Put it on plastic

On AM on Thursday they noted research which shows four in ten people use credit for basic purchases such as groceries, the implication being that many of those are doing so because they can’t use cash as they need to defer that spending to stay afloat.

PETER RYAN: So credit cards being used for entertainment or paying for the groceries at the supermarket whereas once upon a time they would have been a direct charge from the savings account?

CHRISTINE CHRISTIAN: Would have been a direct charge from the savings account or cash, and credit cards were you know, generally used then for bigger ticket items where people felt that they could purchase the item and then pay it off over a period of time.

The research is specifically about people who have no choice but to use their credit cards for such purchases:

Four in ten (43 percent) Australians expect they will need to use their credit card to pay for otherwise unaffordable expenses in the coming months

I’m certainly one person who uses the credit card regularly for things like groceries — but happily for me it’s not because I have no choice; it’s a deliberate decision.

I do it because my cards have an interest-free period, and I pay the entire credit card bill before the due date, so I don’t incur any interest.

There’s the convenience of not continually having to go and get cash. And the cash sitting in my mortgage offset account for a bit longer helps reduce my home loan interest.

And then there’s the points. Most of my purchases are now on the Mastercard, which earns Commonwealth Award points (for a $59 annual fee — I’m not totally convinced it’s worth it).

Additionally if I remember to hand over my supermarket loyalty card when buying groceries (well, those I don’t buy at a greengrocer or at Aldi) for transactions over $30, I earn frequent flyer points and petrol discounts.

The frequent flyer points I’ve earnt (plus a bunch that have been sitting in my account for quite some time, some of which came over from the Mastercard) have piled up and last weekend I ordered a new barbecue with them — a Weber Q which apparently has an RRP of $419. I’ve been meaning to buy a barbecue for ages, so I’m looking forward to having a go of it. (Surprisingly unlike that clock I ordered years ago which took weeks to turn up, they’ve already been in touch about delivering it.)

The Commonwealth Awards points, I’m still saving. They might go into a new digital camera when my old Canon A70 finally dies. Or perhaps towards a new TV if I eventually get enough points. (I just realised my Loewe 68cm 4:3 CRT is almost ten years old. Damn thing still works, though a slight flickering occasionally at the top of screen might give me a good excuse to upgrade.)

Sadly none of the schemes I’m in have the gizmo I’m currently coveting: the Topfield 7160 PVR. I might have to buy that one myself.

On the credit card, naturally.

Of course, I’d never want to be in the position of not paying the card off in full every month. I wouldn’t want to be using it for spending on things I can’t afford, and it would be especially alarming if those things were the essentials of life.

That must be a scary position to be in.

PS. There’s an interesting article in today’s Age, where Choice notes: “If you are shopping exclusively at Woolworths chasing points in the hope of getting a $50 gift voucher, you are much better off just shopping at a cheaper store like Aldi or Costco if you are looking to save money.”

By Daniel Bowen

Transport blogger / campaigner and spokesperson for the Public Transport Users Association / professional geek.
Bunurong land, Melbourne, Australia.
Opinions on this blog are all mine.

11 replies on “Put it on plastic”

I use my card because I have to pay a sodding fee to withdraw cash these days so the stuff’s bloody precious.

Yeah, we are very similar. I pay $70 a year for ANZ credit card (wife and self) but get about $200 or more “cash back” due to points earned, so I’m infront. I always pay full card balance by date.
All of our Qantas points earned at Woolworths (loyalty program) are converted to $100 Woolworths gift cards when we get up to 13,000 points. I reckon “cash” is better than a set of steak knives!!

We use a credit card to pay for groceries, but it’s a debit Mastercard, so I’m wondering how much detail went into this research, and how many credit cards used are actually debit cards.

I wouldn’t use a debit card – they’re not insured in the same way as a credit card, so you can end up liable for more fraudulent transactions, and it’s harder to get a chargeback done.

I’ve had a basic Visa (no reward points or any of that nonsense) for years – just $24/year for two cards (my wife and myself). It’s convenient for spending today and paying next month, to take advantage of the interest-free period, and it’s reasonably cheap to use for getting cash overseas (unlike MasterCard that hits you with a double whammy – first a commission for converting to USD, then another commission for converting to AUD).

I never thought I’d do it, but I got a David Jones Amex recently, just because I could get a 40% discount on a large purchase by doing so. It costs a lot more to keep than the Visa ($99/year for the first card, and then another $29/year for additional cards). I’ll have to see whether it’s worth it for the reward points, but from the big discounts I’ve already got at David Jones, it’ll take about eight years before I’m back at break-even, if I don’t get anything from reward points. The trouble is, a lot of places charge 2% or more for using Amex, so I mainly use it for groceries and clothes.

Don’t get rid of the Loewe until it’s a smoking ruin! I still have mine (it’s a widescreen) and it’s got a better picture than any flat panel TV.

I’m like Rae in that I use Credit transactions for ordinary purchases, even though my card is a Debit Card. My bank freely admits (in those “How To Minimise Your Fees” leaflets) that it charges folk for EFTPOS transactions over a certain monthly limit (number of transactions, not $ value) so they recommend choosing CR not SAV or CHQ at the checkout. And, as it’s a debit card, the whole “interest-free period, pay it off in the same billing period” thing doesn’t apply!

And with “PIN for CR” in such widespread use, one is not often troubled for signatures, either.

Like many here, I find it easier to use credit, and pay it off on the date. Streamline account has maximum transactions before I get charged for them, so I save that for withdrawing cash. How would these researchers tell that I’m doing this?

I’m somewhat annoyed by organisations (you know who you are, airline carriers) that charge extra for CC transactions, but offer no other way of paying. (I tell a lie, Virgin seemed to last time I bought, but they wanted me to download an app to do it, and that set off alarm bells)

I have a “Qantas Ultimate” American Express and a NAB Qantas Visa that I use everywhere. It’s nice to rack up frequent flyer points on purchases I would have otherwise made anyways. If a place takes credit, I swipe the AMEX :)

A myriad of possibilities exist in Japan, but the ‘bank card as debit card’ has not taken off here. People will transfer money on to debiting cards (including the ‘Suica’ card used to take trains here), but I’ve never gone that route. I use a credit card which accrues frequent flyer points, and some others will reward you with cash or gift vouchers. However, bank credit cards seem rare here – most people get there cards via a vendor such a department store, shop, petrol station chain etc which operates with (or is controlled by) a major credit agency such as Saison or Aeon here. Those companies then deduct your charges from your nominated bank account. A complex procedure, and makes finding (online) your spending hard.

At the register you are usually asked if you want to do a ‘one time’ payment, which means that the amount charged will be treated like a debit, but that debit will only occur in the next credit cycle, not immediately. This means that such a charge may not come out of your bank account for 2-3 months. The other style is ‘revolving’ credit, which I’ve NEVER used, and would be too scared to, knowing interest rates here.

The other odd thing, and something that any criminal in their right mind would take advantage of, is that using a credit card in places like supermarkets (especially those whose parent company is the same as the card you offer at the register) requires NO signature, No PIN nothing – nothing. Pure trust….

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