your departure ticket on your card to activate cover, while other cards require you to exceed a minimum spend threshold of trip expenses on your card before that particular journey will be covered.

Activation requirements, where consumers are required to use their credit card to pay for travel arrangements, vary from provider to provider.

Do your own research with travel agencies, direct with insurers or through online insurance comparison sites to help you make the right decision between stand alone and credit card travel insurance. These online sites provide further details about pros and cons of ‘free’ credit card travel insurance.

They will help answer questions like:

• How do credit card travel insurance and stand alone travel insurance compare?

• Who is covered?

• What is covered?

• What are the price comparisons?

• What excess will you pay if you make a claim?

• How much of your luggage and valuables are covered?

• What is the maximum period you can travel?

• What is the limit of your medical expenses?

Take control of your travel spending

The activation requirements (eg paying for that plane ticket), minimum spend requirements and on-the-go holiday spending and shopping could lead you to a hefty credit card bill at the end of your travels. Budget well upfront!

You don’t want to be one of the one in six Australians drowning in credit card debt or going over your credit card limit as a result of your holiday spending.

If you need to fund your holiday, talk to us first before you overload your credit card. There are other options to pay for those big ticket items!