If you are smart with your money, a credit card can be a useful asset for managing your cash flow month to month. However, credit card agreements are not to be entered into lightly, so make sure you do your research before committing to a deal.
There are many different options available and credit limits vary according to the applicant. Interest rates are also provider and applicant dependent so make sure you know exactly what you are signing up for.
A lot of cards will offer a certain period of interest free purchases, which is great! But keep an eye on the limits because they can creep up as a nasty surprise.
The best place to start is getting a credit card free credit report. There are many places online where you can check your credit rating for free which will give you a good indication of the kind of deal you can expect and indeed whether you should even be considering a credit card!
If you have a bad free credit rating, you can be fairly sure that even if you do find a company willing to give you a credit card, they won’t be giving you a favorable interest rate or a very high limit on what you can borrow.
Credit Report Cards
Like being back at school, you can also get hold of your free credit report card. This is a visual representation of your credit rating as it currently stands. It’s probably the best way to quickly understand what you need to do to improve your credit score. Good free credit card reports will also let you know what steps you can take to improve individual aspects of your report if they are suffering.
Know Your Limits
While it can be tempting to get a credit card with a high limit (in the thousands), this can be dangerous if you have no previous experience with credit cards. Make sure you really know your stuff before committing to high limits.
The best way to start is with a low limit (perhaps £200) to see how you do. If you find yourself regularly hitting your limit before the month is even over, this is a good sign that you probably need to seek other ways to manage your cash flow. If you’re the type to just whack things on the credit card and think about paying for it later, you will quickly find your negative balance stacking up. Your monthly minimum payment will start to creep up and you’ll soon find yourself in trouble.
Dos and Don’ts of Credit Card Use
The biggest DON’T is not to use your credit card for daily expenses such as food, clothing, socializing etc. Use cash or your debit card for these expenses so you are sure you’re only spending what you can afford. Another bad credit card management approach is only making the minimum monthly payment. You should aim to pay off your credit card every month, or at least as much as you can.
Do negotiate a lower interest rate. Don’t accept a high rate just because it’s there, haggle with your provider and see about bringing that figure down.