Credit cards are an expensive way to manage debt, but they are a vital part of daily life, and so many of us have been sucked into relying on them to finance our lifestyles. There are several things you can do to make sure the total cost of your credit card debt is kept down.
The Credit Card shuffle
Money Saving Expert Martin Lewis says it isn’t necessary to take out a new card each time you want to move your debt to a low interest account. Each time you take out a new account in return for the 0% interest six-month period, or whatever is on offer, you’re creating a new debt liability on your credit file, and the company that you signed up with (such as Money Supermarket, for example) will be getting paid a commission for the sale.
Martin Lewis’s Credit Card Shuffle takes a bit of research and a few phone calls but it could save you hundreds of pounds in ongoing interest and kill the need to take out yet another credit card. Basically, it involves moving your debt from one full card to a card that has credit available on it – with the card provider offering you a lower interest period on that debt they are taking on. Quite simply, you could be converting a debt that is costing you 15% to one that costs you 2.9%, by way of example, as you can see in Lewis’ video.
Other credit card tips
- Look for credit cards that offer cashback or points benefits on purchases.
- Use a pre-paid card. These work like debit cards but they offer the benefits of a credit card when you are shopping. Buy a Mastercard pre-paid card and put £100 on it, and you can use the card anywhere Mastercard is accepted. The benefit is that you can only spend the money you have put on the card.
- If you travel abroad, check how much your credit or debit card charges for ATM withdrawals. It’s often cheaper and safer to use a debit card in an ATM abroad than cashing a load of Euros before you go. Withdrawing money on a credit card, however, isn’t cheap because of the interest you are paying on the money.
- Keep checking your statements for any unexpected charges or price increases. Compare your interest rates regularly with other cards on the market. Move your credit to a new card if you want to benefit from some interest free period. Some cards offer up to 18 months 0% interest if you move a debt from one card to them.
Most importantly, the best thing you can do with a credit card, if you’re in a position to do so, is to send it back and cancel the account so you are no longer tempted to use it. You could cut it up with a pair of scissors but the card is actually the property of the lender and they may not like you damaging the card and disposing of it unsecurely.