Your credit card arrives and a new idea is born; ‘pay off the balance every
month, and escape the interest’. Smart idea but putting it into practice
is quite often the only thing wrong with an idea as good as that.
As is most often the case, things never go according to plan. The unexpected
payment to fix the car, the plumber called out on a winters night are a few
of the endless ways that your wallet can get unexpectedly raided and may mean
the money set aside with good intentions to pay your credit card, gets spend
on more pressing matters.
And so you find yourself in the position many of us do, a credit card debt
that seems to be growing faster than your waist, but what can we do?
In today’s market, we are overwhelmed by the number of credit cards available,
every company from banks, football teams, charities, high street stores even
down to the petrol supplier seems to offer them, all claiming their card is
the one for you.
Although the free availability of credit cards is often seen as a bad thing
and encouraging yet more debt problems than people have already, one side effect
has emerged that can actually help, or at least ease, your finance problems
– competition.
Credit card companies have some serious competition and ways to attract you
to their particular card have had to be devised such as low interest rates,
cash back, free insurance the list seems endless. But perhaps the offer that
can be used best to actually help you with your problems is the balance transfer.
Companies appear to be extremely generous in allowing you to transfer your
debt to them and waiving interest but the reality is, they just want the interest
for themselves and a way for them to achieve this is to entice you over by offering
a zero or low interest rate. The minimum payment that has to be made barely
scrapes the surface and when the interest free period runs out, you have lots
of debt left and they get lots of your cash in the form of interest payments..
How to use this to your advantage:
1/ Balance
transfer can vary from 0% interest upwards with the period that this will
continue for from a few months to nearly a year. Spend time looking at all the
current providers offering this
2/ Determine how much you will need to pay off each month so that you clear
the debt on the last payment in the 0% grace period. If this is easier said
that done, try to pay off as much as you feel you can handle and look to transferring
the remaining balance onto a different card which is also offering special deals
when the current one finishes.
3/ Make sure you ALWAYS pay the minimum amount, failure to do this can blow
the whole deal and you’ll find the interest back in your life and potentially
a record stored in a dungeon somewhere preventing you getting another card.
Set up a standing order immediately you get the card to pay the minimum amount
so you don’t have to worry about meeting this and top up every month via
online banking or at any bank with the paying in slip up to the required amount.
4/ If you do have to use the card for new purchases, think about using a card
offering 0% interest on new purchase too but be careful to pick a card that
is offering a months interest free period on new purchases. There are many cards
that appear quite cheap, but reading the small print shows they will charge
you interest from the day you make your purchase. In the long run, they will
make up the difference by doing this.
5/ Spend a few hours examining all the cards on offer and write down which
things you need and which you don’t, calculate how much you can save by
using the free offers such as insurance, cashback and such, and how much you
can pay each month to clear your debt.
6/ If you have to use another card at the end of the offer, apply for it a
month before you need it and transfer your balance a few weeks before the first
one expires. These offers usually only allow a few weeks window to make a transfer,
make sure the 0% offer is actually what it seems and make the transfer quickly
after getting the card, that way you can avoid any problems and delays and ensure
you don’t get into any interest period by mistake.
Which credit card to use will be different for every one and will depend on
your current debt, how you live your life and your income. Remember, these offers
will NOT solve your debt problems, nor will they postpone repayment for ever,
they are however, a good, interest free way of gaining more time and can give
you breathing space while you concentrate on tackling the problem.
Finally, like the best diet plans, have a well thought out plan and stick to
it!
More information available at http://www.1st-uk-credit-cards.co.uk