Using credit cards for everyday spending

One of the classic warning signs that credit cards are being used too much is that they are being used for everyday spending such as groceries, petrol and utilities.  This can still act as a warning sign, but it doesn’t need to.  In many cases credit cards can be a perfectly sensible way for paying for day to day spending.

One of the reasons that it can be a good method for day to day spending is that many credit cards offer cash back on spending.  This will mean that if credit cards are used instead of cash then the cash back can go back to the card user.  This can build up to quite a considerable sum over time. On some cards there is also free insurance on the credit card.  This can mean that if there has been a large breakage then money can be claimed back.  This cannot be used for small items as there is an excess on most of these policies.

Some credit cards offer discounts when the card is used, in the same way that they would for a loyalty card.  The Coles Group offers two cards that save a large amount on petrol, while the Woolworths credit card can offer rewards for grocery shopping.  Many other credit cards will offer double points or cash back specifically for grocery shopping or for petrol, even if they are unconnected with any brand.  The reason for this is that these are areas where traditionally credit cards were not used.

There are also grace periods when interest is not charged on credit card purchases.  When money is running out towards the end of the month then this can make a credit card a good alternative to an overdraft.  However credit card interest rates mean that there should be no balances outstanding on the shopping and if there is an alternative between keeping a debit balance on a credit card after the grace period and putting it on to an overdraft, then it should go on the overdraft as this has a far lower interest rate.

Many utilities and some grocery stores will charge surcharges for using credit cards.  This is because there is a merchant fee that is charged to the shop for using the credit card.  This is ironically the same reason why credit cards offer cash back and other rewards for using credit cards.