24 Sep, 2015

Discover the best ways to use your Credit Card!

Owning a credit card in today’s mass consumer society is relatively standard, however many of us are completely oblivious to the fact that we are using them in the wrong way.

Money Lending Expert has put together some top tips to help you make the absolute best use of your credit card; to help you manage any existing debt, to manage you finances more effectively and to hopefully save you some money!

Life of Balance

 If you’ve already racked up a fair amount of debt on an existing card or if you want to use a credit card to purchase an expensive item and therefore require a longer payment period, then a life of balance transfer card could be the answer. PD53874821_BBPKF6-_2819435bThese specialist credit cards allow you to pay off debt over an extended period of time and will also accept debts which have been transferred across from other cards. The majority of the providers of life of balance cards allow you to plan an agreed timescale in which to have cleared the balance by, but you must ensure you cover at least the minimum repayment each month or you will, as with any credit card, be faced with charges and in the long term this may damage your credit score. Whilst we’re on the subject of credit rating, it’s important to be aware that unless you currently have a good credit rating, you are unlikely to qualify for a lifetime balance transfer card.  If you are unsure of what your credit score is, websites, such as Experian, provide an excellent credit check service. Always use a comparison website to research which card is the best option for you.

Balance Transfers

In a similar vein, transferring an existing balance onto another card is sometime hugely advantageous. Many of the major credit card companies offer 0% interest for a set period of time if you transfer an existing balance across to one of their cards.  They basically want your custom and this works just as well for them as it does for you. One huge advantage of this, other than the fact you don’t have to pay interest for a while, is that it brings together all your debts into one combined amount.  CREDIT_CARD_CAKE_CM2904__39975_zoomFor example, if you have credit card debt spread over two or more cards as well as a couple of store cards, you can move all of this debt onto the new 0% card.  The new credit card company are essentially paying off all of your old debt to then create one total sum. It is then up to you to ensure you pay the minimum repayment each month, or ideally more so that you can aim to have paid off the whole balance before the 0% interest period ends. One key factor in making 0% credit cards work for you is that once your balance has been transferred across, you must not send any more on them.  Treating this type of credit card as a payment method will not help towards paying the balance off and more often than not any extra payments made on the card afters the balance has been transferred across will be charged at a different interest rate. And finally, some people have cottoned on to the fact that it is entirely possible to keep switching between credit cards so that when one 0% interest rate period has expired, they can move across to another 0% card. Unsurprisingly, this has not gone unnoticed by credit card companies and now these so-called ‘card tarts’ have seen how doing this can affect their credit record.

Don’t use it for Cash!

Although you can use a credit card to withdraw money from an ATM, under no circumstances should you consider doing this! ATM431x300Not only will you be charged an extortionate rate for the privilege, but lenders will also treat it as an indication that you are struggling for money. Every transaction that is made on your credit card is recorded on your credit record, so when a lender sees a cash withdrawal it will automatically flash up as a danger sign to them. Even if it is not the case, lenders will make the assumption that you are using your credit card to get cash out because you do not have enough money left in your bank account and are therefore relying on credit, which does not exactly give them much faith in you to make your future credit card repayments.

Direct Debit

keep-calm-and-pay-by-direct-debitThis is a simple one, but once set up will make your life a whole lot easier and ensure you pay off your credit card in time each month.  A lot of people get stung by late charges or lose low interest rates simply by forgetting to make their credit card repayments in time.  By setting up a direct debit each month to automatically make these repayments takes the pressure away and means there’s one less thing to think about. Ideally you should aim to set the direct debit up for more than the minimum amount so that the debt can be paid off sooner, but sit down and work out how much you can afford each month.  If after a few months your circumstances change or you realise you can actually afford to pay more one month, then you can easily pay more manually on top of the direct debit amount that will be taken.

Spread Repayments

iStock_000001280766XSmallIf you have more than one credit card, but have decided against transferring across to a new card to make combined balance, then you must think carefully about how you pay off these cards. Don’t for one minute think that you have to pay off the same amount from each card.  Your main priority should be clearing the card with the highest APR as that is the one that is costing you the most. So if you have, say, three credit cards, with one of those cards clearly having a higher APR, it makes much more sense to make the minimum repayments on the two lower cards and paying more on the higher one. Once the high card has been paid off, you can then focus on clearing the next highest card and so on.  This clever repayment process is called ‘snowballing’ and is the quickest way to clear debt.

Credit cards are incredibly beneficial and can in some instances be a better payment option than a debit card.  For more information about whether to pay by credit or debit, see our article –  Which is best – Credit of Debit Card?

About : Simon

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