Tips for Better Credit Card Usage

Credit cards can be a great financial aid, but like any form of borrowing they have to be used well to avoid problem debts as well as to simply make sure that your credit is as cost-effective as possible. Here are a few ways you can optimise your credit card spending:

Don’t Use Them Unnecessarily

A credit card is not free money. It is not even a free “advance” on money you are going to repay later – unless you have 0% on purchases and repay before this expires of course. It is very easy to underestimate interest and the cost that it represents in real terms, writing it off as “a little bit extra” on each repayment. However, interest can mount up a lot more than most people realise over time. Keep your credit card for the times where you need it, or can see a clear benefit in using it.

Don’t Maintain Debts Long-Term

Managed properly, credit cards are a fantastic source of short- and medium-term borrowing, but over time they can really get costly. Recent research from the FCA has shown that well over a million consumers are maintaining debts for several years and making only the minimum repayments. The financial regulator was concerned at the cost of interest, as well as the lack of help available from lenders. Aim to clear your debts as soon as you reasonably can and not maintain debts longer-term.

Switch When Introductory Deals Run Out

Like many services such as insurance, credit cards are something you should switch regularly. Introductory offers such as 0% periods can be great, but the price increase when these offers run out can be steep. The simplest solution is simply to take out a new card with a new introductory offer, transferring any remaining balance at the most favourable rate you can. When you take out a new card, make sure you actually cancel your old one rather than simply ceasing to use it. Not doing so can harm your credit rating, as it looks to lenders like you are juggling multiple cards.

Use it in Place of More Expensive Finance

One place where credit cards excel is in replacing more expensive finance options. For example, a credit card, if available, will be astronomically cheaper than most payday loans. Alternatively, there are other situations which we might not think of as borrowing but, really, are. For example, do you pay for your car insurance or road tax in instalments? If so, you are effectively being offered finance, and the total you pay will be more than if you had paid in a single lump sum. If you pay it in full using a credit card with a year or more of 0% on purchases, then you can spread the cost without paying extra by paying off your credit card balance in instalments over the same period.

3 Ways to Avoid Debt

Debt is a burdensome situation to be in; uncomfortable financially and emotionally. It can be gotten rid of through careful planning though ideally, it is best to avoid getting in to it in the first place.

Here are 3 main tips for avoiding debt related problems.

CUT YOUR SPENDING HABITS

Make sure you do not exceed the budget you have prepared for yourself. Overshooting the budget is a common problem and there can be no easy solutions unless you learn how to cut your spending. Otherwise, expenses will pile up and this will make it very difficult to meet your daily needs.

CHANGE THE WAY YOU SPEND

Changing your spending habits is a good way to get rid of debt. Avoid spending on frivolous, fancy items and ensure you only stick to the basic things. Sticking to essentials is a good way to prevent yourself from crossing the limits of your budget. Ensure that your spending pattern is financially viable.

CHANGE YOUR ATTITUDE

Become more oriented towards saving rather than spending.  See it as a challenge rather than a chore. You need to become more cautious in order to spend well and spend less for quality items.

 

Thus, changing your attitude, changing the way that you spend and cutting your spending habits is a certain way to avoid issues of debt in your life.