Credit cards & coronavirus

Whilst many banks have lowered minimum monthly repayments, interest, or paused repayments, the fact of the matter is that even in these unprecedented times, rent, mortgages, bills and general living expenses don’t disappear.

If you’ve lost your job, or had your hours cut, or generally found yourself in financial hardship, this is a good time to think about your finances and potentially consolidate some of your debts.

Our guide discusses your options in regards to credit cards and coronavirus and how to free up some funds so you have more cash to splash.

Should I take out a credit card during coronavirus?

Struggling to pay your bills? A credit card can be an option to get you out of a temporary pickle. But how do you ensure you don’t come out the other end with a ton of debt?

Taking out a low interest credit card can ensure that your debts don’t spiral out of control, or comparing cards that offer a 0% interest on new purchases for an introductory period is also a good short term option.

Keep in mind that getting a credit card and forgetting about the balance isn’t going to make it all go away. You still have to make repayments each month. Although paying off the minimum interest payment each month isn’t the dream, this might be your only option right now so don’t beat yourself up. If you do turn to credit cards at this time, have a plan about how and when you intend to pay back the debt.

Whilst paying with plastic isn’t an ideal long term solution, it can be a temporary measure when things are a bit tight.

I already have a credit card and struggling to make payments

Skipping payments could affect your credit score and late payment fees won’t make your financial situation any better. So don’t bury your head in the sand, if you already have a credit card and are struggling to make payments, it’s time to speak to your bank.

Many institutions are offering financial assistance to support their customers in these troubling times. If you’ve lost your job or suffered loss of income as a result of COVID-19, some are offering three-month credit card support packages where you will not be charged or accrue any interest on new card purchases or cash advances, or on any existing debt – and you won’t be required to make any repayments during this time.

Can you shift your debt into a new credit card with 0% balance transfer and 0% interest? These deals are available anywhere up to two years and can free up some extra cash for you now while you need it.

A balance transfer card could give you an introductory 0% p.a. interest rate for anywhere from 6 to 26 months when you move your existing debt to a new card with a balance transfer offer. This is a great option for those who are accruing interest on current balances and are eligible for a new card. However, you should note that after the introductory period you will be charged interest on any remaining balance, usually at the higher cash advance rate.

There are a few other key details to remember before you apply for a balance transfer card, including the following:

• Most balance transfer cards accept debts from Australian credit cards, charge cards and store cards issued by a different provider.
• Some cards – including those issued by Citi, Coles, Virgin Money and Qantas Money – also accept debts from personal loans when they are issued by a different provider.

The amount of debt you can balance transfer depends on the credit limit you’re approved for on the new card. This, in turn, is based on what you could reasonably afford to pay off over a three-year period (based on a range of personal and financial factors). So even if you’re approved you may only be able to get a partial balance transfer.

I have a mortgage to pay

Another way to free up some extra funds is to speak to your mortgage provider and put your payments on “holiday” or on hold. You can reduce or avoid making your home loan repayments for up to six to 12 months depending on the lender. You also might be able to negotiate a better deal on your current loan based on your circumstances.

Consider refinancing and comparing new home loan offers. If you’ve been stuck in the same plan for some time, switching to a new lender opens you up to better deals that can save you heaps.

With just a few hours work, you could have some extra cash each month to spend on the essentials, or put towards your credit card bill.

How to budget during coronavirus

Curb your spending 

Whilst takeaways and online shopping are tempting, they won’t help towards essentials like groceries and bills. Curb back any unnecessary spending and start a spreadsheet to understand your incomings and outgoings. Even doing this can be a weight off your shoulders getting a clear picture of where you stand financially each month.

Set yourself goals

Paying off debt is so much easier if you have a goal. You can’t be aimlessly paying off random debts here and there. Everyone who sets out to pay off their credit card debt without a plan inevitably fails. Have a set plan, follow it and make no exceptions.

Pay off high-interest debt first

Although dipping into your savings isn’t the dream, it can be a short term option to paying off debt if you’re in a financially stable position. Whilst it’s never fun to dip into your nest egg, if your savings are earning 2 percent in interest, but you’re paying 10 percent interest on your loan, it just makes sense to be paying off the loan quicker.

Consolidate your debt

Do you have multiple cards all with different interest rates and payment due dates? You could consolidate them all into one new card that has a 0% balance transfer for up to a year, or longer. That way you’re not accruing any unnecessary interest payments. Alternatively taking out a loan for a longer term that spreads your payments out, (meaning you pay less each month) could free up some cash.  Remember with this second option you should consider this usually means you’ll end up paying more in the long run, but it may alleviate some of the financial strain that you’re facing now.

FAQs

I had to cancel a travel booking made on my card, can I get my money back?

If you booked your travel with your credit card, you might be able to lodge a dispute for cancelled or unfulfilled services.

Many credit card brands include purchase protection benefits, which protect your purchased items for anywhere from 30 days to a year after purchase, provided that you paid for them on your credit card.

How can I stay on top of my finances if I’ve been impacted by coronavirus?

Your bank’s app will track your spending and categorise what-you’re-spending-where. These can be great during times of financial hardship to get a better handle of your expenses and  motivate you not to unnecessarily spend.

How can I pay my credit card debt if i’ve lost my job?

Many institutions are offering financial assistance to support their customers in these troubling times. If you’ve lost your job or suffered loss of income as a result of COVID-19, some are offering three-month credit card support packages where you will not be charged or accrue any interest on new card purchases. 

Speak to your bank to see what they can do.

General Advice Warning

The information provided is of a general nature only and does not take into account any personal objectives, financial situation or needs. Before making a decision you should consider the appropriateness of the information having regard to your personal circumstances.

Always read the full terms and conditions.