In the financial conversations we have with people everyday, we’ve found there are three different ways people generally use credit cards.

For this purpose, let’s call them “the good,” “the understandable” and “the ugly.”

The ugly comes when people treat their credit card limit, kind of like they treat the speed limit. Somehow they think it’s something to aim for!

If there’s anything available on the card, they’ll spend it – paying off only the minimum each month.

As you can imagine, this is disastrous financial disaster, and often locks people into long term – high interest debt.

Next comes the understandable – when people use a credit card as an emergency fall back.

If something goes wrong and there’s no savings to cover it – they’ll use the credit card, and work to pay it off as soon as they can.

This can be handy when times are tough – but beware, banks love to charge high interest while you attempt to claw your way back out of debt.

Now let’s get to the good part, and the main point of this article…

The third way people use credit cards is to combat their mortgage payments – saving them thousands of dollars in interest, which otherwise would have gone straight to the bank!

How do they do it you ask?

It all starts with knowing the advantages a credit card can really bring you…

If you want to skip right into taking advantage of this and other tricks to help pay your mortgage off sooner, Get in touch with one of our consultants today!

Credit Cards Are Not Always Bad! (Especially When it Comes to Mortgages)

While most people think credit cards are nothing but money-sucking monstrosities, they can actually save you a TON of money on your mortgage!

But ONLY if you use them wisely…

If used like ‘the ugly’ example above, you could indeed find yourself in debt – wishing you’d never got a credit card at all.

On the other hand, if used well – they can be an extremely powerful tool to help battle your mortgage.

Use ‘Channelling’ To Make The Most Of These Credit Card Savings

But before I go any further, I want to make sure you’re in a position to reap the full rewards of this little credit card trick…

Because for this to be effective, first you need to be structuring your home loan more efficiently.

In order to do this, you’ll want to be channelling or offsetting your income and savings.

This basically means your bank accounts are working in sync with your home loan account to keep your balance lower each month.

If you have no idea what I’m talking about, have a read of our previous article:The WRONG Mortgage Structure That’s Only Making Your Bank Richer (At Your Expense) for more info about channeling and offsetting.

Or you could get in touch with one of consultants and we show you how you can pay your mortgage off sooner.

If you’re already doing so – this credit card strategy can help you save even more on interest!

Here’s how it works:

Embrace Your Credit Card’s Interest Free Days

We all know how a credit card works. You’re essentially spending the bank’s money for free – providing you pay it back at the end of the month.

They also come with varying limits – so people don’t go too crazy with the impulse spending.

So how does all of this affect your mortgage?

Well, as you know, if you currently have a home loan, you make monthly interest payments to your lender.

But what you might not know is that this interest isn’t calculated monthly – it’s actually calculated daily.

This means the higher your home loan balance is throughout the month – the more interest you’ll have to pay.

Now remember what I was saying earlier about credit cards?

You’re not spending your own money, you’re spending the bank’s money!

So by using your credit card’s interest free days, you’re leaving money in your loan account for longer – saving you a load on daily interest.

For example, let’s say you’ve spent $3,000 on your credit card, instead of spending it directly out of your bank account.

In this case you’ve effectively left $3,000 extra sitting in your account, which is offsetting against your mortgage.

This reduces your balance, and most importantly, the daily interest you get charged.

So by doing this each month, you’re using the bank’s money to get the effects of a smaller mortgage.

Of course, it does require some discipline.

The golden rule of using a credit card is to ALWAYS pay your monthly bill – or else you’ll get charged MORE interest!

And considering this article is all about SAVING money on interest – that’s not really what we want…

But if you can comfortably see yourself paying it off every month – you’ll be totally fine.

Things like setting up a direct debit for the payments, and setting your credit card limit to not too far above what you need each month, can help ensure you stay on track.

Your income channelling will also still work fine without this credit card trick – this is simply a little tip to maximise your interest savings even more!

If you’d like to see if this strategy could work for your personal financial situation, be sure to get in contact with us.

One of our home loan advisors here in Hamilton can meet you for a free consultation, and work out the exact calculations for your circumstances.

You too could be one of 19,000 kiwis currently saving $39 million on their mortgages thanks to NZHL.*

To see if we’re the right fit for you, Get in touch with one of our consultants today – or contact us directly if you have any other enquiries.

Get in touch with us

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For more actionable ways to have your mortgage paid off in no time – download our free guide: “8 Simple Tactics You Could Use to Pay Off Your Home Loan Faster .”

Learn some of the simple mortgage strategies currently saving our clients over $39 million in interest costs.*

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*Figure based on actual balances of current clients at the current NZHL floating rate and correct as at 30/06/2017

Useful links:

Our Contact Details:

  • Address: NZHL – Hamilton CBD, 851 Victoria Street, Hamilton, New Zealand
    Postal Address: PO Box 531, Hamilton 3204
    Phone: 07 839 9620
    Email: hamiltoncbd@nzhl.co.nz

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For more actionable ways to have your mortgage paid off quicker, download our free guide:

8 Simple Tactics Anybody Can Use to Pay Off Their Mortgage Faster.”

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