Case studies - carefree and savvy

Carefree Leigh ... too carefree

Leigh spends her spare money on sports and overseas travel. She has a lower interest (14.9%) National Bank Visa card with an annual fee of $78. She also has a Qantas ANZ Visa Classic card (annual fee $65), which she doesn't use because the interest rate is too high.

She pays back $500 a month on her card but finds that online rugby-ticket purchases and plane tickets keep her balance at around $1000 all year.

She pays roughly $160 in interest each year - and this, together with the annual fee, means she's paying $238 per year for the card. If we add on the annual fee she pays for her never-used ANZ card, that figure creeps up to $303 per year in credit-card costs.

Leigh has enough money to pay off her balance but hates digging into her savings account, which has an interest rate of 8%. At that rate and after tax (39% marginal rate), Leigh's $1000 investment will earn her just $49 in interest.

Leigh is paying $254 more a year by keeping her $1000 in savings and not paying off and managing her credit cards better - that could pay for a few Christmas presents.

Stefanija could be even more savvy

Stefanija is a busy accountant who actively manages her three credit cards. She changes cards as her reward preferences change and she doesn't worry about interest rates because she pays off her cards each month.

Currently she has a BNZ GlobalPlus MasterCard to collect airpoints, a Diners card to collect Fly Buys rewards and a National Bank Thoroughbred Visa card ... just in case.

Although she doesn't pay any interest and she maximises her rewards by putting as much as she can on her credit cards, Stefanija could spend a little more time looking at the annual fees she pays.

With multiple cards come multiple fees - she could save by consolidating her spending into one card or she could swap her "just in case" National Bank Visa (with an annual fee of $45) for a card with no annual fee if you use your card every three months (such as Kiwibank's MasterCard Zero).

Debit-card urban myth

Stefanija told us that when she goes overseas next year, she plans to get a Westpac Debitplus card as she's heard that they don't incur international transaction fees. But this isn't the case.

Westpac charges the same international transaction fee for debit cards as it does for credit cards - 2.5percent. However, if you use it within the Global Alliance Group in their respective countries, for example Westpac in Australia or Deutsche Bank in Germany, you don't have to pay ATM fees ($8 for cash withdrawals and 60c for enquiries).