Can credit cards help your cashflow?

Can credit cards help your cashflow?

The regulations around personal credit ratings mean that lenders can easily find out “who’s been naughty and nice” when it comes to credit card debt and repayments. And you don’t want this to affect your business (or family). So, just like any risky activity, you need to be careful when using your credit card as a cashflow management option for your business as, when the credit card bill comes in, you’ll need to pay. It’s important not to overextend. This blog is part of our series on ‘why managing cash flow doesn’t have to be like an extreme sport’. Read on to find out how credit cards can help your cash flow.

Credit card regulation

Loan and credit repayment details are one of five additional pieces of information that lenders can pass on to the credit bureaus as part of a new more comprehensive credit reporting regime. Individuals can be slapped with a black mark against their credit rating.

Know your limits

Be aware of ALL your cards and their limits. Even those ‘emergency cards’ that we keep in the deep dark corners of our purses and wallets. It doesn’t matter whether you have borrowed the full amount or not, it is automatically assumed that you already have. Know your limits and when they’re due. You don’t want to pay hefty interest if you can’t pay your cards off.

But it’s not all doom and gloom

As opposed to only negative aspects of a person’s credit history being taken into account, you are also rewarded for your years of good behaviour. A few minor defaults which in the past could prevent someone from obtaining a credit card, can be outweighed by years of diligence in paying bills on time.

The do’s and don’ts

Do

Don’t

  • Set up automated direct debits to pay off all credit cards and loans. This will safeguard you against unforeseen circumstances such as holidays or hospitalisation.
  • Paying debts late. Any payments more than five days late will be recorded as a late payment.
  • Cancel all credit cards and credit lines that you’re NOT using or need.
  • Paying your debts REALLY late. Debts larger than $150 and remain outstanding after 60 days will be recorded as a default.
  • Make sure you pay something. Pay a smaller amount rather than default on a payment.
  • Applying for credit cards and loans that you DON’T need.
  • Check that your credit file is accurate. Credit bureaus make mistakes – make sure you’re not one of them.
  • Failing to organise easier payment plans with lenders when repayments become too difficult, will end in default.

 Credit balances, electricity and even phone bills are on your cards. With post-paid phone bills being among the first young people receive, now is a good time to teach your kids about the importance of managing their finances and their reputation.

If you get an adrenaline response with every credit card bill, get in touch. We’ll help you to develop better strategies and practices around credit card and debt payment.

Find out how.

For more information on the new regulations, what it will mean for you and other ways you can take control of your credit history, visit www.creditsmart.org.au, or book in with us for a free consultation.