Credit card with a huge limit that you dont overspend on is the best way. Actually, multiple cards so you can put trusted recurring payments and paypal and alipay on one so that you dont have dramas when some random online shop you use is compromised or whatever.
Credit card with a huge limit that you dont overspend on is the best way. Actually, multiple cards so you can put trusted recurring payments and paypal and alipay on one so that you dont have dramas when some random online shop you use is compromised or whatever.
The one thing I wish NZ banks would offer is virtual card numbers - but it's the one thing none seem interested in offering.
To put simply: Interest rate 14-20% (pa) Rewards rate 0.1-1.0% minus fee [a $50 fee and rewards rate of 0.5% means you have to spend $10,000 just to offset the fee with the reward]
I use a credit card for almost all purchases, but I've never paid interest so I don't know exactly how it works. Nonetheless, here's some approximate math:
Current: $6,000 balance at @ 13.5% pa interest = $810 pa (excluding compounding) with no points
Proposed: $6,000 balance @ 20.0% pa interest with, say, 1% points on value of spend. Interest = $1,200 pa (again, excluding compounding)
How much do you need to spend to make this worthwhile?
Extra interest = $1,200 - $810 = $390pa
At 1% points, that equates to $390/1% = $39,000 pa = $3,250 per month
So, if you spend at least $3,250 per month on the credit card, then the points cover the extra interest. Just. But with the risk that if the balance increases then the 20% interest will rapidly get out of control.
If the interest compounds, which I guess it does, then the required spend will be higher.
Also note that interest usually starts from the purchase date, not when the credit card payment to due, which might make things even worse.
tl;dr Points are a bonus, but don't chase them. Pay off your current debt and never again pay interest on a credit card balance.
Credit card with a huge limit that you dont overspend on is the best way. Actually, multiple cards so you can put trusted recurring payments and paypal and alipay on one so that you dont have dramas when some random online shop you use is compromised or whatever.
The one thing I wish NZ banks would offer is virtual card numbers - but it's the one thing none seem interested in offering.
Interestingly, ANZ do this via their app for NFC payments - A friend of mine set it up the other day on his phone, and it set up a new virtual card in the app.
but yes, some virtual cards would be nice, to be able to do exactly what you're suggesting.
joker97: To put simply: Interest rate 14-20% (pa) Rewards rate 0.1-1.0% minus fee [a $50 fee and rewards rate of 0.5% means you have to spend $10,000 just to offset the fee with the reward]
Yes, you need to spend quite a considerable sum to justify most rewards credit cards. For most people, a credit card with a lower annual fee would be a better option. I always do a quick spreadsheet model when evaluating credit card rewards options.
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