Wednesday, January 16, 2019

credit card

How would you feel about paying an extra 15% for everything you buy? If you do not pay off your full credit card balance each month, the chances are that you are already paying that much extra in credit card charges, which range from 8% right up to 23.5%. 

Plus, there are a whole host of other costs you may not be aware of such as annual fees, ATM cash advance fees, foreign currency conversion fees, late payment fees, over the limit fees, replacement card fees etc.

How often do you really check your credit card statement for all of these charges, or do they just slip by unnoticed?

Credit cards have given us the freedom to buy whatever we want (within reason) whenever we want it - it's just so easy and convenient to use them. But it is a luxury that comes with a heavy cost. A bargain is not a bargain once you add on exorbitant credit card interest charges. 

The good news is that these charges are mostly avoidable by changing your card usage habits. The main thing is to simply be aware of them. Get yourself credit wise and start today. Cut back your spending and stop handing over your hard earned cash to the banks - it is time to outsmart the card merchants. 

Tips for an interest-free future:

Use your savings

It might hurt to use your savings to pay of your credit card debt, but you need to look at the picture in black and white and keep the emotion out of your decisions. Any savings or investments you have are unlikely to give you a return anywhere near as high as the interest rate your credit card provider is charging. So use your savings to cancel your debt and move on. You can start saving again straight away, as you will be saving a packet on interest rates. 

Switch cards

Play them at their own game. Many credit cards offer interest-free periods for balance transfers. Switch your balance to one offering a 0% grace period, and use that time to get really serious about reducing your debt. Or if reducing your debt to zero within the interest-free period is not an option, choose a card with the lowest annual interest rate instead. 

Consolidate your debt

With home-loan interest rates at an all time low, it has never been a better time to consolidate your debts into one manageable sum. Your mortgage broker can organise finance options that will pay off your credit card debt and add the sum to your home loan. It is a simple process that could potentially save you thousands of dollars, and if you have not re-financed your home for a while, you could also find that your broker can clear your credit card debt and reduce your monthly mortgage payments. 

Ditch the credit card

Once you have paid off your credit card debt, keep it off. The easiest way to do this is to cup up the card and say goodbye to credit card shopping forever. Or at least keep it tucked away in a safe place at home in case of an emergency. Oh, and be sure to cancel any direct debits that are billed to your credit card or move them over to your current account. 

Debit not credit

Get into the habit of using a debit card for all your purchases. Start the practise of budget planning and set aside funds for various expenses each month - that way, you will avoid bill shock at the end of the month and limit yourself to spending only the cash in your bank account. 

Start saving

Do things the old-fashioned way - if you want to make a big purchase, set up a savings plan and stick to it then once you have the money, go out and buy your desired item. Be strict with yourself in terms of what constitutes an emergency and therefore requires the release of your credit card from its hiding place. If your hot-water heater packs up, of course it will need to be replaced immediately. The latest 55'' OLED 4K Ultra HD TV? This you can live without until you have saved up enough cash. 

Resist temptation

Easy credit is like a drug: you get an instant high from your purchase, followed by a nasty comedown once the bill arrives. Think before you waste your money on unnecessary purchases, learn to just say no and keep the credit peddlers at bay.

property investment

The unsustainable property price rises of recent years have finally slowed and we can feel a sense of balance returning to the real estate market. With tighter lending restrictions in place, it may not seem like the easiest time to start investing, but for savvy first-time investors looking to make the most of their capital, it's actually a perfect time to enter the market. 

Business analysts CoreLogic show that rather than falling, house prices are now plateauing. Population numbers in the east-coast capitals are continuing to surge: Sydney and Brisbane each have a growth rate of 2%, while Melbourne is racing ahead to become our most populous capital, with a growth rate of 2.7%. All these extra people are going to need somewhere to live. 

To further stabilise the market, the Reserve Bank looks likely to keep interest rates at their current historic lows until at least 2020. These current market conditions combine to create a favourable environment and good opportunities for investors. 

To make sure that you are one of the savvy, well-informed investors, here's what you need to do:

Do your homework

Houses in good areas with access to schools, transport and amenities will always be in hot demand and though they may carry a premium price, they will attract a good rental and yield strong capital growth. Look for areas of low supply and high demand. Try to buy off-market and consider using a buyer's agent to help you. If you are looking for an apartment, go for areas with fewer apartment buildings and smaller, more boutique developments. 

New apartments have been soaring into our cities' skylines, meaning that in some areas there is an over-supply. This glut of new builds has led to a rise in so-called 'property investment companies', selling (often lower quality) apartments on behalf of developers for premium prices to unsuspecting buyers - and earning significant commissions, that are all built into your purchase price. If the units in a new build are being targeted primarily at investors, rather than owner-occupiers, alarm bells should ring, as they are unlikely to make healthy capital gains. 

If you purchase an apartment that is marketed as an investment property, in a block of investment properties, you are restricting your eventual sale to other investors, who will always be looking for a bargain. And in a block of 50 or 100+ apartments, you may find yourself competing with a number of other investors looking to liquidate at the same time. 

So don't limit your sales potential to investors only. Instead, look for properties that will also appeal to owner-occupiers when the time comes to sell. These people are much more likely to pay more for a home they really want. 

Once you have found a property you want to buy, it's essential to do your due diligence. Look at recent sales in the area and talk to local real estate agents; ask them for their opinions on current market values and rental prices. Never rely on just one source of information before you buy - gather as much intelligence as you possibly can. 

Make a plan

Like anything in life, your investment will be more successful if you have a plan. Before you invest, take the time to define your ultimate goal, timeframe and what you hope to achieve along the way. Ask yourself why you are investing. Is it for a secure retirement or your children's education? Are you looking for long-term rental returns, and are you fully aware of the responsibilities of becoming a landlord? What are the tax implications of your purchase? It's a good idea to talk to your accountant before you begin your investment journey to establish the right structure for your purchases. Consider your exit strategy to ensure you set things up correctly from the start to achieve your desired result. 

Without a clear view of your financial future, you won't be able to draw a roadmap to guide you.

Do the maths

As with all investments, finance and budget planning is the key. The royal commission has brought the banks' practices into the spotlight, and inevitably, their lending criteria has become pretty tight. That's why it's essential to talk to an expert mortgage-broking professional, one with access to a large range of products from first- and second-tier lenders. 

A good broker will add value to your investment strategy, advising how to release equity from your first investment property after a few years to help fund your second purchase and so on.

Use your broker's inside knowledge and expertise to match you with the right loan - one that will help you onto the first rung of the investment ladder... and one step closer to financial freedom.

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Contact Details

Zippy Finance 

PO Box 3078
North Turramurra
NSW 2074

T 1300 855 022 

Louisa Sanghera is a credit representative (437236) of BLSSA Pty Ltd ACN 117 651 760.  Australian Credit Licence 391237. ABN 85 168 278 975.

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