Tips for managing your credit card balance

Reducing your credit card debt and keeping on top of your balance are more important now than ever before with changes to the way your credit history is reported starting to come into effect. Here are some ways you can keep your credit card debt under control.

  • 22 October 2018

    When used correctly, credit cards are a great way to build your credit rating and give you the freedom you need to make important purchases. New credit reporting rules are making it all the more important to be responsible with your credit cards. Here’s an overview on how Comprehensive Credit Reporting (CCR), sometimes referred to as positive credit reporting, and your credit card balance go hand-in-hand.

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    man researching on a laptop while looking at a credit card

    Raise your hand if you don’t have a credit card.

    If you’re reading this article, chances are your hand stayed right where it was, and that’s okay! Your credit card is one of over 16,000,000 credit card accounts in Australia, a number which has almost doubled over the last 18 years, and the reason for that is pretty simple: credit cards are one of the most readily available forms of credit to obtain and most convenient to use. 

    We can tap our cards, our phones or our watches and buy the things we need - and sometimes the things we don’t – without putting in too much thought. These little plastic rectangles in our wallets and on our devices are equal parts blessing, and when misused, curse.

    It’s easy to lose track of your balance and how much you’re spending when you aren’t physically handing over cash for every purchase. Reaching or exceeding your limit or missing a payment can negatively impact your credit report and credit score. And until recently, making payments on time and being responsible with your credit did little to improve your position.

    All of that changed in 2017 when the Federal Government announced a new credit reporting scheme called Comprehensive Credit Reporting (CCR). CCR is a form of positive credit reporting which gives lenders (banks and other financial institutions) a complete look at a person’s credit history. It takes into account negative information (overdue accounts, defaults etc.) and credit enquiries, plus positive information around dates of accounts being open, type of credit and the limits and details of monthly repayments. 

    According to the Customer Owned Banking Association (COBA), the phased introduction of changes to credit reporting is good news for both borrowers and lenders. 

    “CCR has the potential to increase competition because lenders will have more information about consumers, which means they will be able to match credit types better and amounts to borrower capacity. Lenders will have the capacity to more accurately price credit relative to the risk profile of the borrower,” said COBA Acting CEO Dominic Dunn in a 2017 press release.

    This is great, but how does Comprehensive Credit Reporting (CCR) affect me?

    To understand how these changes will affect you, it helps to know how lenders assess you when you apply for a credit card or a loan. Once they receive your application, lenders will obtain a copy of your credit report to get a better idea of you are as a borrower.

    A credit report is a record of your credit history and contains information around how many times you’ve applied for credit (including credit cards) your repayment history and how much debt you have – among other things. Credit reporting bodies compile your credit history to create your credit report and give you a credit score. Your credit score is usually a number between 100 – 1000 that lenders then use to assess your creditworthiness, which is just a fancy way to compare you against other borrowers. 

    Tip

    You can access one free credit report from each credit reporting body every year to keep an eye on how your credit score is tracking. You can also get your credit score from online providers.

    Lenders will use this information, along with the details you provided on your application, to decide if they will approve your credit application and how much they’ll lend you.

    Now that banks and other financial institutions are providing more information to these credit reporting bodies, it’s never been more important to ensure that you keep on top of your credit card payments. The positive reporting means that when you make a payment on time, you’re actively working to improve your credit rating, which can make it easier to get additional and cheaper finance later on.  

    Credit card debt management tips

    When you use your card correctly, it can be a great way to keep on top of your cash flow and ensure that you have enough funds to cover more expensive purchases when you need to. 

    Here are a few ways you can better manage your credit card balance.

    Balance transfer: If you’re going to consolidate a few credit cards into one, think about closing the other cards so that you don’t start to build up more debt on additional cards. 

    Make regular payments: Paying off your card in full every month means you won’t pay any interest on the balance. Setting up a recurring payment onto your credit card will help you meet your minimum repayment obligations and avoid late fees. If you’re unable to pay your balance off in full every month, consider making more than just the minimum repayment to help reduce the amount of interest you have to pay. You can easily set up a regular payment onto your Teachers Mutual Bank credit card from another TMB account in Internet or Mobile Banking.  

    Keep an eye on your account: One of the worst things you can do is not have any idea how much you’ve spent since your last payment. It’s easy to fall into an out of sight, out of mind trap when you’re able to tap and go quickly. Using Internet and Mobile Banking to keep tabs on your balance will help you keep it under control and avoid statement shock, especially after high-spending periods. Regularly checking your account also means that you’ll notice if there are any unauthorised payments and get them resolved sooner.

    Review your credit limit: You might like the idea of having a higher credit limit for use in emergencies, but knowing that you have extra credit available could lead to spending more than you need to. Plus, having multiple cards with unused limits could also negatively impact your credit score under the new CCR rules. You can easily apply for a reduction to your credit limit in Internet Banking or by filling out the form on our website. 

    If you’re struggling to make your repayments, our Financial Hardship may be able to help, or you can call the National Debt Helpline on 1800 007 007.

    For more information on Comprehensive Credit Reporting, visit the CreditSmart website.

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