Bad Credit Credit Cards – Including when to buy a house.

“Everyone’s circumstances are different. So renting might be beneficial and appropriate for someone and not for someone else. And there are pros and cons of both.

“I talk to people a lot about, ‘Is this your definition of success? Is this your definition of wealth, or someone else’s?’ Because you have to be very, very careful of making sure that it’s in line with your values and what you’re wanting to achieve. Focus on your aspirations and goals and vision, as opposed to what you’ve been told should be doing.”

Listen: The Quicky looks into whether renting for life is as bad as we’re being told and whether buying a house is still the Australian dream. Post continues after podcast. 

‘We were told not to use a credit card. Rubbish. Our credit card works for us; we pay it off in full every month and it’s due after our mortgage interest is calculated, so we pay the minimum interest on the mortgage. We also earn enough rewards points (as we put everything on it) to pay for most of Christmas.’

“I don’t have a problem with credit cards per se, as long as they are managed effectively,” Melissa said. “And when I say managed effectively, that means that they are paid off in the interest-free period at the end of every month. So the person pays no interest on the debt, and they start every month with a zero balance.

“Now, that’s a perfect world. A lot of people intend to do that when they take on a credit card and then, out of left field, something will happen. And so the money that was allocated to pay off the credit cards has had to be used for the fridge blowing up, or something like that. And then it tends to get into this downward spiral.”

Melissa said it’s therefore important to be informed (and realistic) about your cash flow and have a plan of attack to pay down debt — both expected and unexpected — when considering a credit card. Carefully weigh the pros and cons.

“People say, ‘Oh, we use credit cards to get points’ and all that sort of stuff, which is fine,” she said. “But I always say go back and actually investigate what annual fees and so on you’re paying to have access to those facilities. Because sometimes you’re better off not having them, and actually just paying for the product in cash. So it’s [important to be] educated and informed.”

‘Don’t buy a home yet; the Sydney housing bubble is going to burst. (This was 2013, luckily we didn’t listen and got into the market and rode it up. Our first home doubled in value in three years, which set us up for our future).’

“The property market does go in cycles,” Melissa said. “But the thing is, if you’re waiting, waiting, waiting, that’s time you’re not in the market. That’s time you’re not paying down debt, it’s time you’re not building wealth by being invested in a property.

“If you find a property that’s in your price range and that’s what you’re looking for, then why wait?”

‘We were told fix your home-loan rate while you can. It was at 8 per cent. Lucky we didn’t listen.’

“At the time that could have been looking quite good! It’s all relative,” Melissa explained.

Again, she said, it’s about what suits your circumstances. For example, if you’re in a position to pay down your loan more quickly, a variable loan will give you that option, whereas you’re very limited with how much you can pay down a fixed loan.

“So once again, there’s no right or wrong, or good or bad; it’s just different circumstances,” she continued. “But having a foot in both camps is sometimes a good idea. Especially now with the rate so low, it could be worthwhile investigating fixing even a portion of it, for peace of mind.”