Tips for managing your budget using credit cards

First things first, when you decide to get a credit card, work out why you want it and when you will use it. If you are the kind of person who might imagine that now you have a card, the world is your oyster and you can buy whatever you like despite the cost, then you are soon going to find yourself heavily in debt. If instead you plan to use a card to maximise your disposable income, then here are some tips to help you achieve that.

When you first choose a card, pick one with a low annual percentage rate (APR), which will reduce the interest you have to repay, but be aware that low introductory rates in the first few months might be short lived. However, do look for a card which might have a 0% rate on purchases for a limited time which will allow you to pay minimum payments without incurring charges. With some cards there may be associated fees for usage. The biggest trap with using a card can be the penalty fees such as late payment fees, transaction fees and over the limit fees, etc which mount up over each month, adding to the ever increasing balance.

Choose a card with additional benefits such as cash back rebates or frequent flyer miles and buy your everyday essentials with this card such as fuel or supermarket shopping. At the end of the year you will receive a welcome bonus which has cost you nothing.

Do’s and Don’ts: Never go over the limit, and ideally keep your limit low, to avoid temptation. Never miss a payment or pay after the due date. A good way to ensure that you never incur these late payment charges is to set up a direct debit to pay a certain amount, or ideally the balance in full, on the due date. If you time your purchase correctly and then pay the balance in full on the due date, you might achieve up to 56 days of interest free credit. It is prudent to never spend more than you can afford to pay back on a monthly basis and to keep track of your spending. If you keep all your credit card receipts you are also in a position to dispute a transaction if something shows up on your bill unexpectedly.

Never withdraw cash using a credit card, as interest builds up from the date of withdrawal, usually at an exorbitant interest rate.

Keep your cards safely about your person and never reveal your pin number to anyone. Sensible use of your credit cards will help you establish a solid credit rating.

 

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