Why your pay disappears so fast?

The end of the month usually brings joy because it signals pay-day. However, that happiness - and your bank account - quickly deflates once you start clearing your stack of bills. While most of your expenses are likely to be items such as utilities or handphone bills, it's the silent suckers that you need to be careful about.

Watch out for these four common money traps and learn to avoid them:

1. Multiple credit cards

A credit card is merely an efficient means of paying for your expenses. Don't treat your Visa as a line of credit and never draw a cash advance from it: You’ll be paying a service fee on top of daily interest charges.

You only really need just one credit card. Get rid of infrequently used credit cards as you run the risk of incurring annual fees or missing occasional payments on cards you seldom use. “Also, try asking your bank to waive the annual fee and whether they can reduce the interest rate,” says Adam Martin, vice-president of Ipac Financial Planning. Banks may often be willing to accommodate such requests, especially for their loyal customers.

2. Personal credit lines

“A line of credit can be especially helpful in covering fluctuations in cash flow,” says Choo Koon Lip, founder of Forex Asia Academy. Just like excess credit cards, however, it can be disastrous when one has difficulty paying on time, he advises. Keep as few of these open and pay them off quickly. They can be kept for emergencies, but should not be used for general or impulse purchases.

Drop your credit lines if you’re not using them in order to keep them at bay. If you’re already in debt, Martin advises that you look at refinancing to another product with an introductory low-interest rate, committing to a regular repayment programme and sticking to it. Once that’s paid off, close it down.

3. Unnecessary Giro payments

The convenience of paying bills by Giro can be outweighed by the fees charged for unsuccessful Giro deductions. Moreover, they take the control of payments out of your hands and require you to monitor your account to ensure a sufficient balance on deduction days, which might not coincide with your pay day.

It's better to switch your monthly bill payments to your (single) credit card wherever possible. For organizations where this is not possible, Giro can still be useful. Choo advises consumers in these circumstances to keep tab of their expenses so as to avoid extra charges.

4. Too many reward programmes

Nearly every credit card has some kind of reward programme, but dividing your loyalty among them can significantly reduce their value. Stick to one programme linked to the credit card of your choice and make full use of it. But be mindful: rewards can come at a price. “This price is generally made up in the area of higher rates of interest,” says Joy Chia, associate financial consultant at Harold Ng & Associates. “Therefore, it’s important to understand all the terms and conditions when it comes to reward cards. You need to make sure that your needs are met.”

Stick to the one that’s linked to the card you actually use or would really like to enjoy, for the lowest cost or with the least burden. Consolidate points where possible, as the value of the reward often increases as more points are accumulated.