Source: Grant Elevators

Source: DebtConsolidation.com.au

Imagine if your Westpac credit card came with a warningusing this card can be extremely harmful to your finances. It may sound like a joke, but in the UK credit card warnings may not be too far from the truth. The British government has previously proposed that its Consumer Credit Act be updated with a requirement for lenders to warn consumers of the dangers of making only the minimum monthly payment on their credit card.

Back in Australia, this kind of legal requirement would be useful in helping to raise awareness of the dangers of making just the minimum monthly repayment. We owe millions on our collective credit cards and, while this works brilliantly for increasing the amount of profits made by banks such as Westpac, it is creating a nation-wide spiral of debt.

Next time you receive your Westpac credit card statement, look at the minimum amount payable. Paying back this amount may get your credit card bill out of your mind for the next month, but it means you will be holding onto your debt for much longer than you should.

If you owe even a few hundred dollars on your Westpac credit card, making the minimum monthly payment will cover the interest but will barelyif at all touch the principal of your debt. Add in the Westpac fees and charges you meet along the way and you could easily find your credit card debt increasing as you make the minimum repayment amount.

Credit cards, such as the range of products provided by westpac, generally attract a much higher rate of interest than other types of credit, such as home loans. As you are likely to owe much more on your home loan debt and will need to look at debt consolidation loans, like many people, you may try to put any extra money towards your mortgage repayments. If you have a credit card debt, you should work towards clearing this first, through making higher repayments or consolidating your debts. The money you will save over time on Westpac credit card interest can be put towards your home loan and used to build your wealth, rather than dissolve your funds and contribute to the bank profits.

One way of using your income to work to your advantage is by using it to reduce the amount of interest you pay on your home loan. How? Most banks and lenders offer an offset account, or Westpac customers may choose to use SmartPay.

How does Westpacs SmartPay work? Its simple. You have all of your income paid directly into your home loan account. In order to make bill payments and access your cash for everyday living expenses, you can arrange direct transfers from your home loan account into other Westpac transaction accounts, or have your bills paid directly from your home loan account.

Using a facility such as Westpacs SmartPay means that every dollar you have paid into your account works for you by reducing the amount of interest payable on your home loan. This way of banking also gives Westpac customers an incentive to be budget-conscious, as the more money you can keep in your home loan account, the less interest you pay.

SmartPay could save Westpac customers thousands of dollars in interest charges, which means they could pay off their home loan debt sooner and slash years from their home loan terms.

westpac allow the SmartPay facility to be used on their Premium Option Home Loan , Rocket Investment Loan, Rocket Access Equity Loan, Rocket Equity Investment Loan, Rocket construction finance and Equity Access Loan, but other loan types are not able to take advantage of the facility. Also make sure you look at the settlement buyers guide to know what you need to do when settling.

A simple strategy such as using Westpacs SmartPay could be an effective way to have your income working for you, by saving you money on your home loan. Similar facilities are offered by other banks and lenders, so be sure to shop around for the features you need in a home loan before making your choice. Speak to your financial broker for further advice on how you can use your income to help out with your home loan.

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