5 Ways to Reduce Credit Card Fees

reduce credit card fees

Whilst credit cards can be a useful tool, they often come with a range of different fees. Credit card fees can end up costing you a lot of money in the long run. That’s why we’ve put together this helpful guide on how to reduce credit card fees in 5 simple ways.

reduce credit card fees

What is a credit card?

Before we dive into the ways you can reduce credit card fees – let’s start with the basics. What is a credit card? A credit card is a line of revolving credit at a set limit that refreshes periodically, generally each month. 

You can use a credit card to make purchases, balance transfers and cash advances. When you take out a credit card, you do so with the condition that you pay back the money that you spent, plus any additional interest. At the very least, you’ll have to make the minimum repayment each month by the due date.

Different types of credit cards

There are many different types of credit cards which all come with their unique benefits and downfalls. One key rule to keep in mind – if you are getting some kind of benefit, such as rewards, low-interest rates or no annual fee, you are often paying for it in another way. This could be through extra fees or higher interest rates. That’s why it’s a good idea to weigh the pros and cons before deciding on which card is right for you.

Here are some of the most common types of credit cards:

  • Low-interest credit card – a low-interest credit card, is a card that offers a lower interest rate than normal. However, to offset the lower interest rate, these types of cards often come with a higher annual fee, more restrictions and fewer rewards.
  • Balance transfer credit card – A balance transfer credit card allows you to transfer your credit card debt from another credit card to this one. A balance transfer credit card usually comes with lower interest rates or even an interest-free period. This allows you to repay your debt and save paying interest on your other card. However, this card is only beneficial if you can pay it off within the low or interest-free period, otherwise, it could end up costing you more.
  • No annual fee credit card – like the name suggests, this kind of credit card doesn’t come with an annual fee, either for a set period or for the life of the card. However, you’ll usually be charged higher interest rates, which could cost you more in the long run.
  • Rewards credit card – This kind of credit card gives you some kind of reward when you make purchases, whether it’s frequent flyer points, retail rewards, supermarket rewards, cashback deals, and petrol rewards. 

Common credit card fees

There are several different credit card fees that you’ll need to keep an eye out for. What fees you’ll be charged, and how much they’ll cost you, completely depend on your specific card. That’s why it’s important to read the terms and conditions carefully before applying for a credit card.

Here’s a breakdown of some of the most common credit card fees.  

Annual Fees Most credit cards come with an annual fee which you’ll be charged each year. The cost of this fee will vary depending on which credit card you have.
Interest Just like an annual fee, most credit cards come with interest. You will be charged interest when you carry a balance (when you don’t completely pay off your credit card debt for the month). 

There are different types of interest rates. They might be called: purchase rate, cash advance rate, balance transfer rate or promotional interest rate. 

Balance transfer fee A balance transfer is when you move your existing debt onto a new account. This can allow you to get on top of your debt, but, you’ll generally be charged a fee to do so.
Cash advance fee When you withdraw money from an ATM with your credit card or buy foreign currency – this is referred to as a cash advance. When you perform either of these actions you will generally be charged a cash advance fee.
Late payment fee Your credit card limit typically refreshes each month. At the end of your monthly period, you’ll receive your bill for how much you’ve spent. With credit cards, you don’t have to repay the full amount, but you’ll pay at least the minimum amount by the due date to avoid late payment fees. If you don’t, then you’ll likely be charged a late payment fee.
International transaction fee If you use your card overseas or make a purchase online with an international merchant, you will likely be charged a fee. An international transaction fee can also be called a foreign transaction fee or a currency conversion fee.

How to reduce credit card fees

Now that you’re armed with all of the information you need on types of credit cards and common fees, let’s get stuck into how to reduce credit card fees. Here are five things you could do.

1. Pay your card off in full before the due date

Each month, you will receive your credit card bill. If you don’t pay this off by the due date, you will be charged late fees and interest. If you pay the full amount off each month, not only will you avoid late fees, but you’ll also avoid having to pay interest on the amount carried over into the next month. This is a great way to reduce credit card fees.

Or, at least make your minimum repayment by the due date

If you can’t repay your credit card balance off in full each month, you should try and at least make your minimum repayment. Your minimum repayment is the lowest monthly repayment you can make without incurring late fees. The minimum monthly repayment is usually about 2 or 3% of the total amount you owe for the month.

By paying the minimum repayment by the due date, you won’t have to pay late fees. However, you’ll still accrue interest on what’s still owing, and this could cost you a lot in the long run.

Therefore, if you want to reduce credit cards fees, you could try and repay your balance off in full each month, or at the very least, make your minimum repayments. It is also worth highlighting that many credit cards, especially low-interest rate credit cards, will void the credit card offer or rewards system if you are late with a payment.

2. Opt for a low annual fee credit card

There are certain credit cards on the market that offer good deals for the annual fee. Some cards might offer a low annual fee and some might offer no annual fees either for a certain time or for the life of the card.

Whilst this is a good way to reduce credit card fees, it is important to highlight that many of these cards will offset the lower annual fee with higher interest rates. This could cost you more in the long run. That’s why it’s a good idea to weigh your options and see what’s the best decision for you.

3. Avoid using your credit card to make ATM withdrawals

When you use your credit card to withdraw money from an ATM, this is called a cash advance. Just like any other purchase you make with your credit card, you will need to pay this back. What’s more – most credit card providers charge a fee for cash advances. How much the fee is, depends on your specific card. 

If you want to reduce credit card fees, you could do this by not using your credit card to withdraw money from an ATM. If you need to withdraw money from an ATM, you could use your debit card instead, which might not charge you any fees.

4. Don’t use your credit card for international transactions

If you want to avoid being charged a fee for international transactions, there are two ways you can go about this. The first is you can shop around and look for a credit card that doesn’t charge a fee for international transactions. Alternatively, you could avoid making foreign transactions on your card altogether. Either of these options could help you reduce credit card fees.

5. Do your research before applying for a credit card

The final tip to reduce credit card fees is to do your research before applying for a credit card. Think of why you want a credit card and then try and find the best one for your needs. You could compare interest rates, fees, and find one that best aligns with your needs.

Does a Personal Loan Harm My Credit Score?

Does a Personal Loan Harm My Credit Score

There are many reasons you might want to take on a personal loan – an unexpected expense, an upcoming holiday, or even to cover a medical bill. But if you’re wondering “does a personal loan harm my credit score?”, Tippla has done the legwork for you! Below you’ll find the information you need to know.

Does a Personal Loan Harm My Credit Score

What is a personal loan?

A personal loan is a type of credit that allows you to make big purchases or consolidate your debts. These types of loans are repaid with interest over a fixed term, ranging from months to years. You can apply for a personal loan from a bank, credit union, or online lender.

The reason for taking out a personal loan can vary. Here are some examples:

  • Consolidating debt;
  • Big purchases: car, holiday, wedding, renovations, medical, etc;
  • To cover unexpected expenses.

If you decide to apply for a personal loan, it can be overwhelming to see how many options are out there. It can be difficult to understand what’s the best loan for you. Here are some key factors to keep an eye out for when comparing loans:

  • Interest rate;
  • Repayment terms;
  • Borrowing limits (minimum and maximum amounts);
  • Fees;
  • Collateral requirements.

Types of personal loans

There are many options for personal loans. That’s why it’s important to understand your personal and financial situation so you can choose the best option for you. Here’s a breakdown of the two most common types of personal loans:

Secured loan: a secured personal loan is a loan guaranteed by an asset, such as a car, motorbike, or something similar. The asset acts as security and if you default on your loan, then you’re at risk of losing the asset.

Because of the extra security, secured personal loans are generally easier to obtain from a reputable lender. They typically come with lower interest rates and fees as there is less risk for the lender.

Unsecured loan: as the name suggests, an unsecured personal loan has no asset attached to the loan. Because of this, the lender is taking on more risk which means you’ll generally be charged higher fees and interest rates than a secured loan. This type of loan is good if you don’t have an asset, though you may have to convince the lender that you’re able to make the repayments through proof of income, and if this is your first loan, you may require a guarantor for security. 

What is a credit score?

Before moving straight into discussing the question “does a personal loan harm my credit score”, let’s take a moment to talk about credit scores. Let’s start with the most important question – what is a credit score? A credit score is a number that ranges from 0 – 1,200. 

A lot of people don’t know how credit scores are calculated. To put it simply, your rating is based on the information contained in your credit report. Your report considers factors such as your repayment history, your credit accounts and even how many times you have applied for credit.

A good credit score indicates to lenders that you have a high level of creditworthiness. The better your score, the more likely you will be approved for a loan and reap the benefits of a higher loan amount and/or lower rates. Your score falls somewhere on a five-point scale ranging from below average up to excellent. 

Equifax and Experian credit scores

Source: Equifax and Experian

Does a personal loan harm my credit score?

Unfortunately, there isn’t a simple answer to “does a personal loan harm my credit score”. Like any form of credit, a personal loan will affect your credit score. But how it affects your score depends on how you handle the personal loan.

When you first make an application for the loan, your credit score will be lowered. Whilst your credit rating will take a hit when applying for the loan, after this point, a personal loan can be beneficial for your score. When used responsibly, your credit score can improve when you take out a personal loan. 

Let’s take a closer look at this.

Applications

When searching for the right personal loan you should try and minimise the number of applications you make. Why is this? When you apply for a personal loan, you are giving the company you’re applying to permission to check your credit report. When they check your credit report this is referred to as a hard enquiry. Hard enquiries harm your credit score, regardless of whether you are approved.

A large number of applications within a short period of time are not viewed positively. Not only will the multiple applications harm your credit score further, but future lenders may also assess your application and deem this proof of you being rejected previously, thus making you a risky borrower.

Instead, you could consider researching your options further and only make one application for the loan which best matches your criteria.

Repayments

If you fail to repay the loan, it will appear on your credit report as a default. This will negatively impact your credit score. Not only will this stay on your credit report for five years, but you may also lose the asset you used to secure the loan (if applicable) or run the risk of having to deal with debt collectors.

What to consider before taking on a personal loan

So we’ve covered the question of does a personal loan harm my credit score, but what about the factors you should consider before taking out a personal loan? Here are some things you should consider before applying for a loan.

Do you meet the loan requirements?

The first thing you can consider is whether you meet the requirements for a personal loan. The basic requirements of any loan are that you are over the age of 18, have a regular income, be a permanent Australian resident (or hold an acceptable non-resident visa), and can provide an overview of your current financial situation.

Check the terms and conditions

The next step you could take is to look into the finer details of your loan. The interest rate is the amount that the financial institution charges in addition to the money you’ve borrowed. Aiming to find the lowest interest rate means that you can focus on paying off your loan rather than extra interest. 

On top of interest rates, you may also have fees associated with your loan. All loans have different associated fees; some to look out for include establishment, servicing, early repayment, early exit, insurance, and withdrawal fees. 

How long is your loan term?

Another factor worth considering is the term of the loan. The length of your personal loan will determine the amount of interest you are charged over its life. Typically, the longer the loan, the lower the monthly repayments. 

How will you pay off the loan?

When taking on a loan, it is important to know beforehand how you will pay off the loan. Whether you choose to opt for weekly, fortnightly, or monthly repayments – or even want to pay it off sooner than the term. Such elements are great starting points to consider before making any personal loan applications.

Effectively manage debt

As we’ve addressed in this article, the question “does a personal loan harm my credit score” isn’t a straightforward one. But if you can effectively manage your personal loan and your debt, then you could actually make your loan work for you.

Here are some easy steps you could take to effectively manage your debt:

  • Consistently make your repayments;
  • Don’t borrow more money than you can afford;
  • Consolidate your debt;
  • Take the time to look for the loan that offers the best value instead of creating multiple applications;
  • Consider making extra repayments if you can;
  • Seek expert advice if you encounter trouble.

What’s The Difference Between Credit Cards And Personal Loans?

credit cards and personal loans

If you are looking for extra finance, whether it’s to make a big purchase, cover unexpected expenses, or build a credit history, there are two main options available for you – a credit card or personal loan. These two types of credit are very popular in Australia, but we’re here to break down the difference between credit cards and personal loans, so you can choose what’s best for you.

credit cards and personal loans

What is a credit card?

Before we jump into the difference between credit cards and personal loans, let’s start with the basics – what is a credit card? Literally speaking, a credit card is a piece of plastic or metal that is issued by a bank or financial services company. 

You can use a credit card to pay for goods and services, as well as any personal expenses that may arise. A credit card is a line of credit that you can use to pay for personal or business expenses on the promise that you repay the money back, often with interest. Your credit card is a revolving line of credit, which means it refreshes after a certain period of time – typically each month, and it will continue to do so up until you cancel the card.

Because a credit card is a line of credit, this means you don’t need to have the money physically in your bank account, as is the case with a debit card. This is where credit cards and personal loans are similar.

Different types of credit cards

In Australia, there are many different types of credit cards. Whilst the basics stay the same, the different types of credit cards all come with their unique purposes and benefits. Here’s a quick overview of the different options available to you.

Low-interest credit cards As the name suggests, a low-interest credit card is a credit card that offers a lower interest rate than normal. Many credit cards charge 20% or more on purchases, whereas low interest-rate credit cards generally have an interest rate that’s 14% or lower. These cards can also come with no interest periods, typically up to 55 days. However, low-interest credit cards can generally come with more restrictions, fewer rewards and a higher annual fee.
Balance transfer credit cards A balance transfer credit card is when you transfer your outstanding debt from one credit card to your balance transfer credit card. The balance transfer credit card usually has a low interest rate or sometimes even a 0% interest rate for a limited time. 

This allows you to repay your existing debt, and try and repay your new debt with the balance transfer credit card within the interest-free or low-interest period, which can save you money. However, if you can’t repay it within this period, then it might cost you more in the long run.

No annual fee credit card Most credit cards come with an annual fee that you have to pay each year across the life of your credit card. A no annual fee credit card is a type of credit card where you don’t have to pay this fee. 

There are two main types of no annual fee credit cards – the first is where you don’t have to pay an annual fee during the whole life of the credit card, the second is where you don’t have to pay an annual fee during an introductory period, which usually lasts for 1 or 2 years.

To offset the lack of an annual fee, these types of credit cards usually come with higher interest rates, which could actually cost you more in the end.

Rewards credit card Rewards credit cards give you some kind of reward, usually in the form of points, every time you make a purchase. There are many different types of rewards cards, and the points can be used for things like – retail rewards, supermarket rewards, cashback deals, frequent flyer points and petrol rewards.

Whilst these cards can give you bonuses, they don’t come for free. Generally speaking, rewards cards often come with higher annual fees and it can take a while for the points to build up (and they can expire). So, it’s important to read the terms and conditions carefully and weigh up the pros and cons.

Cashback credit card With cashback credit cards, you can get cashback when you make purchases. This can come in the form of a cash voucher or money credited back to your account. However, as with all types of credit cards – when there are perks, that generally means higher fees. 

In this instance, cashback credit cards often come with higher interest rates and an annual fee. Some cards can also cap how many cashback points you can earn.

Frequent flyer credit card A frequent flyer credit card is a common type of rewards credit card, and it’s great for those who love to travel. When you spend on your frequent flyer credit card, you’ll accrue points. When you build up enough points you can put them towards flights and either get cheaper flights or have the whole cost covered by points – depending on how many you have.

The downsides to this type of credit card are that the frequent flyer points can expire. These types of credit cards also generally come with standard credit cards fees such as – annual fee, program fee, cash advance fee and more.

Platinum or black credit card Platinum or black credit cards are high-end credit cards. You can get a number of benefits with these cards – exclusive dining and travel deals, as well as rewards points that don’t expire. If you’re over 18 and earn more than $50,000 each year, have a good credit score, then you can apply for one of these credit cards.

Some of the drawbacks of a platinum credit card include much higher annual fees and interest rates.

What is a personal loan?

Similar to a credit card, a personal loan is a line of credit that allows you to pay for personal expenses – whatever they may be. A personal loan allows you to borrow a specific amount of money under the agreement that you pay it back within a predetermined time period, referred to as the loan term, with interest. 

The interest rate you are charged will depend on a couple of factors, including your credit score. Want to see where you’re at? Check your credit score with Tippla here.

When taking on a personal loan, you can get a loan with a fixed or variable interest rate. You can also choose between a secured or unsecured personal loan. 

Different types of personal loans

There are a couple of different types of personal loans. Here is a breakdown below.

Secured and unsecured personal loans

The two main types of personal loans are secured and unsecured personal loans. A secured personal loan is when you take on a personal loan that is guaranteed by an asset such as a car. This asset is used as security against you defaulting on your loan. If you default on your repayments and can’t afford to repay the loan, then you are at risk of losing your asset.

Secured personal loans are generally used to purchase the security you’re using against the loan. Let’s break that down. Say you want a loan to buy a car, then the car you buy will be the security on the loan.

One of the benefits of a secured loan is that you can generally get lower interest rates. Interest rates are set to protect the lender against the risk of you defaulting on your loan. Because your asset serves as collateral, the lender can afford to offer you lower interest rates, because they have already hedged against the risk of you defaulting on your loan.

Unsecured personal loans, on the other hand, is a personal loan that you don’t have to provide any security for. Reasons for taking out an unsecured personal loan range from holiday expenses, home improvements, unexpected expenses, medical bills and more.

Because there’s no security against the loan, the interest rates are generally higher for unsecured loans. But on the plus sign, the application and approval process is usually quicker.

Fixed or variable interest rate personal loans

When it comes to interest rates on personal loans, the most common are either fixed-rate or variable-rate loans. Here’s what that means. A fixed-rate personal loan is when the interest stays the same for the whole loan term.

One of the perks of this is it allows you to easily budget for your repayments, as they stay the same each month. However, a downside of this is you could miss out on your interest rate being reduced if interest rates go down. On the flip side, if interest rates go up, then you’re protected with a fixed-rate personal loan.

Variable-rate personal loans are when the interest you’re charged each month isn’t the same, and it can fluctuate depending on the market. Some of the pros of this type of loan include – fewer repayments because you can make earlier repayments and pay off your loan sooner, more flexibility and potentially lower interest rates.

Although there are some positives to choosing this type of loan, there are still some things to consider. Namely, you might end up having to pay more in interest if the interest rate rises. This can cost you in the long run.

What’s the difference between credit cards and personal loans?

Whilst there are many similarities between a credit card and a personal loan, there are also some differences. So what is the difference between credit cards and personal loans? Here are the main points:

Borrowing amount

When you are approved for a personal loan, you will be given a set amount of money in a lump sum at the beginning of the loan term. You can’t spend more than the amount you have been given unless you take out an additional loan. With a credit card, the borrowing limit refreshes each month, so your borrowing limit is more flexible than a personal loan.

Length of term

Personal loans generally come with a fixed term, whether it be a couple of months or years, and they come with a termination date. Credit cards, on the other hand, are a revolving line of credit and refresh each month. For most credit cards, you can have them for as long as you want – whether that’s a month, years, or even decades. The length of time is determined by you as the customer.

Interest rates

Personal loans generally have lower interest rates than credit cards. According to the Reserve Bank of Australia (RBA), the average variable interest rate for a personal loan as of September 2020 was 14.41% and 12.42% for a fixed personal loan. Whereas the average credit card interest rate ranges from 16-18%, according to numerous comparison sites. However, you can avoid paying interest on your credit card if you pay off the card balance in full each month.

Rewards

Although credit cards might have higher interest rates, they generally come with more rewards and perks. As we covered above, sometimes you might end up paying more for these perks, but if you use them wisely, you can make them work for you.

What’s the right decision for me?

Now you know the difference between credit cards and personal loans, you might now be thinking about what’s the best choice for you. At the end of the day, only you know your financial situation. However, there are a couple of things you can consider when choosing between a credit card or a personal loan. 

Firstly, if you have control over your spending and can follow a budget, then a credit card might meet your needs. Whereas if you’re looking to make a big one-off purchase or pay for an expense, a personal loan might be better for you.

If you’re unsure, you can speak to a free financial counsellor who can help you make the best decision for your personal situation.

What Affects My Credit Score? A Quick Guide

what affects my credit score

Whether you’re applying for credit or simply want to know more, we hear you, and we’re here to answer the age-old question of what affects my credit score? Tippla has provided a breakdown below.

what affects my credit score

What is a credit score?

Before answering “what affects my credit score”, let’s first discuss what is a credit score? Your credit score is a number that ranges from 0 – 1,200, based on the information contained within your credit report. Your score falls somewhere on a five-point scale ranging from below average up to excellent. Your credit score indicates to lenders your creditworthiness; the higher your score, the more reliable you appear to a potential lender. 

What is a good credit score?

Due to Experian and Equifax calculating your credit score differently, the categorisation of the “below average” to “excellent” scale differs between the bureaus. 

good credit score

Source: Equifax and Experian

What’s the difference between a credit score and a credit report?

Your credit score is a number falling somewhere between 0 – 1,200, depending on the reporting agency. In contrast, your credit report includes detailed information regarding your credit history. Your credit score is calculated based on the information contained in your credit report. If you’re still confused about “what affects my credit score”, it’s the information contained within your credit report.

What goes onto your credit report

Many things go onto your credit file, and all of this information will have some kind of impact on your credit score. It’s not just your credit accounts that appear on your report; phone bills, personal loans, and payments to utility companies will also feature on your report. 

Your personal finances, such as checking and savings accounts, have little to no effect on your credit score, as your credit report is only concerned with the money you owe or have previously owed. However, in some unique situations, your personal finances may be affecting your credit score.

What affects my credit score? 

In Australia, you have three different credit scores; here at Tippla, we provide you with your Equifax and Experian scores. It’s important to note that these scores may be slightly different, as they are scored on different scales and attribute different values to the contributing factors. 

Here’s what goes onto your Equifax credit report:

  • Type of credit provider
  • The type and size of credit requested in the application
  • Number of credit enquiries and shopping patterns
  • Directorship and proprietorship information
  • Age of your credit report
  • The pattern of credit enquiries over time
  • Personal information
  • Default information
  • Court writs and default judgements
  • Commercial address information

Here’s what goes onto your Experian credit report:

  • Type of credit provider
  • Type of product that was applied for
  • Repayment history
  • The credit limit on each of the credit products
  • Amount of credit enquiries
  • Any negative events

What harms my credit score

When understanding what affects my credit score, it’s equally important to look at what is also harming it. At Tippla, your reports come from the two leading credit bureaus in the world – Experian and Equifax, each of which considers different factors as detrimental when calculating your credit score.

What harms your Equifax credit score

  • Late repayments
  • Applying for a large amount of credit in a short period of time
  • Closing a credit account
  • Stopping credit-related activities for an extended period
  • Negative public records, such as bankruptcy

What harms your Experian credit score:

  • A large number of credit applications in a short period of time
  • Open accounts with debt collection agencies
  • Short term credit
  • Missed payments
  • Bankruptcy actions
  • Defaults
  • Court judgements

It is essential that you check all your information listed in your credit report to make sure there aren’t any mistakes that could diminish your score. Specifically, check to see that any of the debts and loans are yours and your personal details such as your name and date of birth are correct. If you find any errors or out-of-date information, contact that credit reporting agency and ask them to fix the mistakes.

What improves my credit score

Whether you’ve just checked your credit score and it wasn’t quite as high as you expected, or maybe you just want it to be even better, you can take steps towards improving it when you know what affects your credit score. Maintaining a good credit score means that you are more likely to be approved for different types of accounts and are more likely to get better interest rates when applying for a loan.

When you receive your scores, you should also be able to see the risk factors impacting your score the most; from this information, you can see where changes should be made and make a conscious effort towards doing so. It should be noted that any actions you take won’t see immediate change, and you’ll need to allow time for your creditors to report your positive behaviour before it is reflected in your credit score.

Tips to improve your credit score 

Changing your behaviour can help improve your score over time. You could start by paying your bills on time, as your previous payment history is an indication of your future performance. You could also ensure that you pay off debt and keep balances low on your credit cards and other revolving credit.

You could also improve your credit score by only applying for and opening new credit accounts as necessary. Taking on unneeded credit can damage your score by creating too many hard enquiries or simply tempting you to overspend and accumulate more debt. 

In addition, applying for too much new credit can harm your credit score because it results in numerous hard enquiries, which remain on your report for two years. 

How to fix my credit score

Now that we’ve answered the question of what affects my credit score? Let’s discuss how you can fix your score. 

Credit repair companies offer to quickly fix your credit score by correcting the visible issues on your credit report. Unfortunately, many of the issues can’t be resolved immediately and are things you could do yourself (for free). By reading through your credit report and understanding your score’s contributing factors, you can change these behaviours to prevent yourself from a further decline. 

An important thing to remember is the time taken to fix your credit score can vary, depending on how severe the negative entry is:

  • Enquiries remain for two years.
  • Late repayments can take seven years to leave your credit report. 
  • Public record items can remain on your report for seven years, but some cases of bankruptcy can stay for ten years.

Rebuilding and improving your credit score does take some time, and there aren’t really any shortcuts you can take. One of the best steps you can do is to check your credit scores with Tippla today; from there, you can review which factors negatively affect your score and then head over to the Tippla Credit School to learn more about improving your rating.

How To Check My Credit Report For Free

How To Check My Credit Report For Free

Your credit report is an important document that gives you a clear overview of your credit history and current standing. It’s no wonder a lot of people ask us “how to check my credit report for free”. Tippla has the breakdown for you below.

How To Check My Credit Report For Free

What is a credit report?

Your credit report is a document that outlines your credit history. It is a summary of how you have handled your credit accounts and managed your debt. If you have a personal loan, home loan, credit card, or your name is on a utility bill, then you will have a credit report.

In Australia, you have a credit report with three credit bureaus – Equifax, Experian, and illion. Each month, your creditors and lenders will report your credit information – such as your repayment activity and history, to one of these three bureaus. The information reported by these financial institutions is what makes up your credit report.

The information on your credit report is what’s used to determine your credit score – a number ranging from 0 -1,200. It provides an indication of how reliable of a borrower you are. If you have positive information on your credit report – such as a reliable repayment history, then you will likely have a good credit score. 

However, if your credit report is filled with negative entries, such as defaults, bankruptcy, etc, then you will likely have an average to below-average credit score.

What goes onto your credit report?

There are many things that go onto your credit report, as outlined by Equifax, your credit report contains the following types of information:

Personal information Your credit report will contain certain information about your identity, such as your name, address and date of birth. It won’t include information such as your marital status, salary, etc.
Credit account information Listed on your credit report will be your credit account information. This includes the type of accounts you have, such as a credit card or loan, the date it was open and your credit limit.
Repayment history Your repayment history for your credit accounts will be listed on your credit report.
Credit applications Your credit report will list all of the enquiries that have been made on your report. There are two types of enquiries – hard or soft. Hard enquiries are when a lender or creditor looks at your report when you apply for a loan or type of credit. 

Hard enquiries affect your credit score. A soft enquiry does not affect your credit score, and ranges from you checking your own report or if a company checks your report for a pre-approved offer. If you have applied for credit, then it will show on your report.

Bankruptcies and defaults Your credit report contains negative entries, if applicable. This can include bankruptcies and defaults. Bankruptcy will stay on your credit report for up to 5 years. If you have defaulted on any of your credit repayments in the past 5 years, then it will appear on your credit report.

How long do items stay on your credit report?

Let’s get stuck into how long items stay on your credit report. Here’s a breakdown:

  • Credit accounts – all of your current accounts, and any that you have closed in the past 2 years;
  • Credit applications – any application you have made for some time of credit will remain on your report for 5 years;
  • Repayment history – your repayment history over the past 2 years will appear on your credit report;
  • Defaults – if you have defaulted on any repayments in the last 5 years then it will appear on your report;
  • Court judgements and bankruptcies – 5 years;
  • Serious credit infringements – these can stay on your credit report for up to 5 years.

Why does my credit report matter?

There are many reasons why your credit report matters, but we’ll take you through a few. One of the main reasons why it’s important to check your credit report and keep it, and your credit score healthy, is because it affects your ability to borrow.

If you have a lot of negative entries on your credit report, such as numerous defaults, then you will be perceived as a riskier borrower. Because of this, you might find it much harder to be approved for credit. 

Not only that, but the credit or loans you are approved for will likely come with higher interest rates, more fees and smaller borrowing limits. If you don’t take care of your credit report and credit score, then it can limit your finances, and as a result, your life. 

If you move into a new house or apartment and you need to sign up for your utilities, such as electricity and water, if you have a bad credit report and a low credit rating, then you might also be rejected by providers because you’re deemed too high of a risk. You could also struggle to get a phone contract.

Your credit report can also be valuable in helping you detect identity theft. If you check your credit report and see that something that doesn’t add up, such as a credit account you don’t recognise, then this could either be a mistake or an indication that someone has stolen your identity and is using it to open credit accounts. That’s why it’s important to check your credit report frequently.

How to check my credit report for free?

Now that you understand what your credit report is and its importance, let’s answer the question “how to check my credit report for free”. There are a few ways you can do this, and it depends on how long you’re willing to wait.

Request your report from the credit bureaus

If you would like to view your credit report for free, you can request a free copy from each of the bureaus – Equifax, Experian, and illion. However, it is important to highlight that you will have to wait approximately 10 days if you want to get a free copy. 

Generally, the bureaus will only allow you to see your credit report free once a year. You may have to pay for a copy of your report from the bureaus if you request a copy more than once a year, and if you want to receive it faster than 10 days.

Sign up to a platform like Tippla

This is where platforms like Tippla come in handy! With Tippla you can view your credit reports and credit scores from the two largest credit bureaus in the world – Equifax and Experian. On Tippla you can access your free personal Equifax credit report and your free personal Experian credit report.

Signing up to Tippla is completely free and you can view your credit report and score as often as you want – it won’t hurt your score. Your report is updated every 90 days, so you can see how you’re tracking throughout the year.

Does checking my credit report hurt my credit score?

No, it doesn’t! You can check your own credit report as often as you like, it won’t hurt your credit score or reflect badly on your report. This is because when you look at your own report, it is registered as a soft enquiry. Soft enquiries don’t affect your credit score.

The damage is done when you apply for a loan or type of credit, like a credit card. This is because when a lender or creditor views your report to see if you are a reliable borrower, this registers as a hard enquiry. Hard enquiries initially harm your credit score and will remain on your report for up to 5 years.

For more information on what affects your credit score and report, head to Tippla’s financial blog to find everything you need to know and more.

How Are Credit Scores Calculated in Australia?

how are credit scores calculated

There’s a lot of uncertainty when it comes to credit scores. There’s one question, in particular, that has a lot of mystery surrounding it – how are credit scores calculated in Australia? We’re here to pull back the curtain and give you all the information you need.

how are credit scores calculated

Credit scores in Australia

Before diving into how your credit scores are calculated, you must understand what your credit score is. In Australia, three credit bureaus calculate your credit score – Equifax, Experian and illion. Your credit score sits somewhere on a scale ranging from 0 to 1,200. The higher your score, the better.

Your credit score is a number that represents how trustworthy of a borrower you are – i.e. how likely you are to make your repayments if you take on some kind of credit. There are many things that constitute as credit. 

Examples of credit

The following are examples of different types of credit in Australia:

  • Credit card;
  • Loans – personal loans (secured and unsecured), car loans, home loans (mortgage), business loans, student loans and more;
  • Buy Now Pay Later services;
  • Mobile phone;
  • Internet;
  • Electricity or gas;
  • Water.

Your credit score is based on many factors. These include your credit history – do you always make your repayments on time, have you applied for credit recently, and if so, how many applications did you make? Other factors include more serious credit infringements – have you gone through bankruptcy, have you entered into default?

What is a good credit score?

Your credit score generally falls on a five-point scale – below average, average, good, very good and excellent. The higher your credit rating, the better it is. Not only does having a good credit score feel nice, but it could also unlock many financial benefits for you. 

These include lower interest rates when you take on some kind of credit, a larger variety of credit options, and better terms. All of these benefits could save you money, and all it takes is a good, or even excellent credit score.

So what is a good credit score? A good credit score differs between each of the bureaus. Here’s how Experian and Equifax categorise credit scores in Australia.

Equifax and Experian credit scores

Source: Equifax and Experian

Understanding the difference between your credit score and credit report

What is the difference between your credit score and credit report? Simply put – your credit score is a number, ranging from 1 to 4 digits. This number gives lenders and credit providers insight into how reliable of a borrower you are. 

Your credit report is also referred to as a credit file, however, is what determines your credit score. Your credit report contains detailed information on your credit history. It outlines your credit accounts, credit enquiries (otherwise referred to as credit applications), defaults, judgements and details your credit history. 

If the information contained within your credit report demonstrates good credit behaviour, then you’re likely to have a credit score falling somewhere between good to excellent. If your credit report shows too many credit applications, defaults and serious credit infringements, then you’re likely to have a score ranging from below average to average.

Here’s an overview of what goes on your credit report and how long it stays there:

Activity Average length on your credit report
Credit Accounts Any open credit accounts and accounts that have been closed in the past two years will appear on your credit report.
Credit Enquiries Any application you have made for some type of credit, whether it be a loan or credit card, will appear on your credit report for 5 years. It will appear on your report regardless of whether you went ahead with the credit, and if you were approved or rejected.
Repayment History Your repayment history over the past 2 years will appear on your credit report.
Defaults Your credit report will show if you have defaulted on any repayments in the last 5 years.
Court Judgements Same with defaults, if you have received any court judgements in the last 5 years, then it will appear on your account.
Bankruptcies If you enter into bankruptcy, it will remain on your report for 5 years.
Serious Credit Infringements Any serious credit infringements will stay on your report for up to 7 years.

How does Equifax calculate my credit score?

Credit bureaus like to keep the exact algorithm they use to calculate your credit score close to their chest. Nonetheless, they have revealed certain information about how they calculate your credit score.

According to Equifax, the general factors considered in credit score calculations are as follows: 

  • The number of accounts you have;
  • The types of accounts;
  • The length of your credit history;
  • Your payment history.

Equifax has also outlined the below information as its standard Credit Score model used in its assessment. Of course, this is only a general overview and it is subject to change. Nonetheless, it provides a good picture of what the credit bureau deems as the most important.

how equifax calculates credit scores

How does Experian calculate my credit score?

Now you have a better understanding of how Equifax calculates your credit score, let’s take a look at how Experian calculates your credit score. As highlighted by the bureau itself: “Your Experian Credit Score is calculated applying a statistical algorithm that uses past events to predict future behaviour. Each credit bureau uses a slightly different algorithm and does not disclose in detail how this is calculated.”

Experian does go on to outline some key attributes that are used to generate your credit score. This includes:

  • Type of credit providers that have made enquiries on your report;
  • The type of credit you have applied for;
  • Your repayment history;
  • The credit limit of each other credit products;
  • Negative entries;
  • The number of credit enquiries (credit applications) you have made.

Whilst we don’t know how much each of these items weighs when it comes to calculating your score, you can assume that the above factors will have some influence on your rating. Therefore, if you want to have a good credit score or higher, then you could ensure that you employ positive credit behaviour regarding the above items.

How does illion calculate my credit score?

Last but not least, let’s take a look at how illion calculates your credit score. On its website, illion says that it determines your credit rating by looking at whether you’re reliable with paying your bills. 

Furthermore, the credit reporting agency also outlines that the following events could harm your credit score:

  • Not paying your bills on time, or failing to pay them at all;
  • Applying for credit too often;
  • If someone else defaults on a joint debt.

With this in mind, we can assume that paying your bills on time and spacing out your credit applications could have a positive impact on your credit score.

Credit score calculator

Unfortunately, there’s no such thing as a credit score calculator. However, there are several ways you can check your credit rating. If you’re just wanting to know your credit score, then there are many free online sites you can use. Similar to Tippla, you can sign up in minutes, and you’ll usually need to provide some kind of identification, like your driver’s licence.

However, if you also want to see your credit report, where all the important information is, then some of the online sites won’t be able to help you. This is where Tippla can help! 

With Tippla, not only can you check your credit score, but you can also see your full credit report for both Equifax and Experian. This provides you with a more thorough overview of your credit situation. The sign-up process takes just minutes and it is completely free.

Alternatively, you can get your report directly from each of the credit bureaus. However, you will have to wait 10 days to get your report. If you want your credit report within 10 days, then you might have to pay for it. You might also incur a fee if you ask for a copy of your credit report more than once a year.

How to improve my credit score

There are many ways you can improve your credit score. We recently put together a helpful guide on how to improve your credit score. Here’s a breakdown:

Space out your credit applications

One way you can improve your credit score, or at least, limit the damage to your credit score, is by spacing out your credit applications. When you apply for any type of credit, the lender will look at your credit report. This registers as a hard enquiry on your report and harms your credit score for a time. 

The more applications you make in a short period, the more damage it will do. If you space out your credit applications, then you can limit the damage to your credit score. Not only that but multiple applications in quick succession can indicate to lenders and credit providers viewing your report that you are in financial distress. Regardless of whether this is the case or not, it could lead to you being rejected for a loan.

Make your repayments on time

As outlined by the three credit bureaus, your repayment history is factored into your credit score. For some, it is the most important ingredient. That’s why ensuring that you make your repayments on time is important if you want to have a good credit score.

Keep your credit accounts open

Whilst having too many lines of credit open can be bad for your credit score, it can also be good to keep your credit accounts open, even if you’re not using them. Confused? It does sound contradictory. Here’s how it works. 

The age of your credit account matters, and it can contribute positively to your credit score. The older the account, the better it is for your rating. That’s because it demonstrates that you can consistently handle a line of credit.

Check your credit report frequently

If you want to stay on top of your credit score, then it’s a good idea to check your credit report frequently. Your report can change often, sometimes even multiple times a day. You can never be too careful. 

If you become familiar with your report and score, then you can see if it drops or increases. Then you can take a look at your report and see what’s changed. This can give you a good insight into what’s good and bad for your score. 

Keep an eye out for mistakes on your credit report

1 in 5 credit reports will contain some kind of mistake on them. Not only can mistakes harm your credit score, but they could also be an indicator that you’ve been subject to credit card fraud. That’s why it’s important to check your report and score often.

How Are Credit Scores Calculated in Australia?

Unfortunately, there is no clear answer to the question “how are credit scores calculated in Australia”. This is because the credit bureaus won’t reveal their exact formula for calculating credit scores. Nonetheless, if you do these following things, then it could be the difference between having a good and bad credit score:

  • Make your repayments on time;
  • Pay your bills;
  • Don’t make too many credit applications in a short period;
  • Check your credit report frequently;
  • Don’t take on too much credit.

Want to know more about your credit score? Head to Tippla’s blog where you can find many informative articles and guides on your credit score. If you want to view your free credit report, you can sign up to Tippla and have your credit score and report within minutes.

How To Reduce The Interest On Your Personal Loan

how to reduce the interest on your personal loan

A lot of people don’t realise just how much interest can cost you when you take out a personal loan. That’s why we’ve put together this helpful guide on how to reduce the interest on your personal loan.

how to reduce the interest on your personal loan

The average personal loan in Australia

A lot of Aussies rely on personal loans. According to data from the Reserve Bank of Australia (RBA), the total amount of outstanding personal loans in Australia was more than $145.5 billion as of September 2020.

The RBA also reports that the average variable interest rate for a personal loan is 14.41% and 12.42% for a fixed personal loan.

In ustralia, there are two main types of personal loans – secured personal loans and unsecured personal loans.

How to reduce interest on personal loans

There is a range of different personal loans available in Australia – short-term, long-term, secured, unsecured, fixed-rate and variable rate – the list goes on and on. 

Tippla recently put together a guide on how to reduce the interest on home loans. As was the case with home loans, if you want to reduce the interest on your personal loan, then you could compare all of the different options available to you. MoneySmart recommends comparing these features:

Comparison rate
  • a single figure of the cost of the loan – includes the interest rate and most fees
  • make sure you’re comparing the same loan amount and term
Interest rate
  • the rate of interest you’ll pay on the amount borrowed
Application fee
  • the fee when you apply for a loan
Other fees
  • the monthly service fee
  • the default fee or missed payment fee
  • any other fees — read the terms and conditions to find these
Extra repayments
  • whether you can make extra repayments without paying a fee
Loan use
  • some loans can only be used for specific things like buying a car or home renovations
  • make sure you can use the loan for what you need
Loan term
  • shorter terms often have lower interest rates
  • longer terms usually mean lower repayments, but you’ll end up paying more interest

Source: MoneySmart

In Australia, you can also get a low-interest loan and a no-interest loan. They can also come with no fees and fast approval. 

Pay off your personal loan quickly

When you take out your personal loan, you will be charged a set amount of interest each month which will be factored into your repayment amount. Therefore, the quicker you pay off the loan, the less interest you will pay. Say you get charged 14% interest each month for a 6-month short-term loan, and your repayments are $100, you’re paying an extra $14 each month. 

Now say, you pay off your loan in 4 months instead of 6, you’ve saved yourself $28. Now imagine this on a larger scale, and you could really save yourself a lot of money.

We’ve put together a number of ways you could pay off your personal loan faster.

Round up your repayments

A simple way you could repay your loan faster and save yourself from having to pay all of the interest is by rounding up your repayments. Say your monthly loan repayment is $235 a month. If you instead repaid $250 a month, then you’ll reach the end of your loan faster. Depending on the loan term, you could be saving yourself months worth of interest by doing this.

Before you start making these extra repayments, check if there’s an early exit fee or any other fees that you might be charged.

Pay fortnightly, instead of monthly

Similar to rounding up your repayments, if you change the schedule of how you repay your loan, you could save yourself in interest. But how does switching your repayments to fortnightly from monthly make a difference?

Let’s say your loan repayment is $200 a month, over a 2-year period. Instead of paying that amount each month, you could pay $100 each fortnight. This way, you’ll end up paying more in the long run, as there are 26 fortnights each year (you’ll pay $2,600 instead of $2,400). This way, you could repay your loan months ahead of schedule, and save on interest.

Make additional repayments

Another way you could repay your loan faster is by making additional repayments when you can. By doing this, you could keep to your normal repayment schedule, but make impromptu repayments as and when you can afford them. The amount is up to you – any additional repayments will bring the end of your loan quicker, and that could save you a lot in interest.

Long-term loans aren’t always best

A lot of people might be tempted into getting longer-term loans with lower interest rates, thinking it will save them more money in the long run. However, this isn’t always the case. 

As an example, say you borrow $1,000. If you take out a short-term loan with a 3-month repayment period and a 14% interest rate. Throughout the loan, you’ve paid $420 in interest.

On the other side, imagine you take out a longer-term loan of the same amount, with a 2% interest rate over 2 years. That 2% interest rate is dramatically smaller than 14%. However, over the 2 years, you’ll end up paying $480 worth of interest, which is $60 more than the higher-interest short-term loan.

Refinance your personal loan

If you’re trying to reduce the interest rate on your personal loan, there is also the option of refinancing your personal loan. This is when you take on a new loan to pay off your existing one. There are a number of reasons why people decide to refinance their loans:

  • To get a lower interest rate;
  • To get a shorter, or longer loan term;
  • To consolidate their debt.

Why refinance your personal loan?

When you refinance your loan, you might be able to get a better deal than your existing one. This is especially true if your credit score has improved since you took out the initial loan. Generally speaking, the better your credit score, the better the interest rates and conditions available to you will be. Therefore, if your score has improved, then you might be able to get access to better deals compared to your initial loan term and that could save you. 

Debt consolidation

Refinancing your personal loan could allow you to consolidate your debt. If you have debt from multiple sources, such as numerous personal loans, then you might be able to combine this into one debt consolidation loan. A debt consolidation loan combines all your current debts into one single debt with one interest rate and one repayment date. 

The benefits of doing this include ease. You will only have to worry about one loan. That means one loan, one interest rate and one repayment schedule. By going down this road you might be able to get a better interest rate overall and save money.

However, there are some things to consider. You’re not guaranteed a lower interest rate when you take on a debt consolidation loan. In some instances, consolidating your debt could mean that you are paying higher interest rates, which means you’ll end up paying more in the long-term. 

On top of this, you might be charged extra fees by your provider, such as establishment fees, fees for paying off your other debt early, etc. These extra fees could outweigh the benefits of the lower interest rate. That’s why it’s a good idea to carefully weigh up your options and read the terms and conditions.

Access to more finance

If you refinance your loan, you might be able to get access to a higher credit limit. This could be good if you’re in need of extra finance. Perhaps your situation has changed, your family has expanded – the list goes on and on. 

Refinancing your loan could be an easy way to accommodate this. However, taking on a higher credit limit means you’ll have more to repay. It’s important to ensure you can make the repayments before taking on a higher limit.

Credit cards in Australia

As Tippla recently covered, a lot of Aussies have credit cards. There were 13,668,490 credit cards in circulation as of November 2020, according to Finder. Credit cards are similar to personal loans – they are a line of credit that you have to repay. Like personal loans, they often come with interest and extra fees.

How to reduce the interest on your credit card

There are several ways you could reduce the interest on your credit card. For example, you could opt for a low-interest credit card.

Another thing you could do is pay off your credit card each month in full. With credit cards, you don’t have to repay everything that you spend each month. Most credit cards come with a minimum monthly repayment. 

This is the minimum amount you have to pay each month to meet your credit agreement and avoid late fees. This is usually around 2 or 3% of the total amount you owe for the month.

However, as we explained in our previous article when you only repay the minimum amount, your remaining balance is charged interest. Head to our article to see why doing this can quickly increase your credit card debt.

With this in mind, to avoid paying extra interest, you could pay off your credit card in full each month. To achieve this, you could set up a budget and be careful with the purchases made on your credit card. You could try to only spend what you’re sure you can afford to repay each month.

How to reduce the interest on your personal loan

There are a number of ways to reduce the interest on your personal loan. These include:

  • Comparing multiple loans to get the best deal;
  • Paying off your loan quickly;
  • Opting for loans with shorter terms;
  • Refinancing your loan.

If you’re unsure of what’s the best option for you, you can reach out to a free financial counsellor. They can explain your options and help you make the best decision for you.

Can You Use a Personal Loan to Pay Off Credit Card Debt?

As spending picks back up in Australia, more and more Aussies will be accruing a credit card debt. This has led to many asking the question – can you use a personal loan to pay off credit card debt? We’ve put together this handy guide outlining the pros and cons, as well as explore other options.

Credit card debt in Australia

Credit card debt in Australia fell during 2020, hitting its lowest level in more than 15 years. There were a few factors contributing to this – reduced spending during the pandemic, and Aussies switching to other lending services such as Buy Now Pay Later (BNPL).

According to figures from the Reserve Bank of Australia (RBA), throughout the pandemic in 2020 $6.3 billion in credit card debt was removed. This is a reduction of 23.5%.

Whilst these figures were reassuring, it appears that Aussies have been making up for lost time towards the end of the year, and so far into 2021. Across the Christmas period, Australians generated $24 billion in credit card debt.

Forecasts for this year expect consumer spending to increase in 2021 and again in 2022. According to Trading Economics, consumer spending in Australia is expected to be $271.25 billion in 2021 and $279.39 billion in 2022.

Loosely translated, increased consumer spending this year and in 2022 could see credit card debt back on the rise. That’s why it’s good to know your options.

Paying off credit card debt

A credit card is a line of credit that you can use to make purchases – both online and in person. You can also make balance transfers and cash advances. Unlike debit cards, you’re not limited to the money in your bank account. Similar to personal loans, credit cards provide you with extra finance set at a predetermined amount, which resets each month.

The extra finance provided by credit cards isn’t free money. You have to pay back what you spend. At the very least, you will need to make the minimum repayment every month by the due date of the balance if you want to avoid late fees.

With a credit card, you have a few options.

Pay off your credit card debt in full

Each month you will receive a credit card statement. This outlines all of your transactions and the amount you owe. The most cost-effective way to pay off your credit card is to pay it off in full each month. This means you pay back the full amount that you spent during the month.

Paying off your credit card debt in full is the most cost-effective way because this way you don’t carry over any debt into the next month, which will generally incur extra interest. However, it’s not always possible to pay off your credit card bill in full each month. If you have an unexpectedly expensive month, you might not have enough to settle the debt. That’s why there are other options.

Repay the minimum monthly repayment

Most credit cards have a minimum monthly repayment option if you can’t repay your full credit card bill. The minimum monthly repayment is the lowest amount you can pay in order to meet your credit agreement and avoid late fees. The minimum monthly repayment is usually about 2 or 3% of the total amount you owe for the month. 

So what does this mean? Well, you don’t actually have to pay off your whole credit card bill each month. You only have to pay the minimum repayment if that’s all you can afford. But there’s a catch. You will still accrue interest on the remaining amount owing, which could cost you more in the long run.

Want to know how quickly credit card debt can get out of hand? Tippla recently covered why only making the minimum repayment can cost you in the long run.

Consequences of not paying off your credit card debt

If you don’t repay your credit card debt, or make the minimum repayment at the very least, there can be quite a few consequences. Whilst each credit card issuer has a different approach to late payments and defaults, we’ve put together a general overview of some of the consequences.

Personal loans in Australia

A personal loan is a type of instalment loan where you borrow a fixed amount of money. With a personal loan, you generally repay it on a monthly or fortnightly basis with interest. When you’ve paid back the loan your account is closed.

A lot of Australians rely on personal loans. Data from the RBA showed that the total amount of outstanding personal loans in Australia was more than $145.5 billion as of September 2020.

Can you use a personal loan to pay off credit card debt?

If you’re struggling to repay your credit card debt, you might be thinking about taking out a personal loan. But is this a good idea? We’ve outlined some of the pros and cons of doing this.

If you’re not sure what’s the best option, you can seek the advice of a financial advisor, who can help you make the best decision for you.

Consequences
Fees and interest
  • If you default on your credit card you could be charged late fees. Whether this occurs will depend on the conditions of your credit card;
  • You’ll likely be charged additional interest on all transactions during the statement period. You could also be charged interest on your late payment fees.
Impact on your credit score
  • Defaulting on your credit bill can harm your credit score. The extent of the damage will depend on how late your payment is and when you settle the bill;
  • In addition to hurting your credit score, defaulting on your credit card bill will stay on your credit report for 2 years. This means if you apply for a loan or credit with a financial institution in the 2 years after the default, they will be able to see this on your credit report. They could then reject your application.
Default notice
  • In Australia, if you have an overdue payment that exceeds $150 for 60 days or more, then it will be classified as being “in default”. Once you’re in default, your credit card issuer will provide an official notification, and this can last on your credit report for 5 years.
Impact on your reward points
  • If you have rewards attached to your credit card, such as frequent flyer points, then these could be suspended or even terminated if you default on your bill.
Debt collectors
  • If your credit card debt is passed onto a debt collector, then it could make the situation much harder to deal with.

Pros of using a personal loan to pay off credit card debt

1. You might be able to get a better interest rate with a personal loan

If you’re considering using a personal loan to pay off your credit card debt, it could be a good idea to look at the interest rates. If you carry a credit card balance then you could be getting charged high-interest rates. 

The RBA reports that the average variable interest rate for a personal loan is 14.41% and 12.42% for a fixed personal loan. With this in mind, you might want to weigh the interest you’d have to pay for a personal loan vs the interest you’ll incur if you don’t pay off your credit card bill. If a personal loan turns out to be the most cost-effective way, then it could be worth considering.

2. You could save your credit score

As we mentioned above, defaulting on your credit card bill can hurt your credit score. Not only that, but it could remain on your credit report for 2-5 years, depending on how long it takes you to repay the debt.

Whilst taking on a personal loan will result in a hard enquiry on your credit report, the damage would be less than having a default on your credit report, which can stay on your report for 5 years.

Equifax explains it like this: “Hard inquiries serve as a timeline of when you have applied for new credit and may stay on your credit report for two years, although they typically only affect your credit scores for one year.”

Again, it’s important to weigh your options. Will a personal loan stop you from being issued an official default notice? If so, then it could be worth your while to take out a personal loan.

3. You could pay off your debt quicker

When you only make the minimum repayment of your credit card bill, your debt can quickly accumulate. Before you know it, you could have a large credit card debt that could take years to pay off.

This is where a personal loan could help. It could allow you to pay off your credit card debt instantly. Then, you’d need to set up a payment plan to repay your loan. But then you wouldn’t have to worry about your outstanding debt growing each month with interest. 

Cons of using a personal loan to pay off your credit card debt

1. It could lead to more debt

Although a personal loan could help you remove your credit card debt, it could also put you in even more debt. You’re merely transferring the debt from your credit card to the personal loan. 

If you continue to use your credit card after you have removed the debt with the personal loan, then you could end up having both a credit card debt and a personal loan debt. If you choose to go down this route, you’ll need to be careful and keep an eye on your spending.

There are a range of other options you could try first before using a personal loan to pay off your credit card debt, which we’ll cover later in this article.

2. You’re not guaranteed to get a lower interest rate

Whilst personal loans might on average have lower interest rates, it’s not a guarantee. If you have a below-average credit score, then you might only be offered high-interest personal loans. If this is the case, then there might not be any benefit to using a personal loan to pay off your credit card debt. In fact, you could end up paying more in interest and fees on the personal loan than your credit card. This is something to keep an eye out for.

3. Like credit cards, personal loans have fees

Like credit cards, most personal loans have fees, including late payment fees. Some common personal loan fees include:

  • Establishment fees;
  • Ongoing monthly fees;
  • Late payment fees;
  • Early repayment fees.

It’s important to read the terms and conditions of your personal loan carefully before taking on a loan. Be sure to weigh the pros and cons, or speak with a financial advisor if you’re uncertain.

Other ways to pay off credit card debt

Can you use a personal loan to pay off credit card debt? The short answer is yes. But there are also a few things you could try first before resorting to that option.

Pay as much as you can each month

If you have a credit card and you’re not able to pay off your whole monthly bill, instead of just paying the minimum monthly repayment, you could try and pay off as much of the bill as you can. That way, you’ll have less debt carrying over into the next month, and less being charged interest. This is one way you could try and minimise your credit card debt.

MoneySmart also outlines: “If you’re finding it hard to pay the minimum amount, contact your bank or credit provider straight away or talk to a free financial counsellor. Taking action early stops a small money problem from getting bigger.”

Reduce your debt

If you find yourself in a difficult situation. You could try and reduce your debt. If you want to do this, the first thing you need to know is how much you owe. Once you know that, then you can try and move forward.

MoneySmart recommends taking the following steps:

  1. Work out what you can afford to pay;
  2. Prioritise your debts;
  3. Build a savings buffer;
  4. Get help if you need it.

When it comes to reducing your debt, there are two main methods – the snowball system and the avalanche system.

Snowball system 

The snowball system is where you look at your list of debts and organise them from the biggest to smallest amount. Once you’ve done that, you make the minimum payments towards all other debts and increase the amount for your smallest. Your goal is to pay off this one as quickly as comfortably possible. Once it is paid off, move the remaining amount from your debt budget towards the second smallest debt. 

Avalanche system 

The avalanche system has the same initial approach. You need to look at the list of debts but organise them from highest to lowest interest instead. If you mean to save money, this method could do the trick. Choose the debt with the highest interest rate. The longer you keep high-interest debt, the more it will cost you. Make the minimum repayments towards all other debts and increase the amount for your highest interest debt. While this may take a little longer, it will be very rewarding in the long run. Once this debt is paid off, your freed budget could be much bigger and can be put towards the second highest interest-debt.

Credit card balance transfer

Another method you could try is a credit card balance transfer. This is when you transfer your debt, AKA the balance, to another credit card. This could help you get on top of your debt, as you might be able to get a new interest rate of either 0% at a special low rate for a limited amount of time. This usually ranges from six months to 2 years.

A credit card balance transfer could allow you to pay off your debt faster and save you money, especially if you get a low or no interest rate deal. However, if you can’t pay off your debt quickly, then it could end up costing you more. 

Is it smart to use a personal loan to pay off credit card debt?

To answer the question “can you use a personal loan to pay off credit card” – whilst you can use a personal loan to pay off your credit card debt, that doesn’t mean you should. There are a number of things you could do before you resort to using a personal loan to pay off your credit card debt.

To summarise, you could:

  1. Reduce your debt;
  2. Pay off as much of your credit card debt as you can each month;
  3. Opt for a credit card balance transfer.

If you’re ever unsure of what’s the best decision for you, you can talk to a free financial counsellor. They’ll be able to explain your options and help you make the best decision for your financial situation.

How to Use Credit Cards Effectively: A Guide

how to use credit cards effectively

Millions of Australians have some kind of credit card. But there’s a difference between having a credit card and utilising a credit card. To help with this, Tipple has put together a helpful guide on how to use credit cards effectively.

how to use credit cards effectively

As of November 2020, there were 13,668,490 credit cards in circulation, according to comparison site Finder. These credit cards netted a national debt accruing interest of $20.9 billion. At the same time, the number of debit cards in circulation was more than double, at 34,861,747.

With this in mind, it’s clear that a lot of Aussies are using credit cards to help with their finances. So let’s dive into the ins and outs of credit cards.

What is a credit card?

When you take on a credit card, you are getting a line of credit that you can use to make purchases, balance transfers and cash advantages. Where a debit card limits you to the money you have in your bank account, credit cards are like a loan. This is because they provide you with extra finance which is set at a predetermined amount.

Like a loan, you have to pay back your credit card. At the very least, you will need to make the minimum repayment every month by the due date of the balance.

As highlighted by Investopedia: “Credit cards impose the condition that cardholders pay back the borrowed money, plus any applicable interest, as well as any additional agreed-upon charges, either in full by the billing date or over time.”

Who offers credit cards?

In Australia, there are a lot of options when it comes to credit cards. In fact, there are hundreds of options available. Nowadays, banks don’t offer one type of credit card. They often offer multiple different types of cards all serving different purposes. You can get access to low-interest credit cards, no annual fee credit cards, balance transfer credit cards, and rewards credit cards. 

Rewards cards can vary. A common one is credit cards tied to the frequent flyer points of main airlines such as Virgin and QANTAS.

The benefits of credit cards

With anything in life, there are both pros and cons to having a credit card. Let’s start first with the benefits of credit cards.

Access to extra finance

One of the main reasons people get a credit card is because they want access to a line of credit. A credit card allows you to spend money you might not have in your bank account at that very moment. It gives you the freedom to buy what you want and need without restricting you to your bank account.

This extra line of credit can become especially useful in emergency situations. You can deal with the problem right away and not have to wait until payday. It is very important to highlight that a credit card isn’t free money. You have to pay back everything you spend. So it’s good to be careful that you don’t fall into the trap of overspending and putting yourself into further debt.

Build up your credit score

One benefit of having a credit card is that you could use it to create a good credit history and boost your score. If you make your monthly repayments on time and don’t max out your credit card, then it could boost your credit score.

Rewards

A lot of credit cards have some kind of rewards programs where you can earn bonuses. This can range from frequent flyer points, bonuses tailored to specific stores, cashback and extras such as travel insurance.

Security

Another benefit credit cards can offer is the added security when shopping online. As we recently highlighted, online financial fraud and credit card fraud in Australia is a real threat. This is when scammers will somehow access your card details and use them to shop online.

If you use your credit card to shop online, if scammers do get access to your credit card details, then it’s not connected to the money in your bank account. However, if fraudsters get your debit card details, then they will be draining your personal money.

If you are a victim of credit card fraud, you will most likely not be liable for the money stolen. Generally, once you alert your bank or financial institution about the fraudulent transaction(s), they will freeze your card and reimburse you the funds.

However, there are some situations where you could be liable for the lost funds. For example, if you display your pin obviously on your credit card for all to see, or you took too long to notify the bank, then you might be liable for the fraudulent charges.

In Australia, most credit cards now come with a chip on them, in addition to the magnetic strip. The encryption of chip cards helps to prevent fraudsters from stealing your card information during point-of-sale transactions.

The downside of credit cards

Whilst there can be numerous benefits to having a credit card, there are also a few things to watch out for. Whilst credit cards give you access to extra cash, you do have to pay that money back. 

Fees and interest

When you take on a credit card, depending on which one you select, you might have to pay credit card fees and interest. This means, when you spend money on your credit card, you might end up having to pay back more than you anticipated. 

When you apply for a credit card, you should read the conditions of the card carefully and make sure you can afford the repayments. It’s also important to be aware of what actions trigger fees and interests on your repayment.

Minimum repayments

Most credit cards have a minimum monthly repayment. This is the lowest amount you have to pay in order to meet your credit agreement. The minimum monthly repayment is usually about 2 or 3% of the total amount you owe for the month. 

This means that you don’t actually have to pay your whole bill when you have a credit card, you only have to pay the minimum repayment by the due date to avoid paying late fees. However, you will still accrue interest on the remaining amount owing, which could cost you more in the long run.

Here’s an example of how the minimum monthly repayment works. Say your credit card charges you 10% interest per year and you spend $1,000 on your credit card in one month. If your minimum repayment is 2%, then you would have to pay at least $20 by the due date to avoid late fees. However, the remaining $980 that you haven’t paid will be charged the interest rate, which will cost you an extra $98. 

This $98 in interest will be added to your outstanding balance for the next amount. Then you’ll have to pay interest on the new amount. Taking into account that you’ll probably spend more in the next month, you can see how your credit card debt can quickly get out of hand!

credit card debt

Maxing out your card

Maxing out your credit card is when you reach your credit card limit. Say your credit card limit is $8,000, then maxing out your credit card would be when you spend all of that $8,000 in one month.

When you max out your credit card, you can’t make any more purchases until you make a repayment. Depending on your card conditions, you might incur fees and charges when you max out your card, which means you’ll have to pay even more back.

When you max out your credit card, it means you have a lot more to repay. Even the minimum repayment amount is higher. 2% of $1,000 ($20) is a lot less than 2% of $8,000 ($160). And 10% interest on $980 ($98) is a lot less than 10% on $7,840 ($784). 

If you prefer to pay off your credit card in full each month, then you might struggle to fully repay your credit card bill if you max out your card. Like with anything, it’s important to only spend within your means so you don’t put yourself into a difficult situation.

Rewards programs

Although credit card rewards programs can be a great way to increase your frequent flyer points simply by spending money, it is important to carefully read and understand the conditions of the cards.

Often, cards with rewards programs come with higher interest rates and additional fees. Sometimes these extras can actually offset the benefits that you get through the rewards program. That’s why it’s a good idea to carefully examine the rewards programs and see if it will work out better for you in the long run.

How to use credit cards effectively

With the pros and cons for credit cards outlined, now it’s time to get into how to use credit cards effectively. When it comes to your credit card, you shouldn’t be over-reliant on it. It is a tool that when wielded properly, could greatly benefit your life. However, credit card debt can be a slippery slope.

So how could you use credit cards effectively? You could start off by finding a credit card that meets your needs, whatever they might be. You should read the terms and conditions carefully. It’s important to always keep in mind that whatever you spend, you need to repay.

Keep an eye on your balance

One way to use your credit card effectively is to avoid maxing out your card. You could do this by keeping an eye on your balance. Investopedia outlines that it’s better to keep your card balance low relative to your credit limit. This is because maxing out your credit card can harm your credit score and indicate to lenders that you’re a risky borrower.

As we mentioned above, there are numerous drawbacks to reaching your limit. These include extra fees and charges, the inability to use your card until you make a repayment and higher risk of defaults.

Make more than the minimum repayments

Although you don’t have to pay more than the minimum repayments by the deadline each month, it could work out a lot better if you do. This is because it could save you from being charged extra interest. 

In fact, the best thing you could do is to pay off your credit card in full each month. That way you won’t be charged interest on the remaining debt, and you won’t carry credit card debt into the next month.

Pay your credit card bill on time

Each month, you will receive your credit card bill, outlining all of the transactions you’ve made during the month. Once you receive your statement, you will have a fixed time to pay off your credit card, or at the very least, make the minimum monthly payment to avoid late fees.

When it comes to your credit card, it’s important to pay your credit card bill on time. If you don’t you’ll most likely have to pay late fees and in some cases, extra interest. Not only that, but it could be good for your credit score. Even if you have a credit card that has 0% interest or 0% balance transfer terms, these will likely become void if you are late making your repayments.

Your repayment history is one of the most important factors when it comes to your credit score. If you don’t pay your bills on time or miss them altogether, it could harm your credit score. Therefore, one way to use your credit card effectively is by paying your bill on time.

Be on the lookout for credit card fees

You can incur credit card fees for a number of different reasons and they can add up over time. That’s why it’s important to know what fees you can be charged with your particular card and what triggers them.

credit card fees

Credit cards and your credit score

Your credit score is based on your credit history. Good credit behaviour can improve your rating, as can bad credit behaviour. If you are to miss a credit card payment, then this will show up as a default on your credit report and negatively affect your credit score.

How to use your credit card effectively

There are a lot more aspects to credit cards than meets the eye. There are many things you could do to make sure you’re getting the most out of your credit card. You could repay your credit card in full each month, avoid over-relying on your card, make sure to pay off your bill each month on time and more.

How to Report Credit Card Fraud: Protect Yourself and Your Credit Score

report credit card fraud

Fraudsters are adopting more sophisticated methods to steal your card details. Tippla has put together a guide on how to protect yourself and your finances, and, if the worst should happen, report credit card fraud.

report credit card fraud

As technology advances, you don’t need to only worry about someone stealing your credit card out of your bag. But also that your details might be stolen online. So how can you protect yourself from and report credit card fraud if you do fall victim?

What is credit card fraud?

Let’s start by going over what is credit card fraud. As outlined by Experian, credit card fraud is “when someone uses your credit card or credit account to make a purchase you didn’t authorize”.

This could happen in many ways. A thief could steal your physical credit card and use it to make purchases. Alternatively, scammers could steal your details online, such as your credit card number, PIN and security code. With these details, they can make purchases online without having your physical card. 

Types of credit card fraud

Credit card fraud comes in many shapes and sizes. Sometimes the fraud is physical, for example, they steal your credit card from your wallet, or the scam is online. This is referred to as card-not-present (CNP) fraud.

Here’s an overview of the different types of credit card fraud:

Credit card theft – when someone steals your credit card from your wallet, bag, car – wherever you keep it;

Using lost or stolen cards – say you dropped your credit card somewhere, and an opportunist picks it up. They proceed to use your card as if it was their own instead of reporting it to police;

Counterfeit cards – counterfeit credit cards are physical cards that were created with real account information that has been stolen from victims using a device called a “skimmer”. Often, the victims still have their real cards, so they’re not aware that their details have been stolen.

Intercepting and using mailed cards – when someone orders a new credit card and it’s sent to their address in the mail, fraudsters will steal this mail and use the card. Whilst credit card companies do their best to protect the cards during transit, they can be stolen from your mailbox.

Account takeover – as the name implies, account take over is when someone takes over your account. They could do this by getting your address and basic information and learn some of your security questions, such as your mother’s maiden name. Once they have this information, they’ll call up your bank or provider and change the account details. They might change the address, so a new card is sent to their address and not your own.

Fraudulent applications – using your details, such as your name, date of birth and address to apply for credit cards in your name.

CNP – card-not-present fraud is when scammers steal your details when you pay for something online. For this type of fraud, they only need basic information such as your credit card number and name to execute the fraud.

Credit card fraud in Australia

Although credit card fraud is an issue in Australia, there is an encouraging declining trend. According to figures released by the industry self-regulatory body Australian Payments Network (AusPayNet), fraud on payment card transactions dropped by 15.4% to $447.2 million for the 12 months to the 30th of June 2020. This continued the declining trend recorded in the previous year.

CNP fraud, which is when someone’s credit card details are stolen online and used in mainly online transactions, fell by 14.0% year-on-year down to $392.4 million.

Even though these figures are encouraging, that’s not to say that credit card fraud isn’t a real threat. 

Credit card fraud vs identity theft

Identity theft is a type of fraud where someone uses another’s identity to either steal money or gain some kind of benefit. Credit card fraud is a type of identity theft. This is because the scammers are using your credit card details to make purchases without your consent.

As outlined by the Australian Competition and Consumer Commission’s (ACCC) scam statistics website Scamwatch, common methods of identity theft include phishing, hacking, remote access scams, malware and ransomware, fake online profiles, document theft and data breaches.

How to tell if you’re a victim of credit card fraud

The Australian Federal Police outlines the following ways you can identify if you have been a victim of identity theft:

  • Items have appeared on your bank or credit card statements that you don’t recognise;
  • You applied for a government benefit but are told that you are already claiming;
  • You receive bills, invoices or receipts addressed to you for goods or services you haven’t asked for;
  • You have been refused a financial service, such as a credit card or a loan, despite having a good credit history;
  • A mobile phone contract has been set up in your name without your knowledge;
  • You have received letters from solicitors or debt collectors for debts that aren’t yours.

How to report credit card fraud

Credit card fraud can happen even when your card is still in your wallet. Therefore, it’s a good idea to monitor your credit account to see if there are any suspicious transactions.

If you discover there are purchases on your credit account that you haven’t authorised, then you might be a victim to credit card fraud. If that’s the case, here’s what you should do:

Alert your credit card company

The first thing you should do if you discover you’ve been subject to credit card fraud is to immediately contact the credit card company and alert them to the fraudulent activity. They should put a hold on your account so the fraudsters can’t make any more purchases, and reimburse you the money. 

Change your online passwords and PINs

Once you have alerted your credit card company or bank to the fraud, you should log into your account and change your online banking password and PIN. Password managers can help you create complex passwords that are hard for fraudsters to crack. You might want to consider using one of these to help create a strong password and prevent further fraud.

Check your credit report

Your credit report can be a valuable resource to help you detect credit card fraud and identity theft. Your credit report outlines all of the different credit accounts you have. If you check your report and see that you have credit accounts open that you never authorised, then you might be a victim of credit fraud.

If you have been a victim of fraud, then you should contact the three credit reporting agencies in Australia. These are Equifax, Experian and illion. You should report the fraud to each of these credit bureaus. You can ask them to place a ban on your consumer credit information.

Placing a ban on your consumer credit information can help prevent fraudsters opening accounts in your name. During the time the ban is in place, credit providers won’t be able to view your credit report without your written permission. Credit providers can’t open up an account without viewing your report.

You can also add a fraud alert to your credit report with each of the agencies. This means you will receive a notification when certain changes happen to your credit file.

Report credit card fraud to the police

If you are a victim of fraud, you should report credit card fraud to the police. If your details have been stolen online, you can report the fraud via ReportCyber on their website here. You can also call the following number: 1300 292 371.

How to protect yourself from credit card fraud

As the saying goes, prevention is better than cure. Here are some things you could do to protect yourself from falling victim to credit card fraud.

Keep your wallet or purse secure at all times

Whilst online scams are a real threat, thieves can still steal your credit card from out of your bag. When out in public, you should keep your wallet or purse secure at all times to stop it from being stolen.

Shred financial documents before putting them in the bin

The Australian Federal Police recommends shredding any personal or financial papers before you throw them away, so people can’t access your details. Alternatively, you should keep them in a secure place if you want to retain them.

Be careful when using your card

When you’re out in public, you should always cover the keypad at ATMs, to stop strangers from viewing your pin. The same goes for when you’re entering your pin on EFTPOS terminals.

You should also be aware of your surroundings and keep an eye out for anyone trying to watch you. Sometimes, scammers might try and attach technology to the ATM or EFTPOS terminal to scan your details. You should look out for any strange or loose fixtures attached.

For extra protection, you can ask your bank or financial institution for a credit or debit card with an embedded microchip. These are more secure than cards that only have magnetic stripes.

Be mindful of where you provide your details

When you’re shopping online, you should be mindful of where you provide your details. You should only buy from reputable companies or from ones whose security measures you can verify.

One method you can do is look at the company’s web address. With the https the “s” indicates that the site is secure.

On the other side of this, if you’re using a public computer, such as an internet cafe, or using an unsecured wireless connection (AKA a hotspot), avoid doing your internet banking or making payments.

Furthermore, you should be cautious of who you provide your personal and financial information to – both online and offline. 

How can credit card fraud hurt your credit score?

Your credit report details all of your current credit accounts, as well as any credit you’ve had over the past two years. The impact fraud will have on your credit score, however, depends on what the scammer does with your details.

If they max out your credit card, this will hurt your credit score, as it indicates that you’re not responsible with your finances. If they make multiple applications in your name, this could also harm your rating.

However, it is important to highlight that although credit card fraud can hurt your credit score initially, once you alert the credit reporting agencies to the fraud, they will remove the fraudulent accounts or transactions and your credit score will revert to what it was.

Keep a watchful eye

Although credit card fraud might be on the decline in Australia, it remains a real threat for Aussies across the country. Even if you do all of the right things you could still become a victim to fraud. Constantly checking your accounts, prioritising your online security and knowing how to report credit card fraud could help you reduce the damage if your details are stolen.