Using Credit Wisely

10 Tips to think about before using credit

1. "Can I pay cash?". This is the first question you should ask before purchasing anything. There are no credit charges associated with cash payments and the goods belong to you immediately. Lay-by may be another alternative. With a lay-by you can pay a small amount each week (depending on store policy) with no interest charged.
2. If you have to borrow the money, pay the highest possible deposit on the goods to get lower repayments on the overall cost.
3. Pay off the loan as soon as possible. This way you pay less interest.
4. Try to buy only one item at a time on credit. If you are paying off a few, then your budget may not be able to meet all of the repayments. Avoid consolidating loans to purchase new items as you may be paying more interest over a longer period.
5. Examine the goods before signing a contract to make sure they work and are in good condition.
6. Do not count on income you do not have or do not receive regularly, such as overtime or casual earnings. Try to meet your commitments from a balanced budget.
7. Be sure that you can afford to meet each repayment. Budget the repayments with your rent and living expenses.
8. If you are getting credit for a car, allow for other expenses such as registration, insurance, stamp duty and transfer fees. Do not forget running costs such as petrol, repairs and maintenance.
9. If you are in financial trouble, contact your credit provider before the due date to renegotiate payment details, they are more likely to negotiate before a due date than after it.
10. Beware of 'interest free terms, with no payments for 6 months'. A financial counsellor saw a client who believed this to mean that part payments began 6 months after the purchase. This was not the case. Payment in full was required by the end of the advertised interest free period. Read contracts carefully and ask for a full explanation before signing them.

It is especially important around Christmas time that you do not get into the credit card trap. Make sure that you PREPARE IN ADVANCE. See our brochure on Christmas Tips on this website for more ideas.

For some alternative ideas to using credit and preparing a balanced budget, it may be useful to obtain the assistance of a financial counsellor. Qualified financial counsellors are available free of charge for people who live near Lutheran Community Care at 309 Prospect Road, Blair Athol, South Australia. For more information about this service telephone 8269 9300.

The Office of Consumer and Business Affairs is also able to give you information about using credit successfully as well as information about your rights as a consumer. For more information you can contact them on 8204 977 between 9am-5pm Monday-Friday.

This information was prepared by the Low Income Support Programs of Lutheran Community Care and Wesley Uniting Mission