How to Avoid Those Nasty Credit Card Bills

So, you just got yourself a new credit card. You’ve probably heard the horror stories that accompany the word. The word on the streets is if you own and use a credit card, you’re going to find yourself knee-deep in debt. You don’t have to end up like this though.

If you are smart, and you make the right decisions when using your new card, you won’t have to deal with horrendous bills.

Here are a few ways in which you can avoid getting miniature heart attacks every time your statement arrives.

Credit card bills: Don’t just pay the minimum!

When you first applied for your card, you should have been informed about the card’s minimum payment.  This is the smallest amount you have to pay for your bank every month if you have an outstanding balance.

If you miss this payment, or cannot pay the full minimum amount, the issuer will impose a late payment fee, which can be as much as half the minimum amount!

While it might be tempting to go ahead and pay just the minimum while racking up a larger overall bill, this is a terrible idea. Interest rates [the percentage of your outstanding charges that is added to it monthly] are typically high on credit cards and over time, interest payments can become crippling.

For example, the average credit card interest charge is around 20% per annum charged monthly. On a balance of £1,000, this 20% charge will cost you £219 a year. If left unpaid for four years including interest your balance will have ballooned to £2,210.92! What a waste of money.

Photo by 401(K) 2013

This example illustrates how you should always attempt to pay your bill as soon as you get it, and pay it in full. If you can’t quite make the full amount, pay as much as you can so the total interest bill charged is lower. This way, you won’t have to worry about a shocking figure on your balance when you do pay it off.

Making your payments on time and over the minimum amount also puts you in good standing with your bank, which will come in handy in the future!

Financial emergency? Keep the card in your pocket!

It is going to be very tempting to just use your card when you run out of cash. On a shopping trip and really want that gorgeous dress? Don’t let your credit card come to the rescue. If you don’t have the funds to pay off the bill at the end of the month, you’re going to wind up struggling with debt.

You’re just too young for debt to ruin your life. Learn to plan your outings out better so that you won’t have to call on that shiny plastic rectangle to bail you out in a tight spot.

Don’t apply for more credit cards

You probably know a bunch of people who have two or more credit cards in their wallets. While it is tempting to always have one as “backup,” this is a slippery slope. It is far easier to lose track of your payments, and the stress of multiple bills arriving at once is just not worth it. Keep your credit card collection limited to one.

If you can resist the temptation to overuse your card and can make your payments in full as well as on time, your card company is going to value you. After some time, you may receive special interest rate offers, balance transfer deals, loyalty points or a higher credit limit. These offers may seem tempting but remember, credit card issuers are out to make money, they want you to spend, which is why they give valued customers preferential deals.

If you are offered an exclusive deal, keep the tips above in mind and don’t let the credit card company take advantage of you.

If you’re looking for more tips, tricks and advice on saving, investing and growing your wealth, download the Money Is Boring ebook today. Just click here to download for free.

Article by Silvia Palasca.

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