Credit Hangover – MoneySmart Rookie
Tips on saving and spending for people aged between 18 and 25 on the MoneySmart website:
Tiramisu. Delicious. Best cake ever. I swear. Oh, my God. I gotta go. I didn’t realise how late it was. Are you gonna leave now? Yeah. Sorry. Can you fix up the bill? Yep. OK. Sure. I’ll get the next one. Bye. Alright. That’s fine. See ya.
How would you like to pay for that today? Uh, just by card. Can you just put it on this for me? Sure. No problem. Thanks. Look, sorry, it’s been declined. What? I tried three times. (PHONE BEEPS) Oh, sorry.
Maxed out your credit card? Staying on top of your finances can help you avoid some embarrassing rookie errors like this one.
Credit is borrowed money that you have to pay back with extra costs, like interest, fees and charges to use the credit. So whether you’re buying a car or a meal, here’s how to avoid some of those rookie errors with credit.
I’ve got a debit card because I wanted to buy things online for Christmas presents, eBay. And it was just easier to do that. If something happens overseas and I run out of money or something horrible happens, I’ve got that money there. That’s the reason I got it, so I could buy more and more things online.
Um, probably the dumbest choice I’ve ever made. I just spend what I earn. But, um, no, I feel really bad about not budgeting, and I need to. I’m quite impulsive. If I’ve got that credit card with 1,000 bucks or whatever it is in my pocket, I’m more inclined to go and just buy something.
Credit can cost you big time. Say you max your credit card to $5,000, and the interest is 20%. So you decide to stop using the card and just make the minimum repayments every month to pay off the balance.
How long do you think it would take to pay off that $5,000? Incredibly, it would take over 45 years. That’s because you’re not just paying off the $5,000, you’re also paying off the interest on the $5,000 you borrowed.
So how do you stay in control of your credit? Well, if you’d been through all this before, you’d know what to do, right? So, Chloe, meet older and wiser Chloe. Whoa! Hi. Good news. I’m engaged. The bad news is I’m $20,000 in debt.
What? 20 grand? How did that happen? Well, first I borrowed money for a car. Then I started applying for credit cards and I just spent it like it was free money. I even put my 21st on the card. Was it good? Oh, no, wait. Don’t tell me.
What are you going to do about all that money that you owe? Well…That’s when things got worse. You might not realise this, but even your mobile phone and internet companies can charge you if you’re late or miss payments.
They might even give you a bad credit record.
So, what’s a credit record? Well, it’s a record about you, all your credit applications and missed payments if you’re a bad repayer. It’s pretty scary, so it’s important to always pay your bills on time.I had so many cards and I missed a few repayments. Turns out it all goes on my credit record. I can’t even get a loan to buy a house now. The banks rejected me because of my bad credit record. And because I’m still paying off my credit cards, I have even less money to live on now.
So what are you going to do? Well, I met with a financial counsellor. You know, it was really good to talk to someone who didn’t judge me. And it was free. It was good. You know, like, she helped me set up a budget and I’m slowly paying it off bit by bit.So is there anything I can do to help? Well… You know I tend to act impulsively, so let’s make a deal to always wait before spending.
How about this, say, for every 100 bucks, let’s wait a day. So if you want something that’s $500, you wait five days.Deal? Yeah. Deal. I’ve always been about EFTPOS. I’m never really about credit. I don’t like the idea of having to pay for it later. I put a third of everything I earn in the week to just spendings. So, just, like, groceries, things along those lines. Everything else, sort of, goes into a savings account and that savings account is sort of almost like it’s, like, a locked safe.
I’ve fallen behind on payments before because I haven’t been keeping up with what’s going on and not paying attention to bills. Not looking at my accounts. And it’s a good idea to try and increase your repayments. You’d be surprised how much you could save.