For those of us living in the UK, credit card providers offer a great range of useful options. A credit card can allow you to spread out the cost of larger purchases such as cars, sofas and even holidays.
However, there is another side to being a credit card holder â€“ and that’s managing your repayments responsibly. Before you even think about applying for a credit card, you need to know the five essential rules for managing credit card repayments.
1. If you pay your balance off in full each month, you won’t pay any interest. You should always remember this when prioritizing your bills. If you clear your balance, interest rates won’t apply to you. This is the most sensible and cost-effective way to use a credit card.
2. Setting up a direct debit for credit card repayments is the best way to manage your bills. If you think you might forget a payment (and it happens), you should safeguard against this by setting up a direct debit to pay off your credit card bill each month. Do this, and you will never be charged for a late payment or worse, miss a payment completely.
3. Make sure your payment will reach the provider in time. It’s no good making your payment on deadline day if it takes a few days to reach your credit card provider or clear in their account (i.e. if you make a payment at the weekend, it may not be processed until the following Monday). You may still be subject to late payment charges even if you send the payment on time.
4. If you can’t pay off your balance in full, make sure you know the rate of interest you’ll be charged. For example, you might be on a credit card that has an introductory period of low interest. You need to know when this ends, because if you can’t pay off your balance in full one particular month, you could be charged more interest than you expected.
5. If you only make minimum repayments each month, your balance will take longer to clear. It’s very tempting to only make the minimum required payments on your credit card bill, but bear in mind that each time you do this, you will be adding interest to your balance and increasing your debt. Overall, your card will be more expensive and your balance will take longer to clear.
If you don’t follow these rules, your credit card could end up being far more expensive than you ever imagined. You could be subject to charges and fees, you could damage your credit rating (which makes any future credit card applications you may make more difficult) and you could even end up in debt.
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