Owning credit cards can feel like a good thing at the beginning; the seemingly unlimited purchases, freedom to access overdrafts and more. But when the debts pile up, it can be truly uncomfortable.
Fortunately, getting out of a debt crisis is not impossible. It requires some discipline, patience and careful planning. The disadvantage of accumulating debts doesn’t stop at reducing your loan credibility, it can cause personal stress and threaten one’s well-being. In order to live a debt-free credit card life, here are 4 hacker tips to guide your money habits.
- Use one credit card at a time
It can be tempting to apply for multiple credit cards, especially since it is easy. But having more than one increases your chances of spending more and increases likelihood of debt. Luckily, there are still ways you can make the most by using one card. Select a credit card with a low rate and use it instead, regularly. If you want to boost your credit score, pick one with a high utilisation rate instead. You can calculate rate by dividing your balance with the card’s limit.
- Request for lower rates
This can be done with a simple phone call to your credit card provider. So long as you have a decent credit score- say 730 or higher- and you are a loyal customer who meets payment deadlines, this should be easy. You could have one or two percentage points cut from your current rate. A low rate can save you hundreds of pounds annually. If a competitor has offered you a more competitive rate, let your card provider know as this can up your chances of a better offer.
- Transfer your balance carefully
Many people transfer money from a higher rate credit card to a significantly lower one. While this is a savvy move for saving money, it can bite you if you fail to do so cautiously. Be careful of using the new card while the bargain rate is still up, otherwise you will be required to pay interest on the new purchases. When you get the new (lower rate) card, stash it somewhere for the time being. Pay into your transferred balance monthly, but continue using the old card which has no balance. At the end of the month, when you pay the full bill, you will incur no interest charges.
- If you are truly hard up, make two minimum payments monthly
Most card issuers will charge interest on your account daily. In this case, the sooner you pay with the card, the faster your average daily balance is used up. This automatically means less interest charges for you to pay eventually. If you have a tight budget, pay the due minimum for the month, the pay the same amount 2 weeks later. Keep paying the minimum monthly amount (and interest charges) until your debt is cancelled. This way you manage your debts more conveniently.
Having a functional credit card can be a convenient way to handle your money payments, as long as the you keep it to a minimum and choose a reasonable rate for your expenses.