Use Your Credit Cards Sensibly To Help Yourself Stay Out Of Debt

By: Joseph Kenny

When a minority of the population receive a new credit card, they often seem to view it as some sort of challenge. If a new card arrives that has a 5,000 spending limit, there seems to be an assumption that they have been given 5,000 to spend as they wish as quickly as possible.

Credit has been reasonably easy to find over the last few years, especially with credit card offers dropping through the door every week. However, responsible card ownership and usage is the only correct way to handle your available credit. Many people think they will just use the plastic this week and pay it off over the next few months. Unfortunately, this is a spiral that people get into where they are always using their credit cards and never paying much attention, paying them off.

From this situation is easy to get into a maxed out card and lack of funds to make decent payments to your credit cards each month. It always is a wise move to plan to pay off as much as you can from your cards, as quickly as possible. If you use half of that available 5,000 credit that is 2500, if you make equal payments for 30 months. The total amount of interest you pay will be 630, remember, that is on a debt of only 2500.

Individual personal debt in the UK now totals an incredible 1.3 trillion. With so many debts, and so much money involved. It is hardly surprising that mistakes are occasionally made in the processing of payments. It is possible to become the victim of debt collector's when the money owed is not your debt or responsibility. It is quite possible that the money owing could be the responsibility of a previous tenant or owner of the house you live in.

In the last year, the FOS, or Financial Ombudsman Service has received in excess of 200 complaints relating to debt collection. Over half of which are in connection with unrecognized debts. The FOS is in charge of regulating all companies that operate under a consumer credit licence. In the UK, this amounts to about 80,000 organisations. As people become more aware of the FLS. It is expected that the number of complaints about debt collection will increase many times over.

If you increase your payments so that it takes 18 months to pay off the card. Instead of 30 months, you will save over 300 in interest payments.
The big attraction of credit cards is of course the very flexible, payment terms they offer. All other types of loans require that you make set payments every month, without exception. However, the credit card more or less choose your payments amounts every month.

A sensible plan is to pay off an absolute minimum of 5% of the outstanding debt each month. That way, you are keeping your interest payments down and not allowing the credit card balance to get too high.

If you take the option to consolidate your debts by transferring balances from a couple of different cards to one card, or perhaps by taking out a debt consolidation loan. Do not then think that this releases all the spare cash now available on your cards. What this is in the reality is a chance to put your financial house in order, and get control of your credit card spending.

Credit card borrowing is expensive; use the credit cards as a convenience, not as an alternative way of paying, especially for day-to-day purchases.
Good credit card deals are available, and you should search those out. Look for cards, with low interest rates that are permanent, not just the first few months.

Remember that sensible use of the credit card not only keeps you out of debt. It also actually increases your credit rating, making it easier for you to obtain new loans, especially large ones like mortgages.

Therefore, it is to your advantage to always consider, if you should make a purchase with your card, or wait until payday and pay with cash.

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