Credit cards are a wonderful thing if they’re used sensibly. You can forget about saving up for that dream holiday, or missing out on the new season’s clothes because you’re short on cash… Simply pop your desired purchase on your card and repay as much as you can afford each month. Sounds easy doesn’t it?
Sadly, if something sounds too good to be true, it often is – and credit cards are no exception when things get out of control. This article from debt specialists, Fresh Finance, offers a few key pointers that will help you keep your credit card balance under control and (even better) use your card to boost your income and your credit rating.
Tip 1: Choose your card carefully
There are lots of cards out there offering 0% interest deals on purchases and/or balance transfers, so this is an easy choice if you’re looking to save money with your new card. Bear in mind, however, that the interest-free period won’t last forever and you’ll still need to make a payment off your balance each month. What’s more, you’ll probably be charged a fee for any amounts you transfer over from other accounts.
So, whilst switching to a 0% card is a good move if your existing card is maxed out, it’s still worth comparing different providers and reading the small print carefully. Do your homework right and you could end up with a real bargain.
Tip 2: Look out for cards that give something back
Whilst interest rates are key when making a credit card decision, it’s also worth looking at the other features and benefits that different cards offer. Some providers will give you points for each purchase that you can then redeem at selected retailers, whilst others offer cashback – an easy way to help control your balance.
A word of caution, however. Most cards that offer an all-singing, all-dancing array of benefits will come with a catch. It could be an annual fee or a higher than average interest rate, but it will be there somewhere. Once again, you’ll need to research the market and find a card that offers genuine value that you can benefit from.
Tip 3: Don’t be tempted by the minimum payment
This is an easy trap to fall into when you have a 0% deal, as no interest is accruing on your balance. But don’t get complacent. Even extended 0% offers will end sometime and if you started out with a high balance, you could be in trouble. It’s much better to pay off as much as you can afford each month, so things stay comfy when the interest kicks in.
You should also bear in mind the sheer length of time it will take to clear your balance if you only make the minimum payment each month. Do you really want to still be paying off your honeymoon when you’re celebrating your Silver Wedding anniversary?!
Tip 4: Never use your card to withdraw cash
OK, so if it’s a dire emergency then you can. But we mean a dire emergency, nothing less. Withdrawing cash is what your debit card is for, which is why it’s free to use at most cash machines. Take cash out on your credit card and you’ll pay through the nose with withdrawal fees on top of sky high interest rates. And don’t forget this applies to cashback as well as ATM transactions.
Tip 5: Pay on time, every time
Perhaps the most obvious tip, this is also the most important. Regular monthly payments, all made on time, will result in a nice row of zeroes on your credit file. This is something potential lenders love to see and paying on time will help you access further unsecured credit, as well as secured loans such as mortgages, in the future.
This is precisely why credit cards are such a good way of repairing your credit rating if you’ve had problems in the past. Yes, you won’t qualify for a high credit limit or a 0% interest deal if you have a poor credit history (or no credit history), but there are lots of cards out there that are designed to help you repair the damage. Get one and use it sensibly. A couple of years from now, you may find you can access mainstream credit again.
On the other hand, not paying on time is a very bad idea whatever the current state of your credit rating. Damage to your credit file aside, you’ll open a whole can of worms if you let your payments lapse. From creditor harassment to CCJs, bailiffs to bankruptcy, it could ruin your life. So if you find you can no longer make your payments, it’s time to get help.
Talk to Fresh Finance today
If your credit card spending has got out of hand, or you’re drowning in any other type of debt, Fresh Finance can help. Get in touch today and take your first step to regaining financial control.
Call us free on 0808 168 8262 or apply online for specialist debt help today.