Our top 5 tips that will help you say goodbye to credit card debt and hello to interest free credit and rewards.
Think of using credit cards as a bit of a game; play them well and they are an incredibly cost efficient way to borrow money and can even earn you a little extra along the way, but play them badly and you could be charged extortionate amounts of interest causing your debts to spiral out of control. Thankfully the rules of the game aren't that difficult to learn - here are our top tips.
Balance transfer expensive debts
By transferring your existing debts onto a credit card with an extended 0% balance transfer offer you could potentially save hundreds in interest payments and clear your debts in a much shorter space of time. But be careful, as this only works if you don't make any purchases at all on your balance transfer card.
If you haven't managed to clear your debts by the time the 0% offer expires, transfer your remaining balance to another card with a 0% offer and continue to make interest free repayments until your outstanding is completely cleared. Bear in mind that most lenders are now charging a handling fee when you make a balance transfer so go for cards with the longest 0% deal possible to get the most interest and fee free time for your money.
Say no to cash on credit
Never use your credit card to withdraw cash or as a guarantee for cheques as for the majority of providers withdrawals of this nature are not eligible for the same interest free periods your purchases are.
This means that in most cases you will be charged interest on the whole amount withdrawn from the day you take the money from the cash point or from when the cheque in cashed. Where possible it's a much better option to pay on card and repay the balance fully at the end of each month.
Always meet minimum payments
Ensure you always meet the minimum repayments on your credit cards (at the very least) as most providers will charge a high late payment fee and in certain cases may also withdraw credit privileges such as interest free periods which can really leave you without a paddle!
Additionally, make sure you don't leave making your repayments to the last minute as some companies take several days to register payments received against your account, so even if you officially pay on time they may still classify it as being late. Setting up a direct debit for a fixed amount each month provides a manageable way to ensure you never miss a repayment.
Banish store cards
Think of store cards as evil because the vast majority charge extortionate interest rates and give you little in return (they're now obliged to admit this on their statements - as if that really helps!). Never use these cards for everyday borrowing as it could end up costing you as much as an extra 30% on top of the cost of your purchase!
If you do spend on a store card only do so to either make the most of the interest free period (this is quite handy as you will actually earn a little more interest on the balance in your current account than you would have done should you have paid for the purchase in cash - mind you, this is only beneficial if you fully repay the outstanding) or in return for special membership discounts of privileges, although again, be sure to pay the balance off in full!
Don't mix and match your cards
By keeping your debts separate and using one card for paying off balance transfers and another for purchases you'll be make your credit cards work in the most efficient way. This is because lenders tend to pay off the cheapest debts first so if you spend on your balance transfer card its likely that any repayments you make will go towards the interest free debt so your purchases will sit accruing interest for longer.
Look for cards with extended 0% introductory offers on purchases so that any repayments help to clear your debt in the first instance. If you still have an outstanding balance when the initial offer period expires, transfer the remaining amount to a 0% balance transfer card and start again until your debts are completely cleared.
However, while this cycle of optimising 0% offers is an economical way of borrowing, you should ideally use it with the aim of clearing your existing debts rather than accumulating new ones as once you are debt free you can begin to use credit cards to make money rather than simply reducing the amount you owe.
Compare Credit Cards via money.co.uk
