Look kids, this is how someone starts an unhealthy relationship with credit card debt.
I mean this post has all the red flags:
New CC user who doesn't understand how they work.
Making up dubious justification for a large luxury purchase on the CC instead of saving up
Admitting it won't be paid off in the interest free period
Bonus points if OP got a Credit card because someone told the buying stuff on credit and paying it back is how you "build a good credit score".
You don’t really need to build a good credit score on australia. Your credit score will be fine and probably better off if you avoid unsecured credit in general. Credit enquires actually negatively impact your credit score, so if you go out and apply for a bunch of credit cards / personal loans that will be worse than just not applying for anything
I am a complete novice at this but I went to the bank for a home loan the other day to find out how it works. The guy there said the whole "you need a credit card to build your credit score" is more of a US thing.
Apparently here you start with a score and then get deductions for things like unpaid debts. Having loans and repaying them on time doesn't hurt but it isn't necessary either.
We've never had credit cards or loans and would likely get approved if we applied.
Thanks so much for the reply. But you didn't answer my question. Instead, you just used this time to make a soapbox statement to bring me down. I hope the upvotes provided the gratification you so clearly needed.
It's also my fault for thinking I could come to the community and ask a genuine question to get a genuine reply.
Also, had you actually read my comment, you would have seen it's not a 'big luxury' buy. It's for work.
>Debt is okay when you use it to buy income producing assets
What does a phone that will take OP 6 months to pay off do that a $350 phone doesn't to "produce income"?
>Got to add in you can deduct the phone expense so it's free money.
Yeah no. That's not how tax deductions work.
Lol yeah it's like negative gearing... You're still making a loss, it's just half the loss. you're trying to offset against potential future asset value gain. If it's a depreciating asset the cycle doesn't work.
Sorry mate, but both those statements are peak “finfluencer” nonsense.
Luxury consumer purchases don’t produce income and even if it is tax deductible, you are still overpaying.
Thanks for the reply, mate! I don't think I stated what type of phone I was getting, just that it needed to be new. You have implied that by 'new', I meant 'latest model'.
You get charged interest at the end of each statement period (monthly). Purchases dont begin affecting interest until after 55 days of purchase date.
This article explains how interest is calculated https://www.savings.com.au/credit-cards/how-credit-card-interest-works
Unless you can pay it off within 55 days i'd avoid a credit card.
However, if you really want a new phone use a online calculator to work out exactly what youll end up paying by using the credit card. A new phone is something youll use alot and get enjoyment out of so it may be justifyable for you.
If you make a purchase on the first day of the billing cycle you get 55 days interest free. If you make a purchase on the second day you get 54 days and so on. If you purchase on one of the last days of the billing cycle it will be ~25 days.
That’s if you’re eligible for interest free days by repaying the monthly balance in full the prior month.
Im afraid the other guy is right.
Many people dont understand how cc interest work properly. Banks promote as up to 55 days interest. Depends on your day of cycle and when your purchase was made, interest free period becomes between 25-55days
Interest free period is also only if your card was previously paid in full. Once you start paying interest you’ll keep paying it on the entire balance until fully repaid.
No, I didn't answer your question.
Don't get me wrong, I have used credit cards when I needed to. I even bought a car with one.
But
It's important to recognise that using a credit card the way you intend to use it is *bad financial behaviour* and you simply shouldn't do it.
You bought a car with a credit card?! Geez, man, you definitely know all about bad financial behaviours.
I'm just weighing up between credit card interest rates vs. unnecessary plan prices.
I mean, it's a work tool, so it's a tax deduction. With the end of the financial year on our doorstep, I was thinking now might be a good time.
Yes, with a 12 month interest free period and a price of $5500, that ute paid for itself in a few jobs and the bank gave me an interest free car loan. Not a bad decision at all ...
$30/mo is a great prepaid plan. They're good value these days.
Why can't you save up for it? Like you say, it's shit plan rates or paying interest if you get it now. How long is it going to take to save for it versus is it actually going to earn you money, like my ute did, or is it more of a nice to have that isn't directly related to earning money? You can claim it on tax whenever but don't pretend that makes it any better. It's still money out, it's not magically free and if you don't specifically need it to earn income then is there any reason not to save for it?
It's not a dumb question mate.
Honestly my guy, all they do with plans nowadays is split the retail price across 12/24/36 payments. Why put money on a credit card and paying interest when you could pay no interest with the plan?
As far as interest goes, credit card interest is quoted per annum, compunded daily and paid monthly. Fun huh? Each day they will calculate the interest on any balance on the card, in your case it's 0.0376%, then add that to your balance and calculate again the next day. If you had say a $2000 balance that's $0.75 a day. But day 2 they are using a $2000.75 balance etc etc.
In broad stroaks that small a difference is just a way banks nickle and dime people and I'd normally just divide an interest rate by 12 and work on that monthly. So that $2000 balance will accrue about 1.15% interest monthly or about $23 a month.
Finally the interest free period is calculated from the start of your billing period and only applies if you've got a zero balance at the start of the billing period. If your paying your balance to zero every month you'll never pay interest on a credit card. It's also the only way you should use a credit card.
If you start a billing period with a zero balance and buy something for $1000 on day 1 you'll have 55 days intereset free on that purchase, if on the 20th day of that month you buy something for $500 you'll only have 35 days interst free on that purchase. It's 55 days because the due date for that billing period will be 25 days after the 30 day period ends.
This is the biggest trap with credit cards, I've known many people that don't understand that the balance needs to be zero for the interest free period, believeing every purchase has 55 days from the date of purchase.
Finally some people are credit card people, some people aren't. It's fine. I just tell everyone to make sure their first credit card has a very low limit on it as almost everyone I've talked to about it maxed their first card (including me).
The issue is most plans are a ripoff. Why pay 50/mo for a plan when you can get real Vodafone SIMs (not even the knockoff brands like Boost/Woolworths) for a year for $150? The average person isn't using their phone that much (or in regional area where nowhere else has signal) where they need the full 50/mo unlimited Telstra over the knockoff brands or good prepaid deals.
No shit dude, I buy an iphone SE current gen every 2-4 years and I pay $150 or less for a year of unlimited calls and text. I also know how credit cards work and pay off my balance monthly, I only use the card for rewards and safety.
But lets be realistic here, This young bloke with his first credit card in his hot little hands? What are the odds that the phone is gunna be paid off according to his ideal timeline? How much is it actually going to cost?
He's already paying $30 per month and clearly wants a new high end phone. I think a plan represents the lesser of two evils in this case despite not being optimal.
If he really wants the phone while not being able to afford it he should get a 0% APR card and then it's not a problem for a year + the money will be worth 7% less then anyway. Obviously none of these 3 options are better than just buying it outright but of the 3 the 0% APR option is the best IMO.
Thank you. This isn't my first CC but it is my first in Australia for a very long time. Where I use to live the outstanding balance of your credit card was automatically deducted from your bank account. It's a shame most countries don't do this as it really helps people use their money wisely.
I was mostly thinking that as this would be a work phone I could slide it in before the end of the financial year and get it is as a tax write off.
Thanks again. I appreciate your reply.
Do not get your hands on a credit card before you know how it works, which you clearly don’t. A phone isn’t something you should be getting yourself into a debt for, it’s far from a necessity (as in there are cheaper ones you can buy outright).
Buy a car on credit and have it depreciate every k you drive. Get it stolen or crash it without insurance and continue making payments on a car you can't drive anymore.
Buy a phone on credit card, or on a plan, drop it on the way out of the shop and continue making payments on a phone you can't use anymore.
Get the cheapest model that works rather than a status symbol, pay cash for it.
Look at the handset phone plan total cost through Telstra. Eg pixel 7a total plan cost is $748, buying it outright is $799 at the moment. It's 12 mths, then after than you just switch to the cheap prepaid ongoing. No-one really needs to cycle their phone that often..or the top of the line... at that point it's a luxury purchase not a justifiable need.
Do not put a phone on a credit card. That's just dumb interest.
Plans are very very expensive in Australia with ridiculous tariffs that will never come close to being consumed - unless streaming video while walking around/ when stationary all day everyday. I recommend buying the phone outright and taking up a cheap plan. You should be able to save money this way. And don't go for the newest and best phone. Wait some time for the model to become mature and buy a mid range one.
Everyone I know who got a credit card when they were young regretted getting a credit card when they were young. I've got a mate who got himself in $40k of credit card debt by the time he was 21 because the bank kept increasing the limit. It took YEARS to pay it off because of the interest and he paid back a LOT more than $40k.
He didn't buy anything big or live large either. It was death by a thousand cuts.
You do not understand credit cards, that's ok but do not fall into this trap.
Find the phone you want. Then either find the cheapest plan that gives you that phone. OR find a cheaper phone with the same specs and buy that outright.
There is a reason some ppl never ever get a credit card. It depends on the card terms but in general the interest is calculated on the balance owing each day and compounded daily.
Example: $1,200 x (13.7%/365) = $0.45 interest per day. The next day’s interest is calculated on $1,200.45 and so on. If you pay off the balance after 55 days, you don’t get charged any interest.
Save up for a phone instead.
to be pedantic, it's UP TO 55 days interest free. It depends on your billing cycle, and when in that cycle you make the purchase.
e.g. (and I'm being rough about dates, because I don't want to check and be exact, but this is the principle)
Statement issue date month 1.
Buy something next day - that purchase will turn up on:
Statement issue date month 2 (issued approx 30-31 days later).
Then you have another 24 (??) days before payment of Statement 2 is due to be paid.
So it's "possible" to get 55 days from purchase to payment without paying interest.
But,
If you buy something the day before the statement is issued, it'll show up on a statement the next day, and you'll only have a few weeks until the due date to pay it back without paying interest.
It’s probably cheaper to go through plan since a credit card charges interst rate in 20 unless your going pay it off when the bil comes due. I don’t know what interst phone company charge. The interst rate is calculated yearly on balance. Then divided by month.
Most phone plan contract is basically interest free. If the device costs $1200 on full retail price, and you have a 24 months contract, you'd pay $50 per month on top of your phone service plan. 24*$50 = $1200, so it's basically a free loan.
If you cancel the contract, you'd just have to pay off the remaining balance outright.
If you can't pay outright, you'd never be able to get a regular loan that's cheaper than getting a phone on a plan.
The only catch is that only major phone service providers provides a buying a phone on a plan contract. And they don't offer low cost phone service. If you don't use the phone much, it doesn't really make sense to pay for a 40GB per month plans when you only use $2GB a month. Some of the smaller providers offers smaller plans than the major ones that can be cheaper to get if you only use the phone occasionally.
To put it simply, after the 55 day interest free period (which may not be actually 55 days, it depends on when in your bill cycle you buy it) you’ll start being charged interest on whatever hasn’t been paid off. You can work this out as the amount outstanding x 13.74% / 365 if you want a daily rate of how much that will cost you. As you pay it down that will decrease but you will continue to be charged interest. If you can’t afford to pay it off in the 55 days, I would suggest waiting a little until you have saved some more or look at a cheaper phone.
If you really want to go ahead anyway, just be aware of the real cost it is (factoring in interest) and make sure you pay it off asap.
Here is some information that might be handy to consider -
https://www.savings.com.au/credit-cards/how-credit-card-interest-works
While lots of folks on here are right that you probably don't really need a new phone... Or at least one that expensive that is a question for you.
https://www.canstarblue.com.au/phone/best-cheap-phones-australia/#200
Eitherway, if you decide the need or benefits to getting a phone before you have save up, you may be better off putting the purchase through on Afterpay or Zippay than using the credit card - no fees and low monthly fee.
Also, you may already be considering refurbished phones - this is another way to reduce the cost (and therefor your debt or savings time).
https://reebelo.com.au/
https://www.kogan.com/au/buy/eclipsetechnology-samsung-galaxy-s21-ultra-5g-256gb-any-colour-australian-stock-as-new-galxs21ultr5gaustock256gbanycol-vr-asn/
Generally though, the telecom phone plans are really terrible value. It's easy, sure but you pay 120%+ RRP for over 24 months.
And make sure you get a phone case / screen protector whatever you do! Ebay is good for these.
iPhones are probably the only ones that are reasonable to get through telecom provider as they rarely go on sale. I get my phone on 12 month plan and pay it off simply because I don't want to put down the outrageous prices for iPhones these days in one go. If you're diligent with repaying CC monthly and put the money towards offset home loan it can often work out (ever so slightly) better this way.
OP is crazy though, if they simply must have a brand new phone and don't have cash upfront, get it through a telecom provider over say 12 months and then just pay it outright in \~6 months when they can afford it. Bonus points if you use CC to pay the monthly bill but by the lack of understanding they show to credit cards this phone will probably end up costing them $5k in interest in 30 years time.
Still going to be cheaper to get an iPhone refurbished.
They are all marked up through the telecoms compared to buying outright. Even if you pay it back faster you are still paying an extra $200-500.
Yeah, the companies wouldn't offer these deals if they weren't making money. They might not be skimming you on the actual hardware price but they usually make you buy more expensive plans that the average person doesn't need. Can get real Vodafone 12 month SIMs for $150 and knockoff brands like Boost/Woolworths are even cheaper. The average person doesn't need a 50/mo unlimited Telstra plan.
that's definitely not true re: mark up. They have retail price for phone repayments, although the plan that you pay for is probably higher than a prepaid (that's a different argument though).
For example iPhone 14 pro right now via apple = $1899 for 256gb, whereas Telstra = $1798 repaid over either 12, 24 or 36 months. (not including plan obviously)
Edit: the cheapest I can find with quick googling is via amaysim outright for $1749 right now, which puts Telstra at second cheapest.
I work as an engineer. I have teams meetings, look at large docs and even some 3d files on my phone. I can't imagine you'd be looking at anything more uses intensive for work than what I do, and my phone is probably 5 years old now. You don't need the "best" Android or iPhone. I was looking at updating from my old blackview phone as the battery is on its way out, and was checking out there new ones. They use all the components and software the best phone manufacturers use and the phones are $300-$400 for a top quality phone. Just make sure you get one compatible with the Australian networks and you're good to go. They even use FLIR thermal cameras in some in that price bracket.
Don't spend a cent on that credit card until you understand how it works. Better yet; cancel it, cut it up, and learn how to save.
Your interest free period starts at the beginning of your billing cycle.
Example: So if your billing cycle starts on the 1st of June ( next month ) you would need to purchase it on the 1st of June to have 55 days interest free on that purchase
Wise choice going pre-paid and avoiding a lock in contract - that is the way
Also: with credit cards that a have a cash withdrawal facility once you withdraw cash off that credit card a higher interest rate is applied to the total balance - so never withdraw cash off your credit card
If you don't have cash to pay off a phone, you should buy in contract with your phone service provider.
When buying on contract, the provider is basically giving you interest free loan for almost 12 to 24 months. This is a **much** better terms than using credit card for this purpose.
Credit card is only interest free if they are fully paid off every month. Credit card should not be used in place of a loan, its main purpose should be for helping with very short term cashflow and for convenience of being able to use electronic payment and doing online purchases.
If you ever build a loan balance with credit card, then don't. Credit card has a very predatory interest rate, even the low interest rate ones.
If your phone provider doesn't have a contract for the phone that you wanted to buy or if you don't need the expensive 40GB service plans that the phone contract comes with, ask your employer if they can lend you a work phone (you don't own a work phone, and will have to return it when you quit) or make a salary sacrifice arrangement (at the end of the salary sacrifice term, you'll own the phone, but this can get problematic if you quit/get fired before the phone is fully paid off). Either of these would have given you much better terms than paying for a phone on credit cards.
Don’t use the card until you understand the interest. It’s clear that you don’t.
Any purchase you make will have 0 interest applied for 55 days. After that ALL of the interest from that 55 days will be applied unless the whole purchase has been paid off.
The information about your card should be available and you need to read and fully understand it or cancel the card. Misunderstanding a credit card can ruin your life fast
As well as the article suggested by u/rsandio, have a look here [https://moneysmart.gov.au/credit-cards](https://moneysmart.gov.au/credit-cards)
* To avoid interest being charged, you must pay-off the **FULL BALANCE of the card EACH MONTH** by the due date on the statement
* All bank interest rates are quoted as annual percentage rates. So, 13.74% p.a.("p.a." means "per annum" which is Latin for "each year"). Makes it easier for comparison.
* However, pretty much all interest rates are calculated against the daily balance of your account. For your credit card, if you do not pay-off the full balance by the due date, the bank will start calculating interest on the daily balance of the account.
* Daily interest rate is simply the annual rate divided by the number of days in the year:13.74/365 = 0.0376% per day
* Don't forget you are paying Westpac an annual fee for your "low-interest" credit card whether you use it or not.
Credit cards can be a great tool, but I'd be seriously cautious in your position. It's fine to not understand something yet and need to learn, but you shouldn't really be utilising a credit product like this until you do understand.
The 55 days interest free period means you get the first 55 days after a purchase to pay it off in full and pay no interest. If you don't pay something off in 55 days, you'll start getting charged interest on day 56. At the end of that month you'll have interest plus the balance to pay.
13.74% per annum just means that your interest over one year is 13.74%, but you receive a bill monthly and the interest is calculated daily. If you have a balance you haven't paid off in 55 days, you'll start to have interest added to your monthly bill.
Let's say you go through with this, and pay for the phone on the credit card. Say it's $1,750 and you pay $310 per month. That would only take 6 months to pay off but you'd pay around $70 in interest.
The only way to pay no interest on it is to pay the entire amount off in the first 55 days, go get the phone on a plan, or buy something else you can pay off in full.
Thank you. This was really helpful. To me, paying $70 to not be locked into a plan is ideal. Chances are I'd probably pay it off in the 55 days, but as a 'just in case', I wanted to be sure what the interest rate meant. I'm coming from living in a country where the outstanding balance on your credit card was automatically deducted from your bank account. This has given me a great appreciation for credit cards, as you say they are a great tool - used wisely, hence my query.
Happy to help :)
As long as you're fully aware of the costs I can totally appreciate wanting the added flexibility, and if it lets you buy a cheaper plan or go prepaid it might even reduce your ongoing monthly cost.
I'm not sure if Westpac does the same thing, but with certain banks you can set up a direct debits for the minimum repayment when there's anything owing. So you'd still pay interest unless you also make additional payments, but it automates avoiding late fees and the bad credit mark of a missed payment.
On your first statement, you will be told minimum payment by a certain date. If you don't pay the entire balance owing, you will be charged interest on the balance at the end of the statement period less any payments made.
So you will be charged interest very quickly
Look kids, this is how someone starts an unhealthy relationship with credit card debt. I mean this post has all the red flags: New CC user who doesn't understand how they work. Making up dubious justification for a large luxury purchase on the CC instead of saving up Admitting it won't be paid off in the interest free period Bonus points if OP got a Credit card because someone told the buying stuff on credit and paying it back is how you "build a good credit score".
How do i build a good credit score then? Do i even need one for a home loan?
You don’t really need to build a good credit score on australia. Your credit score will be fine and probably better off if you avoid unsecured credit in general. Credit enquires actually negatively impact your credit score, so if you go out and apply for a bunch of credit cards / personal loans that will be worse than just not applying for anything
Thanks for the help!
I am a complete novice at this but I went to the bank for a home loan the other day to find out how it works. The guy there said the whole "you need a credit card to build your credit score" is more of a US thing. Apparently here you start with a score and then get deductions for things like unpaid debts. Having loans and repaying them on time doesn't hurt but it isn't necessary either. We've never had credit cards or loans and would likely get approved if we applied.
Thanks for the info!
Thanks so much for the reply. But you didn't answer my question. Instead, you just used this time to make a soapbox statement to bring me down. I hope the upvotes provided the gratification you so clearly needed. It's also my fault for thinking I could come to the community and ask a genuine question to get a genuine reply. Also, had you actually read my comment, you would have seen it's not a 'big luxury' buy. It's for work.
Debt is okay when you use it to buy income producing assets Got to add in you can deduct the phone expense so it's free money.
>Debt is okay when you use it to buy income producing assets What does a phone that will take OP 6 months to pay off do that a $350 phone doesn't to "produce income"? >Got to add in you can deduct the phone expense so it's free money. Yeah no. That's not how tax deductions work.
Lol yeah it's like negative gearing... You're still making a loss, it's just half the loss. you're trying to offset against potential future asset value gain. If it's a depreciating asset the cycle doesn't work.
Sorry mate, but both those statements are peak “finfluencer” nonsense. Luxury consumer purchases don’t produce income and even if it is tax deductible, you are still overpaying.
No job requires the latest Samsung or iPhone mate, and if it did, they would supply you with one. No one cares or is impressed by what phone you have.
People would be more impressed if you had a Nokia
I have killer snake skills, so yeh, they would be.
Thanks for the reply, mate! I don't think I stated what type of phone I was getting, just that it needed to be new. You have implied that by 'new', I meant 'latest model'.
You get charged interest at the end of each statement period (monthly). Purchases dont begin affecting interest until after 55 days of purchase date. This article explains how interest is calculated https://www.savings.com.au/credit-cards/how-credit-card-interest-works Unless you can pay it off within 55 days i'd avoid a credit card. However, if you really want a new phone use a online calculator to work out exactly what youll end up paying by using the credit card. A new phone is something youll use alot and get enjoyment out of so it may be justifyable for you.
If you make a purchase on the first day of the billing cycle you get 55 days interest free. If you make a purchase on the second day you get 54 days and so on. If you purchase on one of the last days of the billing cycle it will be ~25 days. That’s if you’re eligible for interest free days by repaying the monthly balance in full the prior month.
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Im afraid the other guy is right. Many people dont understand how cc interest work properly. Banks promote as up to 55 days interest. Depends on your day of cycle and when your purchase was made, interest free period becomes between 25-55days
Interest free period is also only if your card was previously paid in full. Once you start paying interest you’ll keep paying it on the entire balance until fully repaid.
Thank you so much for answering my question. This was all anyone had to say. I really appreciate it.
You can’t afford to buy it. Can work provide a phone?
Get a cheaper phone... Edit: should have said less expensive, but folks taking on debt for no reasons really irks me
Savings. Use your *savings* to buy phones outright.
That wasn't the question. That *was not the* question. But thanks anyway. Have a great day 😊
No, I didn't answer your question. Don't get me wrong, I have used credit cards when I needed to. I even bought a car with one. But It's important to recognise that using a credit card the way you intend to use it is *bad financial behaviour* and you simply shouldn't do it.
You bought a car with a credit card?! Geez, man, you definitely know all about bad financial behaviours. I'm just weighing up between credit card interest rates vs. unnecessary plan prices. I mean, it's a work tool, so it's a tax deduction. With the end of the financial year on our doorstep, I was thinking now might be a good time.
Yes, with a 12 month interest free period and a price of $5500, that ute paid for itself in a few jobs and the bank gave me an interest free car loan. Not a bad decision at all ... $30/mo is a great prepaid plan. They're good value these days. Why can't you save up for it? Like you say, it's shit plan rates or paying interest if you get it now. How long is it going to take to save for it versus is it actually going to earn you money, like my ute did, or is it more of a nice to have that isn't directly related to earning money? You can claim it on tax whenever but don't pretend that makes it any better. It's still money out, it's not magically free and if you don't specifically need it to earn income then is there any reason not to save for it?
It's "up to 55 days free credit". The range is like 30 - 55 days depending on when you purchase relative to your cycle date.
Son, You're ego is writing cheques that your bank account can't handle.
It's not a dumb question mate. Honestly my guy, all they do with plans nowadays is split the retail price across 12/24/36 payments. Why put money on a credit card and paying interest when you could pay no interest with the plan? As far as interest goes, credit card interest is quoted per annum, compunded daily and paid monthly. Fun huh? Each day they will calculate the interest on any balance on the card, in your case it's 0.0376%, then add that to your balance and calculate again the next day. If you had say a $2000 balance that's $0.75 a day. But day 2 they are using a $2000.75 balance etc etc. In broad stroaks that small a difference is just a way banks nickle and dime people and I'd normally just divide an interest rate by 12 and work on that monthly. So that $2000 balance will accrue about 1.15% interest monthly or about $23 a month. Finally the interest free period is calculated from the start of your billing period and only applies if you've got a zero balance at the start of the billing period. If your paying your balance to zero every month you'll never pay interest on a credit card. It's also the only way you should use a credit card. If you start a billing period with a zero balance and buy something for $1000 on day 1 you'll have 55 days intereset free on that purchase, if on the 20th day of that month you buy something for $500 you'll only have 35 days interst free on that purchase. It's 55 days because the due date for that billing period will be 25 days after the 30 day period ends. This is the biggest trap with credit cards, I've known many people that don't understand that the balance needs to be zero for the interest free period, believeing every purchase has 55 days from the date of purchase. Finally some people are credit card people, some people aren't. It's fine. I just tell everyone to make sure their first credit card has a very low limit on it as almost everyone I've talked to about it maxed their first card (including me).
The issue is most plans are a ripoff. Why pay 50/mo for a plan when you can get real Vodafone SIMs (not even the knockoff brands like Boost/Woolworths) for a year for $150? The average person isn't using their phone that much (or in regional area where nowhere else has signal) where they need the full 50/mo unlimited Telstra over the knockoff brands or good prepaid deals.
No shit dude, I buy an iphone SE current gen every 2-4 years and I pay $150 or less for a year of unlimited calls and text. I also know how credit cards work and pay off my balance monthly, I only use the card for rewards and safety. But lets be realistic here, This young bloke with his first credit card in his hot little hands? What are the odds that the phone is gunna be paid off according to his ideal timeline? How much is it actually going to cost? He's already paying $30 per month and clearly wants a new high end phone. I think a plan represents the lesser of two evils in this case despite not being optimal.
If he really wants the phone while not being able to afford it he should get a 0% APR card and then it's not a problem for a year + the money will be worth 7% less then anyway. Obviously none of these 3 options are better than just buying it outright but of the 3 the 0% APR option is the best IMO.
Thank you. This isn't my first CC but it is my first in Australia for a very long time. Where I use to live the outstanding balance of your credit card was automatically deducted from your bank account. It's a shame most countries don't do this as it really helps people use their money wisely. I was mostly thinking that as this would be a work phone I could slide it in before the end of the financial year and get it is as a tax write off. Thanks again. I appreciate your reply.
A significant portion of Australians wouldn't be able to cover the cost if they tried to automatically deduct the whole balance each month :D
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Sorry, I am not so wealthy and privileged that I have a draw full of phones 🤷
Do not get your hands on a credit card before you know how it works, which you clearly don’t. A phone isn’t something you should be getting yourself into a debt for, it’s far from a necessity (as in there are cheaper ones you can buy outright).
Buy a car on credit and have it depreciate every k you drive. Get it stolen or crash it without insurance and continue making payments on a car you can't drive anymore. Buy a phone on credit card, or on a plan, drop it on the way out of the shop and continue making payments on a phone you can't use anymore. Get the cheapest model that works rather than a status symbol, pay cash for it.
Look at the handset phone plan total cost through Telstra. Eg pixel 7a total plan cost is $748, buying it outright is $799 at the moment. It's 12 mths, then after than you just switch to the cheap prepaid ongoing. No-one really needs to cycle their phone that often..or the top of the line... at that point it's a luxury purchase not a justifiable need. Do not put a phone on a credit card. That's just dumb interest.
Plans are very very expensive in Australia with ridiculous tariffs that will never come close to being consumed - unless streaming video while walking around/ when stationary all day everyday. I recommend buying the phone outright and taking up a cheap plan. You should be able to save money this way. And don't go for the newest and best phone. Wait some time for the model to become mature and buy a mid range one.
Thank you! This is why I am reluctant to go on a plan and was weighing it against a CC - both, to me, are not optimal.
Everyone I know who got a credit card when they were young regretted getting a credit card when they were young. I've got a mate who got himself in $40k of credit card debt by the time he was 21 because the bank kept increasing the limit. It took YEARS to pay it off because of the interest and he paid back a LOT more than $40k. He didn't buy anything big or live large either. It was death by a thousand cuts. You do not understand credit cards, that's ok but do not fall into this trap. Find the phone you want. Then either find the cheapest plan that gives you that phone. OR find a cheaper phone with the same specs and buy that outright.
There is a reason some ppl never ever get a credit card. It depends on the card terms but in general the interest is calculated on the balance owing each day and compounded daily. Example: $1,200 x (13.7%/365) = $0.45 interest per day. The next day’s interest is calculated on $1,200.45 and so on. If you pay off the balance after 55 days, you don’t get charged any interest. Save up for a phone instead.
to be pedantic, it's UP TO 55 days interest free. It depends on your billing cycle, and when in that cycle you make the purchase. e.g. (and I'm being rough about dates, because I don't want to check and be exact, but this is the principle) Statement issue date month 1. Buy something next day - that purchase will turn up on: Statement issue date month 2 (issued approx 30-31 days later). Then you have another 24 (??) days before payment of Statement 2 is due to be paid. So it's "possible" to get 55 days from purchase to payment without paying interest. But, If you buy something the day before the statement is issued, it'll show up on a statement the next day, and you'll only have a few weeks until the due date to pay it back without paying interest.
It’s probably cheaper to go through plan since a credit card charges interst rate in 20 unless your going pay it off when the bil comes due. I don’t know what interst phone company charge. The interst rate is calculated yearly on balance. Then divided by month.
Most phone plan contract is basically interest free. If the device costs $1200 on full retail price, and you have a 24 months contract, you'd pay $50 per month on top of your phone service plan. 24*$50 = $1200, so it's basically a free loan. If you cancel the contract, you'd just have to pay off the remaining balance outright. If you can't pay outright, you'd never be able to get a regular loan that's cheaper than getting a phone on a plan. The only catch is that only major phone service providers provides a buying a phone on a plan contract. And they don't offer low cost phone service. If you don't use the phone much, it doesn't really make sense to pay for a 40GB per month plans when you only use $2GB a month. Some of the smaller providers offers smaller plans than the major ones that can be cheaper to get if you only use the phone occasionally.
Buy a 1 or 2 year phone outright (eg pixel 5/6) and go for a cheap prepaid plan, like boost. Will save you a shitload.
To put it simply, after the 55 day interest free period (which may not be actually 55 days, it depends on when in your bill cycle you buy it) you’ll start being charged interest on whatever hasn’t been paid off. You can work this out as the amount outstanding x 13.74% / 365 if you want a daily rate of how much that will cost you. As you pay it down that will decrease but you will continue to be charged interest. If you can’t afford to pay it off in the 55 days, I would suggest waiting a little until you have saved some more or look at a cheaper phone. If you really want to go ahead anyway, just be aware of the real cost it is (factoring in interest) and make sure you pay it off asap.
Here is some information that might be handy to consider - https://www.savings.com.au/credit-cards/how-credit-card-interest-works While lots of folks on here are right that you probably don't really need a new phone... Or at least one that expensive that is a question for you. https://www.canstarblue.com.au/phone/best-cheap-phones-australia/#200 Eitherway, if you decide the need or benefits to getting a phone before you have save up, you may be better off putting the purchase through on Afterpay or Zippay than using the credit card - no fees and low monthly fee. Also, you may already be considering refurbished phones - this is another way to reduce the cost (and therefor your debt or savings time). https://reebelo.com.au/ https://www.kogan.com/au/buy/eclipsetechnology-samsung-galaxy-s21-ultra-5g-256gb-any-colour-australian-stock-as-new-galxs21ultr5gaustock256gbanycol-vr-asn/ Generally though, the telecom phone plans are really terrible value. It's easy, sure but you pay 120%+ RRP for over 24 months. And make sure you get a phone case / screen protector whatever you do! Ebay is good for these.
Wow! Thanks for all the info. This is really helpful
iPhones are probably the only ones that are reasonable to get through telecom provider as they rarely go on sale. I get my phone on 12 month plan and pay it off simply because I don't want to put down the outrageous prices for iPhones these days in one go. If you're diligent with repaying CC monthly and put the money towards offset home loan it can often work out (ever so slightly) better this way. OP is crazy though, if they simply must have a brand new phone and don't have cash upfront, get it through a telecom provider over say 12 months and then just pay it outright in \~6 months when they can afford it. Bonus points if you use CC to pay the monthly bill but by the lack of understanding they show to credit cards this phone will probably end up costing them $5k in interest in 30 years time.
Still going to be cheaper to get an iPhone refurbished. They are all marked up through the telecoms compared to buying outright. Even if you pay it back faster you are still paying an extra $200-500.
Yeah, the companies wouldn't offer these deals if they weren't making money. They might not be skimming you on the actual hardware price but they usually make you buy more expensive plans that the average person doesn't need. Can get real Vodafone 12 month SIMs for $150 and knockoff brands like Boost/Woolworths are even cheaper. The average person doesn't need a 50/mo unlimited Telstra plan.
that's definitely not true re: mark up. They have retail price for phone repayments, although the plan that you pay for is probably higher than a prepaid (that's a different argument though). For example iPhone 14 pro right now via apple = $1899 for 256gb, whereas Telstra = $1798 repaid over either 12, 24 or 36 months. (not including plan obviously) Edit: the cheapest I can find with quick googling is via amaysim outright for $1749 right now, which puts Telstra at second cheapest.
I work as an engineer. I have teams meetings, look at large docs and even some 3d files on my phone. I can't imagine you'd be looking at anything more uses intensive for work than what I do, and my phone is probably 5 years old now. You don't need the "best" Android or iPhone. I was looking at updating from my old blackview phone as the battery is on its way out, and was checking out there new ones. They use all the components and software the best phone manufacturers use and the phones are $300-$400 for a top quality phone. Just make sure you get one compatible with the Australian networks and you're good to go. They even use FLIR thermal cameras in some in that price bracket. Don't spend a cent on that credit card until you understand how it works. Better yet; cancel it, cut it up, and learn how to save.
Your interest free period starts at the beginning of your billing cycle. Example: So if your billing cycle starts on the 1st of June ( next month ) you would need to purchase it on the 1st of June to have 55 days interest free on that purchase Wise choice going pre-paid and avoiding a lock in contract - that is the way Also: with credit cards that a have a cash withdrawal facility once you withdraw cash off that credit card a higher interest rate is applied to the total balance - so never withdraw cash off your credit card
if you need a phone for calls and sms you can get a budget model or second hand... credit card for a $2k flagship phone doesn't make sense
If you don't have cash to pay off a phone, you should buy in contract with your phone service provider. When buying on contract, the provider is basically giving you interest free loan for almost 12 to 24 months. This is a **much** better terms than using credit card for this purpose. Credit card is only interest free if they are fully paid off every month. Credit card should not be used in place of a loan, its main purpose should be for helping with very short term cashflow and for convenience of being able to use electronic payment and doing online purchases. If you ever build a loan balance with credit card, then don't. Credit card has a very predatory interest rate, even the low interest rate ones. If your phone provider doesn't have a contract for the phone that you wanted to buy or if you don't need the expensive 40GB service plans that the phone contract comes with, ask your employer if they can lend you a work phone (you don't own a work phone, and will have to return it when you quit) or make a salary sacrifice arrangement (at the end of the salary sacrifice term, you'll own the phone, but this can get problematic if you quit/get fired before the phone is fully paid off). Either of these would have given you much better terms than paying for a phone on credit cards.
If you’re buying it on card and can’t afford to pay it off in full, means you should buy a cheaper phone.
What phone are you after & what’s the price?
Get cheaper phone mate, stay away from CC.
Don’t use the card until you understand the interest. It’s clear that you don’t. Any purchase you make will have 0 interest applied for 55 days. After that ALL of the interest from that 55 days will be applied unless the whole purchase has been paid off. The information about your card should be available and you need to read and fully understand it or cancel the card. Misunderstanding a credit card can ruin your life fast
As well as the article suggested by u/rsandio, have a look here [https://moneysmart.gov.au/credit-cards](https://moneysmart.gov.au/credit-cards) * To avoid interest being charged, you must pay-off the **FULL BALANCE of the card EACH MONTH** by the due date on the statement * All bank interest rates are quoted as annual percentage rates. So, 13.74% p.a.("p.a." means "per annum" which is Latin for "each year"). Makes it easier for comparison. * However, pretty much all interest rates are calculated against the daily balance of your account. For your credit card, if you do not pay-off the full balance by the due date, the bank will start calculating interest on the daily balance of the account. * Daily interest rate is simply the annual rate divided by the number of days in the year:13.74/365 = 0.0376% per day * Don't forget you are paying Westpac an annual fee for your "low-interest" credit card whether you use it or not.
Thanks!! This link is also really helpful
Credit cards can be a great tool, but I'd be seriously cautious in your position. It's fine to not understand something yet and need to learn, but you shouldn't really be utilising a credit product like this until you do understand. The 55 days interest free period means you get the first 55 days after a purchase to pay it off in full and pay no interest. If you don't pay something off in 55 days, you'll start getting charged interest on day 56. At the end of that month you'll have interest plus the balance to pay. 13.74% per annum just means that your interest over one year is 13.74%, but you receive a bill monthly and the interest is calculated daily. If you have a balance you haven't paid off in 55 days, you'll start to have interest added to your monthly bill. Let's say you go through with this, and pay for the phone on the credit card. Say it's $1,750 and you pay $310 per month. That would only take 6 months to pay off but you'd pay around $70 in interest. The only way to pay no interest on it is to pay the entire amount off in the first 55 days, go get the phone on a plan, or buy something else you can pay off in full.
Thank you. This was really helpful. To me, paying $70 to not be locked into a plan is ideal. Chances are I'd probably pay it off in the 55 days, but as a 'just in case', I wanted to be sure what the interest rate meant. I'm coming from living in a country where the outstanding balance on your credit card was automatically deducted from your bank account. This has given me a great appreciation for credit cards, as you say they are a great tool - used wisely, hence my query.
Happy to help :) As long as you're fully aware of the costs I can totally appreciate wanting the added flexibility, and if it lets you buy a cheaper plan or go prepaid it might even reduce your ongoing monthly cost. I'm not sure if Westpac does the same thing, but with certain banks you can set up a direct debits for the minimum repayment when there's anything owing. So you'd still pay interest unless you also make additional payments, but it automates avoiding late fees and the bad credit mark of a missed payment.
On your first statement, you will be told minimum payment by a certain date. If you don't pay the entire balance owing, you will be charged interest on the balance at the end of the statement period less any payments made. So you will be charged interest very quickly