4 Credit Card Fears: The Irrational & The Valid

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Like any financial product, credit cards aren’t without their myths, fears and skepticism. While on the whole credit cards are safe to use, there are certain avenues which should be taken with caution, or simply avoided.

1. Making Purchases with your Credit Card Online

Irrational: Being afraid to make purchases with your credit card on the internet.

This has been a prevailing fear ever since credit cards became compatible with the internet. The matter of the fact is, just like real life, the majority of retailers and big names will be trustworthy, where as a minority may not be. If you make a purchase or give your credit card details out online, look out for the following symbols in your internet browser:

Secure encryption signs on three different internet browsers. This means that any personal information such as passwords or credit cards are encrypted and scrambled, making them virtually impossible for a 3rd party to intercept. Credit Card Finder® does not need this level of security as you are never actually required to send us any personal details. Applications are redirected to the official financial provider’s website.

• Trust who you are purchasing from – eBay, Amazon, Woolworths and other large retailers are examples of online sites you can trust by default of reputation. Make an effort to and research whether or not the site you are buying from has a purchase security policy, such as refund if your item does not arrive.
• Internet Security 101 – Use a password which is preferably over 8 characters long, and does not contain any common dictionary words. Don’t share your password, and vary it from time to time.
• If payment by credit card is a choice, pursue it – Not only is payment via credit card accepted as the safest form of online payment, the majority of Australian financial providers offer some form of fraudulent liability. In the rare scenario where you might have faced fraud, simply contact your bank .A.S.A.P and explain the situation and you won’t be held liable. Note that every instance is circumstantial and up to the judgment of each individual bank.
• Keep a record of your transactions – This one is easy to manage, as e-commerce websites send you a confirmation email which practically acts as a receipt. You can take your security a step further and print out each confirmation as well.

Valid: Don’t follow shopping links from e-mails and other websites.

Be very skeptical of any e-mail sent from a retailer or financial institution. Banks and e-commerce sites will never send you an e-mail asking you for your credit card details or password, for instance. Even if the email doesn’t ask you for anything, be hesitant to follow the link.

Hypothetical situation: A ‘phishing’ email (one created with the intent to steal your personal details) from “Commonwealth Bank” links you to login on their website. While many may innocently follow the prompt to log-in, if you look carefully, the URL is “http://www.commonwealth-bank.com”. This is not the official CWB website, and you would leave immediately.

• To find the real Commonwealth Bank website, you would Google ‘Commonwealth Bank’ and simply use the 1st result.

2. Debt Consultation and Confrontation

Irrational: Being afraid to contact creditors about your financial situation.

Australians in financial crisis often hesitate to contact creditors if they are in trouble. We fear that our credit will be cut and the spotlight will unveil more debt. The truth is, creditors are more than happy to help those who take an initiative – they would much rather stub out the problem early then let it grow and get out of hand. Resolve can only come from early confrontation.

Valid: Avoiding credit repayment is a downward spiral.

Time will only bring a lower credit rating, higher fees and more interest. Falling into financial depression can only make resolving the issue more difficult. If you’re paying the minimum each month and your interest is almost rising faster than your balance is being cleared, it may be time to contact help.

3. Being Arrested for not Repaying

Irrational: You can go to jail for not repaying your credit card debt.
While the implications of not repaying debt are not exactly pleasant, unless you’ve committed some sort of fraud, you can not be jailed for a lack of repayment. It is the banks own risk to lend you credit – hence the term ‘unsecured credit’, meaning they can claim no physical assets and little legal liability from you.

Valid: You can’t run away from the consequences.

Although you won’t be jailed, side effects of refusing to repay unsecured debt include:

• Years of harassment and threats from collection agencies. Emotional manipulation and scare tactics will be employed.
• Any form of income you receive will may be garnished, with a portion of it being sent back to the collection agencies.
• For more information, read our guide on ‘What to Say When you Can’t Pay’ here.

4. Using Credit Irresponsibly

Irrational: “I don’t trust myself with a credit card, I’ll use it too much”.
While a fraction of us truly don’t have the discipline to manage credit responsibly, people can get over their heads about the implications of a credit card. The majority of us know that any money spent will have to be paid off, generally even more will need to be paid off.

However by simply taking advantage of the 55 day ‘interest free’ period and not spending beyond our means (easier said than done), it’s possible to even profit from credit cards. Combine reward points and no interest accumulation, and you have truly valuable rewards which aren’t compensated for by interest repayments.

Valid: “Too many late payments will damage my credit rating”

Too true. If you make inconsistent repayments (or consistently late), your credit score will fall to shambles. Having a constant high balance on your card(s) will also take its toll – while it’s acceptable to spend to the max of your credit limit from time to time, staying there for extended periods is not beneficial.

If you plan to budget your credit cards soon, implement our credit card debt calculator into your strategy. Easy, efficient and ultimately free to use.

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