Paying Off Debt
Keep Your Credit Card Under Control

Paying off debt should always be a priority, especially during times of uncertainty and national recession. After all if you don't have much debt you are far more likely to be able to cope with life's unexpected curve balls.

This second page about credit cards will help you understand them better so that you are the one in control and not your cards. Make paying off your debt and money management your number one goal.

So lets start by looking at the hidden costs of those ever so handy cards.

What charges are there on credit cards?

The main way the lenders make their money from credit cards is the interest earned on outstanding balances. This is why they are always offering you higher and higher credit limits, hoping that you will spend up to that limit and have to pay it off slowly.

picture by Catatronic

However there are a few other ways they make money from credit cards.

Fines - if you do not make a payment on time every month they will add a fine to your bill. These fines vary from provider to provider but they are certainly not small and are definitely something you want to avoid.
My credit card advice to avoid this is to set up a direct debit to pay off the minimum amount every month in time for the deadline. Follow this up with sending a cheque if you can, paying off debt little and often is a good idea, this way at least you would have made sure you won't ever be caught with a late payment fine.
Insurance policies - Every credit card provider will offer you insurance to either protect your card if it is stolen or in the event that you become ill and are no longer able to pay off your debts.
By buying this protection with your card it will be costing you much more than if you cover yourself with a separate insurance policy.

Transaction fees - these you won't pay yourself; instead the retailer who is allowing you to pay for your goods with a credit card has to pay a very small percentage to the credit card company.
However, we do pay for it indirectly, as the retailer has to increase their costs to cover this fee. Ah, there's no escape!

The credit card advice golden rules

Here is a quick summary of things to think about when using a credit card. First put your frugal head on:

Always check regularly to see if there are better offers on the market. Sticking with one card could be losing you money.
Seek credit card advice from your local banks and online to see the latest interest rates.

Move a balance to another credit card if they are offering a fixed term of interest free on transferred balances.

Note, if you do this, cut the card up and only use the account for paying off debt on the card itself, otherwise you will be charged interest on your new purchases and this can spiral.

If you pay off your balance every month then consider using a credit card that offers rewards. The rewards are great like money off goods etc.
But these cards are not good for those who need to borrow on their credit card as the interest will far out cost the rewards.
When travelling abroad try to use travellers cheques that you have purchased before you go. Using a credit card or debit card abroad to obtain cash can have extra hidden costs, which are added to your balance.

Never think a credit card is a good idea for paying off debt from other areas of your life. Often the charges are far higher and you will end up paying more in the long run.

Use credit cards only when you have to. The frugal lifestyle is better lived without debt and worry, and the credit card although your friend in times of need, can also be your worst enemy if used carelessly.

This credit card advice is designed to be used as a starting point for your discovery of the perfect credit card for you. Regulalry check offers made by the banks but also check with online comparison sites, which will have the most up to date rates available at the time.