Be Fantastic With Your Plastic: How To Be A Careful Credit Card User
A credit card can be a handy tool to own – if you know how to use it. You may have been lured in by the idea of bonuses, but remember that credit card companies are in it to make money. Every time you spend, you’re effectively taking out a loan. Only the slyest spenders get the true benefits from their plastic. Here are some ways that you too can become a crafty credit card user and beat the banks.
Always pay more than the minimum requirement
When paying back your credit card debts, avoid settling for the minimum payment requirement. Why? Because you’ll never pay the whole thing back. The minimum payment requirement is usually only 4% of your balance. Only paying this amount could take you years to pay back. In fact, if you’re 21 and you take £3000 on your credit card, and only pay back the minimum requirement, you could be 50 before you have it all paid off. This is because the longer you take to pay it back, the more finance charges are loaded on top. Paying off your debts as quickly as possible in as big chunks as possible to avoid spending more.
Keep your eye on interest rates
Credit card companies are frustratingly allowed to change their interest rates willy-nilly, so what might have seemed like a good deal when you first started might turn out not as appealing later down the line. Look out for credit cards with fixed interest rates and always read the small print (fixed interest rates may only be valid for a year after which the card company might be able to lift it). If your interest rate suddenly rockets, pay off all your debts and get a new card somewhere else. Don’t stick with the same card company only out of loyalty.
Consider the risk of the transaction
Consider what you’re using your credit card for and how legitimate the business is. Paying online can be especially risky – there are scammers out there who may continuously demand money off you, claiming they haven’t got your credit payment. Most official online companies shouldn’t be a worry and will have high risk merchant accounts set up to deal with your transaction. Check your statements to make sure payment has been made (and that you are paying off that debt!).
Don’t buy things you don’t need
To improve their credit rating, some people will buy small items such as groceries and petrol and meals on their card that they know they can pay back easily – which is a very good tactic (and in many ways the best way to use your card). But be careful that you’re not just buying things you don’t need as an excuse the flash the plastic. A lot of credit card users will spend more than non-credit card users in an attempt to get the most out of their card. Try to avoid doing this, as you’re only spending more than you would have done!