A simple credit card trick that could help save you interest on your home loan

Adulthood is all about life hacks – little tricks to make things easier.

But, you don’t need to be Houdini to escape paying excess home loan interest. You just need our simple credit card trick that could save you thousands off your home loan.

Firstly, you need an offset account that’s linked to your home loan account.

What’s on offset account?

An offset account is like a savings or transaction account that’s linked to your home loan. But instead of earning interest, the money in this account offsets the amount of money owed on your home loan, therefore reducing the interest you need to pay on your home loan.

Let’s say you have a home loan of $400,000 and $50,000 in your offset account. Instead of paying interest on the full loan amount of $400,000, you’ll only pay interest on $350,000. Over the term of your loan, this can save you thousands on interest.

And unlike some savings accounts or term deposits, you can access the money in your offset account at any time without being penalised – just like an everyday transaction account.

Saving tip:

The interest on your home loan is calculated daily, so the more funds you have in your offset account each day, the less interest you’ll pay.

To maximise your savings, have your whole salary (or wages) deposited into your offset account so it can do its magic and reduce the interest on your home loan.

Put it on plastic

Now here’s where your credit card comes in – ta-da.

Because you want to keep as much money as you can in your offset account, use your credit card for everyday expenses like your morning coffee or utility bill.

This way you can keep the money you would have used to pay for it in your offset account for longer saving you interest on your home loan each day. And at the same time you’re taking advantage of the interest-free period on your credit card.

The interest-free period on your credit card is the maximum amount of time between making a purchase and being charged interest on it. Periods range from 44 days to 62 days, and this is how many days you have to pay off the purchases in that billing cycle. So, for this ‘trick’ to be effective, you must pay your credit card balance off in full by the due date every month.

Saving tip:

Choose a credit card with at least 44 days interest-free to give you time to pay off the balance each month.

No smoke or mirrors.

This credit card trick is a simple way to reduce the amount of interest you pay on your home loan. For it to work just remember to:

• Have your salary or wages deposited into your offset account
• Use your offset account as your primary savings account
• Use your credit card to pay for your daily/monthly expenses
• Pay your credit card off in full by its due date

Linking an offset account to your home loan account can help reduce the amount of interest you pay. And by putting your monthly expenses on plastic – and paying off your credit card balance in full each month – you’ll realise you don’t need a magic wand to help you save thousands on your home loan.