Season 3 Episode 18: Do You Really Need a Credit Card?
"It's fine – I pay it off every month." It's one of the most common things we hear about credit cards. Plenty of Australians see their card as a clever way to use the bank's money, collect points and keep a safety net in the drawer.
But is your credit card really working for you, or is it costing you more than you think?
In this episode, Mel and Darlene dig into the beliefs many of us hold about credit cards, where those beliefs came from, and what it can look like to step away from the card – one purchase at a time.
We discuss:
Mel and Darlene's money truths: letting go as their children grow into adults – from Darlene's son getting engaged and her daughter's exchange plans, to Mel's daughter finishing Year 12 – and why boundaries and honest conversations work better than control
Why knowing your mandatory cost of living makes it easier to see what's really going on your credit card
The "use the bank's money" theory, where it came from, and why it doesn't add up for most people
Why banks love you having a credit card – late payment fees, annual fees and interest
Whether frequent flyer points and travel insurance are really worth it
Why an emergency fund can give you more peace of mind than a credit card in the drawer
The first steps to getting off your credit card, starting with moving your direct debits and building your belief that you can do it
This week's TMC Take is that if you don't have a credit card, you don't need one – including to build your credit history or get a home loan. In fact, applying for several cards can show up when a lender assesses your home loan application. If you already have a card, it can be difficult to come off it, so take it step by step. And if you're one of the rare few who never overspends on your card, carry on, our friend.
We hope this episode gives you the confidence to take a fresh look at your credit card – and decide what's right for you.
ABOUT THE MONEY COLLECTIVE PODCAST
Financial Wellbeing with The Money Collective brings together the stories and insights Darlene Neu and Mel Pearce have gained through working with thousands of Australians and helping them navigate their finances.
With more than 50 years of combined experience in banking and finance, Darlene and Mel break down the barriers we face every day when it comes to money, relationships and family life. It's an honest, no-holds-barred podcast about financial wellbeing and the role money plays in all our lives.
READY TO BEGIN YOUR FINANCIAL WELLBEING JOURNEY?
Get to know your cost of living by listing your expenses using our handy spending review spreadsheet: https://www.themoneycollective.com.au/resources
Book a time to chat with us, ask questions and talk about all things financial wellbeing, home loans and more. Email team@themoneycollective.com.au
Take action and improve your financial wellbeing with our online course: https://www.themoneycollective.com.au/onlinecourse
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00:00:00:06 - 00:00:21:16
Welcome to the Money Collective Podcast. We're here to uplift your financial well-being. Your hosts are me, Mel Pearce and Darlene Neu. We are the co-founders of The Money Collective and together we have over 50 years of finance and banking experience. We provide the tools, information and guidance to better understand your money and feel confident making money decisions.
00:00:21:15 - 00:00:44:04
Welcome back to another team. See Uplift Your Financial Wellbeing Episode. I'm Darlene and this is Mel. Yes. And we are going to start with our truth today. So what's going on for us? Because money is always a challenge in our lives and it's got so much emotional overlay. So my truth today is.
00:00:46:02 - 00:01:11:09
This is a thing in my life at the moment, and it's very connected to belief systems and navigating big life change. You know, and I know we talk about life stages at life phases, but it's something like that. So I've talked in previous ones, you know, my husband verging on that retirement phase. But the other one is kids.
00:01:11:11 - 00:01:37:10
And getting to a stage of life where they are older and you start to become, well, an empty nester. I'm not an empty nester. I've got a 15 year old Lily. She's got three years to go. And oh, my gosh, she's living her best life. She's doing a German exchange next to you, which we are super excited about, you know, just the life and, you know, perspective and things like that.
00:01:37:10 - 00:02:06:14
She's super excited. But, you know, that costs money. So you facilitate those sorts of things. I am a believer that you want to give your kids education in life, education not so much academic education, but life experience, college experiences, because the more experience it be like what we talk about in business, everything's trial and error. What I like, what I don't like, experience different things and, you know, find your happy place, I guess.
00:02:06:15 - 00:02:28:20
So German exchange is definitely part of that in doing those sorts of things. But, you know, that obviously comes with extra cost and she's also given an opportunity to do a study tour in England in July for Dad. So she's totally living the best life. She's just gone to Northern Territory on a camp for three and a half weeks.
00:02:28:22 - 00:02:45:15
Fantastic. You know, so she's doing all those wonderful practical things. But my point is life change. My son is 25. His name is Logan, and he got engaged a few months ago and I'm not sure if I've mentioned it before.
00:02:45:15 - 00:02:47:20
You have to look at it.
00:02:47:21 - 00:03:16:20
That was triggering for me around. You know what that means that then that real challenge which I have talked about, really comes back to how do we define ourselves transitioning into different stages and letting things go right. Is yet to letting like the belief system in that we have to look after our kids, right? Letting that actual go.
00:03:16:20 - 00:03:50:03
I can say it. I know it from a financial wellbeing perspective and we talk about this in in our topics quite a lot as parents. We put a lot of all of our physical money towards our kids, whether we think, you know, that's a reflection of us. I think there's a lot more to that. Whether or not we have those beliefs that we've got to provide for them or and also then we talk about do we actually compromise their resilience because of it.
00:03:50:07 - 00:04:23:11
So all of that. So I'm in the camp of practical. We want them to be resilient. They need to find their own way, have their own experiences, not be able to say, listen, you know, the actual thing of letting go is harder than we think, right? So but through logging, get engaged. I am really going and letting that go, you know, can I say and how does that actually practically play out?
00:04:23:13 - 00:04:29:15
I have not asked him a question about money. Oh, since he got engaged.
00:04:29:18 - 00:04:36:02
Great. Do you ask to make money? Historically, it shows that the opening.
00:04:36:02 - 00:04:42:11
Yes, historically, regularly. Because I would worry he's at uni. The university. Has he got enough?
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Because you're feeling you're responsible for his.
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You know, survival, you know.
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Yeah. And how. Well he's right. Yeah. Going right.
00:04:49:19 - 00:05:02:08
Yeah. And yeah, really interesting. So the good thing is, is that I have stopped asking and actually in the last I haven't even thought about it.
00:05:02:13 - 00:05:03:11
Yes.
00:05:03:12 - 00:05:24:20
I mean I'm talking about it now because, you know, it's part of that life change. But I think that will play out, you know, obviously for Lily as well, because of that first experience, then you know, how you do secondary with the second one is very different. And that resilience and independence, I push a lot harder. That barrow with her.
00:05:24:20 - 00:05:47:18
Then you know, and I spend so much time with you, so I learn from you as well. And so my I was going to actually this is very similar to what I was going to talk about, but my my experience of it is, is slightly different because I have always felt like I'm an independent person, independent from my parents.
00:05:47:18 - 00:05:55:02
I never felt like that they were had to be responsible for me, that I could do it myself, and that I felt like my kids could.
00:05:55:03 - 00:05:59:09
I wonder where they are? You ask them what they think anyway.
00:05:59:11 - 00:06:27:06
Oh, no, no, no. Yeah, but like, I felt like my parents would have completely related to, like, what you were just explaining. My parents would have felt very responsible for my growing up and giving me my education and my all of those things. And I feel like I felt suffocating to me, like it felt like controlling and it felt like I didn't enjoy it, that's for sure.
00:06:27:07 - 00:06:51:16
Yep. That experience was quite controlling. I didn't want to repeat that for my kids, so I actually have a little bit reverse guilt because I am like, No, you guys can do it. I don't feel I do want to solve their problems sometimes, but Percy also is much more No, they have to go and do it, you know, build that resilience into them.
00:06:51:20 - 00:07:20:12
They're both still living at home, so I've got to realise turning 20 next week until he's finishing year 12 at the moment, turns 18 in a couple of months and she's actually what I wanted to talk about today because she has technically finished her schoolwork, right? So she doesn't have to do exams, she's going on scored for year 12 and she's got a few Sundays left of school for the rest of the year.
00:07:20:14 - 00:07:48:00
So there's no, you know, that's kind of being put to bed. And I can see because it's technically school holidays and she's on school holidays, she is checking the UK doing some some baking, you know, socialising, doing whatever she wants to do and then purse last night is like she's finished hasn't she. Like what is she doing. She applied for one job.
00:07:48:02 - 00:07:57:20
Do we think that's enough? We need to sit down and have a serious conversation. And I'm like, Yes, sure, I don't want it to be a loss.
00:07:57:22 - 00:07:58:23
But is that controlling?
00:07:59:04 - 00:08:11:09
Absolutely it is. And then I'm like, Oh, well, we're having the talk now. And he's like, Nah, nah, I'll do it tomorrow, so leave it with me. Anyway, so that's where we're at currently. This is the scenario.
00:08:11:11 - 00:08:29:01
So that's a really interesting one to navigate because what I'm learning in, in being able to not, you know, control the situation because I think if you ask Logan to, he would feel like he felt like that maybe it was suffocating sometimes right? Yeah.
00:08:29:03 - 00:08:33:01
So it's like they didn't trust me to make my own decision. Right?
00:08:33:03 - 00:08:49:16
Right. Which is not the intent, but that's how it plays out. So I think what's served me well and continuing to serve me well with Lily, we'll see how it plays out is boundaries of.
00:08:49:18 - 00:08:51:11
Oh, that's great.
00:08:51:13 - 00:08:57:01
Because in this situation you don't want to say you have to apply for so many jobs because that would be the go to right?
00:08:57:01 - 00:09:00:18
I'm like, What behaviour do I need to display here? But what, what.
00:09:00:18 - 00:09:13:12
Do you want in your house as having an adult person? That's right. Like, is it bored. Yeah. Is it. Yeah. And it's not you can't link it to if you do this.
00:09:13:12 - 00:09:15:12
No. Oh do. That's great advice.
00:09:15:12 - 00:09:16:21
Because that's what happens.
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This is not good.
00:09:17:18 - 00:09:33:13
And that is more than controlling behaviour. Yes. So all it's getting is that it's just these are my boundaries. I've said to Logan you have to be out by February because I've got quite a coming exchange student and I need your room.
00:09:33:15 - 00:09:35:04
I still have Easter.
00:09:35:06 - 00:09:44:18
Yep. And I feel like I always say 25, which is interesting. I used to say it as a joke, but now it's reality. Reality 25 Now.
00:09:44:20 - 00:10:10:21
We manifest these things and we can manifest things through our behaviour. It's. I'm not kidding. It's like what you say, believe, you know, kind of comes true. So we've got to be careful about this. We can't. I'm here to provide guidance to my kids. I want to support them emotionally the best that I can and help them be independent and feel like they are empowered to go and do the things that they want to do without it being a journey that I feel needs to be for them.
00:10:10:21 - 00:10:18:11
So I'm excited. I am not worried at this stage. Kate Yeah, I know. I'll keep you all informed.
00:10:18:11 - 00:10:30:10
You're looking at to the training on that. Well, I'm not going to see them out in the cold, you know. You know, family will be there always, but.
00:10:30:14 - 00:10:31:18
Let them make their own decision.
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To support them when they can.
00:10:33:13 - 00:10:34:07
That's it.
00:10:34:09 - 00:10:51:20
So hard, though, to say this without there being a cause. I also want to prove and things that parents it's just natural human nature to go. I don't want to disappoint my parents. And we say we don't have expectations, but we do. We do it. So it's almost impossible to not.
00:10:51:20 - 00:10:53:05
That's it. Yeah.
00:10:53:06 - 00:11:03:00
Yeah, yeah. But I think keep it in check and if you can talk about it honestly, particularly with them or in the household.
00:11:03:06 - 00:11:30:18
I think that is the other thing. Like really vulnerable, honest conversations with your grown up children around it. I think that is a really good thing about why, you know, so, you know, I've come back to Logan and getting engaged in, you know, this independence like, yeah, I didn't react the way I wanted to react, but I had a vulnerable conversation with sometimes.
00:11:30:20 - 00:11:31:12
Yeah.
00:11:31:14 - 00:11:39:12
At least put it all out. There aren't lines of being so they can say we're just human beings.
00:11:39:12 - 00:11:44:08
It's okay to backtrack. If we fuck it up, it's okay to say I'm sorry.
00:11:44:10 - 00:12:09:22
Right? Exactly. Oh, you know, and where it really came from. Yeah. This is their perception of where it might be coming from. So vulnerable conversations, boundaries and what you lie. Yeah. Yeah. And try and let don't have to manage their lives and they've got it or they don't but it's their life to leave. And I suppose thinking about what we would have wanted.
00:12:10:00 - 00:12:10:09
Yeah.
00:12:10:09 - 00:12:18:05
When we were that age. Yeah. Because, you know, I didn't want anyone to make decisions for me. I'm pretty sure that will be common.
00:12:18:05 - 00:12:33:23
I'm pretty sure it was a pretty common thing. All right. So today we want to talk about something else as well, which is credit cards. The question today is, are they a useful tool or expensive chaos?
00:12:33:23 - 00:12:40:23
And how addicted are you to the credit card? Oh, one. Is that.
00:12:41:00 - 00:12:44:17
Yes. So do Australians have a credit card?
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It is right.
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And it's okay because I don't pay interest.
00:12:49:14 - 00:12:50:11
It's all good.
00:12:50:14 - 00:12:54:06
Don't worry. I don't pay it off every month. Every month.
00:12:54:06 - 00:12:55:21
That's the key thing we do.
00:12:55:22 - 00:12:57:16
Yeah. Yeah.
00:12:57:16 - 00:13:02:13
So then the next question I would ask is then how much fridge do you put on your credit card every month?
00:13:02:13 - 00:13:10:15
Hernan I just paid off. Everybody's got a lump sum on and hope for the best then.
00:13:10:16 - 00:13:38:04
So then the most common and this is related to me because the most common thing I know being so when we talk about financial position, most people can talk about their assets, their liabilities. We understand our loans and our repayments generally, Yes, what our assets are worth. We understand the income that goes in. Sure, Yeah. But the one question and I'm going to put a number on it, I'm going to say 95% if people don't know their mandatory cost of living per annum.
00:13:38:06 - 00:13:38:19
Well they some.
00:13:38:19 - 00:13:40:17
Put a figure on mandatory.
00:13:41:06 - 00:13:56:08
Or any spending, any spending. So I'm just going to go mandatory. And the reason it connects to this. Right, because you your mandatory cost of living, then you could look at your average spend on your credit card and look at the difference. This would be really simple. Yes, you do that.
00:13:56:10 - 00:14:01:01
Yes. But we doing five can the credit card amount three K across a living equals.
00:14:01:01 - 00:14:01:17
Two discretionary spending. Really cool with that.
00:14:03:22 - 00:14:26:03
Exactly. Yeah. So if that's your only form of spending, sometimes we use bank accounts and credit cards. So. So, yes. So the question being, is it a useful tool if I put all my spending on it email and I clear it and I pay it off at the end of the month? No. Why do people think that it is a good tool?
00:14:26:06 - 00:14:39:12
Because we're brainwashed to think that if we pay our interest off, we're using the bank's money and that that's a good thing. We are working the system, we're being clever.
00:14:39:14 - 00:14:42:16
And means we might be saving a little bit of interest on our home loan.
00:14:42:16 - 00:15:01:07
That's right, because we're using the bank's money. We're using somebody the bank's money during that period of time, and then we don't pay any interest. So that's got to be working great guns for us. That's the theory. That is the theory. But the amount of proud Aussies who believe this theory will blow your mind.
00:15:01:09 - 00:15:21:19
Both my mind. I walked. So you know all the polls that we do. Oh, I don't know. I'm going to say three out of four people do it this way. It's very common to have a system like that where you putting all your expenses on the credit card and clearing it. Yeah, I used to do it. Well, see.
00:15:21:19 - 00:15:22:09
Do it, I'm going to say. So we've got two credit cards and I'm trying to work really hard to get rid of one of.
00:15:27:02 - 00:15:29:01
You doing it.
00:15:29:03 - 00:15:32:02
And I don't believe in it. But to your point.
00:15:32:05 - 00:15:33:00
No, I won't.
00:15:33:00 - 00:15:37:18
I did to the point. So it's not as it was. It's so hard to get.
00:15:39:12 - 00:15:59:04
Rid of that credit card. And two, can I actually be honest? Yes. I have had I haven't done everyday spending on a credit card for years, but I had one that had some recurring expenses on it that I closed last week. So even me being I do that.
00:15:59:06 - 00:16:00:15
So that's where this is.
00:16:00:15 - 00:16:04:09
I don't have a credit card at all for the first time since I was 20.
00:16:04:09 - 00:16:12:18
That's amazing. So I'm on a stepping stone thing. But the first step I would suggest to people is to get the direct debits off.
00:16:12:23 - 00:16:14:14
Your credit card.
00:16:14:16 - 00:16:27:14
As a stepping stone, because that's it. Then you can then you're in a position to say, I don't need it anymore yet because it's a barrier. Oh, I've got the direct debits coming through. Yes. Well, get them off.
00:16:27:14 - 00:16:46:05
Yeah. Okay. I want to challenge that. Can we just stay here in direct debits for a moment on the credit card? Because you, darling, have always said having your bills is the only expense going through your credit card is okay. Cuts. The theory is here you have if you know your mandatory cost of living and you've got recurring expense bills.
00:16:46:13 - 00:17:03:03
That will come up, then that could potentially be the only theoretical way that a credit card is valid because you are using the bank's money. It could it is interest free. Your money stays in your offset account. During that period of time, those bills would have come out. We're not doing any spending on it yet.
00:17:03:05 - 00:17:19:18
If you've changed your show. No, I haven't. It is the way our digital system works is it would be what is on there. Mhm. And things like subscriptions. Yes.
00:17:19:21 - 00:17:24:22
Like and they get carried away. But that could happen in any account.
00:17:24:22 - 00:17:25:20
That's right.
00:17:25:22 - 00:17:28:06
And that added to the.
00:17:28:06 - 00:17:29:16
Mentality of.
00:17:29:16 - 00:17:37:08
The credit card of the credit card is a good thing because I'm not paying interest. Can it facilitates extra things going in there.
00:17:37:08 - 00:18:08:22
That's why we say and jump to TMZ type later but that is we say that you're going to have high discretionary spend with it and 100%. So I whilst theoretically you could do the credit card with mandatory cost. Yes. In reality, I think that is very difficult to do. Yes. So then if you can't manage it and keep management of debt and other things creep, I come back to what I've just said.
00:18:09:00 - 00:18:17:23
Get rid of it. Yes. And that's a stepping stone. Take away your direct debits off. Yes. So the first question is, can I do that or not? Yes, I would say that.
00:18:18:01 - 00:18:19:19
What do you mean, can you do can you.
00:18:19:19 - 00:18:23:00
Just only use it for your mandatory fixed bills?
00:18:23:06 - 00:18:27:07
I say it's very high. So to watching all the things will creeping on there.
00:18:27:09 - 00:18:29:03
So if that's the case, then get rid of it.
00:18:29:05 - 00:18:48:21
Okay. So my experience of this was I was using it as a daily credit card, right? Or am I since then I stopped doing Daily Spence's and then I just had some direct debits on there that I hadn't changed over because and there was just a couple left there and because I was was managing it actively and moved to in actively managing it.
00:18:48:23 - 00:19:10:10
The last few months I have had late payment fees because I have I didn't have eyes on that card anymore and that was like one or two things do you hadn't solved on it, you know? Right. So what I think and what I know to be true, because we have worked in banking and finance, the banks love you having a credit card.
00:19:10:12 - 00:19:30:03
There are two reasons because of this late payment fee that they can charge you. Okay, If you don't get it right and there's an annual fee on the credit card and our old friend interest because let's say this kind of gets out of hand. So if everybody thinks listen to this theory, I haven't said this one before, it's coming to me right now.
00:19:30:03 - 00:20:01:20
I'm channelling. All right. Let's say everyone in Australia thinks that, you know, on average, a credit card is a good thing, right. To have because we're using the bank's money and we're going to save some interest. And it's a great thing, right? And then right. So we collectively think that. But what if the person who that does not work for does not have the management skills of managing that credit card and they are using that credit card to actually facilitate their everyday cost of living and cannot pay the full balance of every day.
00:20:01:22 - 00:20:24:07
The banks are bank ing on this. It's all the way to the bank that there is going to be a significant percentage of people who are not paying that balance, often full and they are. It's a goldmine for the bank. So they want us not knowing how the credit card works exactly and keeping us in these mentalities also good.
00:20:24:07 - 00:20:28:15
They don't want to educate us and they are going to take it all the way to the chain, to the mortgage chain, to the credit to everything.
00:20:32:11 - 00:20:34:01
Because that's how to.
00:20:34:01 - 00:20:39:19
The mortgage is absolutely true. They're not going to sit down and give you an education session on how to pay that thing off.
00:20:39:19 - 00:20:48:13
No, no, they're not. Absolutely not. And do you think a bank is going to give you money for nothing? No, no, no, no, no.
00:20:48:14 - 00:20:58:23
So and how ashamed are you right now if you're listening to us talk and you haven't paid interest on your credit card? Oh, my gosh, we keep that pretty quiet. Well, I know very loudly and proudly.
00:20:59:00 - 00:21:04:04
I don't. I've never paid a cent of interest on my credit card, but do I Discretionary saying yes.
00:21:04:06 - 00:21:16:17
Do we overspend? Do we not know how it's going or how much we're spending? Because it's just a in and out situation where we're not even in control. It's just spending. I have a huge limit and. Right, right.
00:21:16:17 - 00:21:37:19
And it needs to. Yeah. Yeah. But getting off them is a job. And I think first of all, disconnecting any automation, if, if, if you've made the decision, you're not going to use it for fixed. You need to get off it, then delete all your direct debits and then you know, have a look at your new banking system design, you know, understand your spending.
00:21:38:01 - 00:21:38:15
Don't use my new system and take the credit card out of it.
00:21:40:14 - 00:21:47:15
Yeah. Okay. What about frequent flyer points? So I get frequent flyer points and I go on for holidays.
00:21:47:17 - 00:21:53:14
So realistic. I'm going to use my example for that. How much frequent flyer points do you really use?
00:21:53:16 - 00:22:02:03
You rack them up. This is because the banks want you doing discretionary spending. Could you look after me? 3.4 interest.
00:22:02:05 - 00:22:03:10
Are you only spending more than what you are getting back in reward?
00:22:07:04 - 00:22:15:14
Well, those rewards cards will have annual fees. They if you work out the what you're saving on a flight and we have done it.
00:22:16:11 - 00:22:17:11
And what did you find out?
00:22:17:12 - 00:22:19:15
That you lose a game they want to make money.
00:22:21:22 - 00:22:30:05
And also you never want to like get your rewards in anything other than flights. If it's a frequent flyer, you don't want to go to this shop. You are being.
00:22:30:07 - 00:22:33:04
Inspired. You are getting that.
00:22:33:06 - 00:22:40:04
Like you're like, Yeah, you're getting your quarter. Like you're eroding the value of the reward completely.
00:22:40:05 - 00:22:50:21
You're better off to have as we would say, a goal account. Maybe it's a travel fund, if that's the priority, be that the money and save it. I use that money.
00:22:50:23 - 00:22:52:16
I'm so passionate about this for it.
00:22:52:16 - 00:22:57:06
And then the other one I hear is insurance. But in the bank, you mean because they offer travel insurance?
00:22:57:06 - 00:23:03:05
Banks offer that on debit cards people I you have you heard of visa debit cards and.
00:23:03:08 - 00:23:04:14
Like lots of online and the products that are available.
00:23:06:10 - 00:23:08:18
As that you can buy travel insurance without having the credit card.
00:23:08:18 - 00:23:14:13
You can have travel insurance without a credit card. You can have it on a debit card. Just look at the options.
00:23:14:17 - 00:23:15:21
That's right.
00:23:15:23 - 00:23:16:21
That's a really common.
00:23:16:21 - 00:23:29:13
One, I would say. Really analyse and dissect it. And I, I very few I'm not even going to say 1% the circumstances. The banks will be making more money or you'll be spending more money, especially.
00:23:29:13 - 00:23:50:14
If you're doing daily spending on it. Yeah, right. Okay. What about this one. Sorry. What you are I it's not me. I have $1,000 credit card. I don't use it. I don't want to pick limit, but it just makes me feel safe. An urgency fund. I have it away and it makes me sleep well at night knowing that I have $1,000 credit card.
00:23:50:15 - 00:24:15:13
Yep. So some coaching I would say is if you don't have an emergency fund right then and you've had a credit card and you feel it is a very common feeling to think that credit cards your back up, you know, that's how you can survive and get through. So a stepping stone in a process would be to build an emergency fund and then put the credit card in the drawer, never use it.
00:24:15:18 - 00:24:21:06
And eventually, if you haven't used it for 12 months, you don't need it.
00:24:21:07 - 00:24:34:06
Let's sit in the car for three years and stay there for five years, whatever, whatever your safety period is. But you won't need it now. I know you won't need it. No, because that thousand dollars ain't really going to solve life.
00:24:34:11 - 00:24:48:14
Exactly. And then the other thing is people say, well, I put them away for travel and things like that. But, you know, like I went to this. There's great products out there that don't have limits on it. You know, when I travelled last year, you know, you just do some research.
00:24:48:16 - 00:24:49:01
And really.
00:24:49:01 - 00:24:50:23
Do it, but it's out there really good.
00:24:50:23 - 00:24:52:10
Was it a debit card.
00:24:52:12 - 00:25:01:13
Where you can have multiple currencies in it? You know, it's called Revolut, the one I use but there's other ones and it really, really good.
00:25:01:15 - 00:25:04:10
Most of the banks are pretty good with having products.
00:25:04:12 - 00:25:06:19
And no fees. You know what you're paying.
00:25:06:23 - 00:25:18:01
I think that this is a mindset. We just think that we need it for points, we need it for travel, we need it for no interest to save money. Yet it's all a scam.
00:25:18:03 - 00:25:24:14
Yeah, so scam. It is absolute scam. And the best thing you can just go right off.
00:25:24:15 - 00:25:43:04
It is like be in the driver's seat. Yes. And all of that stuff. What we also say is that in like if you've got a partner and you've got two incomes and you know, somebody might have a credit card and the other person doesn't even know they've got a credit card and then it has guilt and all of this stuff.
00:25:43:06 - 00:25:59:20
And also see that a lot in conversations when I have it, you know, and you say, well, what's the limit? Because, you know, if we are looking at borrowing capacity, so what's the limit on the credit card? You've got to be a couple there. For example, this is a really common and one someone might say, I've got a 2000 limit.
00:25:59:20 - 00:26:13:14
And then the other bits, all I've got, I've got that, I've got a credit card, and then they really hesitate with the limit. And it's very common for individuals to have cards, what they say to.
00:26:13:14 - 00:26:24:13
Me has got $6,000 of credit cards and I'm like, is that what's owing or the limit? Oh, the limit is 25.
00:26:24:15 - 00:26:30:00
Yeah, that's it. But sometimes the partner you can sense that, you know, the partner may not they're.
00:26:30:00 - 00:26:31:18
Learning things in those may now.
00:26:31:22 - 00:26:35:10
New information is a prime one optimise it pays No.
00:26:35:12 - 00:26:37:15
Look, we don't need that guilt. People can.
00:26:37:16 - 00:26:40:09
Be on it and you know.
00:26:40:13 - 00:26:46:15
It is exactly the same as after paying, you pay all of those Afterpay payday lending stuff. Yeah. Credit cards.
00:26:46:17 - 00:27:11:08
Just to leave you with this thought too. It's the not the concept. The reality is you are spending future money you like. So when you've got to pay that back from future earnings is what I mean. Which means you've got less to spend in the future. That's actually what you're doing, you know. So when I think I haven't even but still that's ridiculous.
00:27:11:08 - 00:27:24:08
Money you just thinking I'll be right I'll sort it out in the future instead of making it informed decision right then can I afford this thing? You shouldn't be based on your credit card limit. It should be based on how much money is available in your bank account. For that purpose.
00:27:24:10 - 00:27:25:13
You're always a month behind.
00:27:25:13 - 00:27:27:19
I know we're boring and nerdy about this.
00:27:27:21 - 00:27:33:04
But it's so true. But as I said, the reality of getting off it, even if once you've made it.
00:27:33:04 - 00:27:40:18
Helps you make better money decisions instead of going on a shopping spree and going, Of course I bought lots of lovely thing. Yeah.
00:27:40:23 - 00:27:48:14
Yeah, yeah. And can I say doing a spending review and understanding that your money goes not having credit card is much easier. It is.
00:27:48:16 - 00:27:51:04
Yes. It's very exciting once you get this.
00:27:51:04 - 00:28:15:23
Yeah but, but it's a what I would say is the very first step is a mindset. Yeah. You've got to believe and want to get off it and that you can and your self-worth is not linked to it. And what I mean by that is that we think we can't manage without it. The one of the biggest psychological barriers is that we believe we can't do it without it.
00:28:16:01 - 00:28:28:09
Again, I'm going to leave you with that. You're here. So you need to work on your belief system that you are okay with money. You can manage money because you know, the most common thing we hear from people is I'm rubbish with money because.
00:28:28:09 - 00:28:35:16
How do you even get started or a new system to when you used to have a credit card is so easy again, people, they make it easy.
00:28:36:02 - 00:28:51:20
For it’s the easiest way to manage your money. And what we are saying is like you have to go and set up a system that's going to be hard. Like, do do I believe that I can do it? Yeah. Do I believe budgets will just get my it will just be broken? It is no point even putting the effort in. Yep.
00:28:51:23 - 00:28:55:17
Everybody. Oh, it's easy to win. Everybody else is behaving the same way.
00:28:55:18 - 00:29:16:09
That's it. So even the concept, I'm going to put this out to people. I'm really thinking about things now. If you've got a home loan. So the whole concept was credit card, home loan offset account, all your savings going to the opposite count and you put all your expenses on the credit card and you sleep it off every month, which is how you get this interest saving.
00:29:16:11 - 00:29:24:08
But what about when you've paid your home loan? Off they go. Put that out to people. Are you still doing it?
00:29:24:10 - 00:29:28:13
Yeah. Or you don't have a home loan full stop like you're renting yet.
00:29:28:15 - 00:29:29:19
Are you still doing it?
00:29:29:21 - 00:29:30:14
Oh yeah.
00:29:30:16 - 00:29:33:23
You know, it doesn't even match I concept it.
00:29:33:23 - 00:29:46:05
That's where it came from darling, because we are means banking and we know that that's where it was. But people don't even know the origins of it. They just know that credit card and all I hear coming out of people's mouths is. But I don't pay interest. Yes.
00:29:46:07 - 00:30:04:20
Right. But even if you believed in that strategy of what I was saying with the home loan, in the saving and the interest, if you don't have a home loan, if anything, that one voice, even the concept is null and void. So, you know, and I reckon there's a lot of people still do it.
00:30:04:22 - 00:30:08:14
Anyway, even if you have a home loan and you still doing that process.
00:30:08:16 - 00:30:10:06
I still don't do it.
00:30:10:08 - 00:30:18:12
I still think that like you're overspending. The likeliness of you overspending is completely outweighing definitely your interest savings.
00:30:18:15 - 00:30:21:08
Totally. Yeah. Do that is your point.
00:30:21:14 - 00:30:27:02
So to roll this all up, the TNC take on this is.
00:30:27:04 - 00:30:34:07
The TMC take on this is don't wait on your credit card all day.
00:30:34:09 - 00:30:36:16
And not let me yell that down my microphone.
00:30:36:16 - 00:30:37:22
Yeah that's right.
00:30:38:00 - 00:30:46:00
Don't get it. Have a credit card. If you don't have one, you don't need one. Don't feel like you should get one. Oh, you do not need one to build your credit.
00:30:46:01 - 00:30:47:19
Oh, that's the history.
00:30:47:21 - 00:30:57:12
I have first time buyers who say to me, I took out a credit card because my partner said I need one to apply for a home loan to build my credit report or my credit score.
00:30:58:09 - 00:31:09:16
Now, I know you do not. You certainly do not. And in Australia, we do not do that type of credit reporting at all. That's a UK and an American thing. It's not true at.
00:31:10:19 - 00:31:16:16
So we only do negative credit reporting, which means if you behave badly on that credit card, it makes your chances worse.
00:31:16:18 - 00:31:17:07
That's right.
00:31:17:09 - 00:31:27:10
And if you apply multiple for multiple credit cards, you through all those inquiries, will show up. And it looks to the bank like you can't afford the home loan and they might decline it based on those inquiries.
00:31:27:12 - 00:31:36:00
Right. So I don't get it to become a credit card to build your credit history. Yeah, yeah, yeah. And yeah, learn different ways to manage your money.
00:31:36:00 - 00:31:47:12
And like, I agree with you, you did say in this podcast episode that there are a small percentage of people who can manage a credit card who do not overspend. Those people are called Savers..
00:31:48:22 - 00:31:57:21
And are so good at managing their money and would never overspend a dime in their life. And if you are one of those people, continue on, my friend.
00:31:57:23 - 00:31:59:09
There is no right or wrong system. So if you do not overspend on your credit card, be my guest.
00:32:06:15 - 00:32:11:17
But yeah, but if you don't have one, don't do it because it is hard to get off it.
00:32:11:17 - 00:32:13:05
As I said, the world is rigged against you.
00:32:13:06 - 00:32:18:07
Absolutely. Don't do it. You know, they have ruined you in any way.
00:32:18:07 - 00:32:21:11
I know the amount of willpower I possess yet don't.
00:32:21:13 - 00:32:25:14
And yet it's easier and never to have done it than to have to revert back.
00:32:25:14 - 00:32:30:18
That's right. Yeah. All right. Asked the lovely staff. See you next time.
00:32:30:20 - 00:32:41:13
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00:32:41:15 - 00:32:53:03
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MEL PEARCE & DARLENE NEU
Co-Founders, Financial Wellbeing Coaches and Mortgage Brokers
The Money Collective
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