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Top tips for good credit card management

Authored by Phil Meekin

Phil Meekin

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Approximate read time: 5 minutes

Good credit card management is important for you as an individual and your business. Any late payments and mismanagement can affect your credit rating.

The ability to look after your finances and pay off debts on time is essential for being approved for any future loans.

If you’ve never had a credit card before, or you’re struggling to stay on top of your repayments, we’ve put together some top tips to help you with the management of your credit cards.

Check bills and credit score regularly

Keeping on top of your bills and your credit score every month at least will be a great advantage for you. This way, you can keep an eye on any activity and pull up anything suspicious immediately. If there is suspicious activity on your credit card statements, then you should inform your provider as soon as possible so it can be investigated and removed.

If there is anything suspicious on your credit report, then this should be disputed as soon as you notice it. If it’s found to be wrong, it will be removed and should no longer affect your credit score. If things like this are left unchecked, then it can affect your chances of approval on credit applications in the future. The health of your credit score can also impact your ability to take out commercial finance loans.

Pay off in full each month

One of the best ways to deal with your credit card is to make sure you pay at least the minimum payment each month. For example, if your minimum monthly repayment is £12, as required by your credit card provider, you should pay at least £12 a month.

The more money you pay off each month, the better, and nothing is stopping you from paying off more than the monthly repayment cost. You could pay off £50 instead of £12 if you can afford it – paying off your credit card earlier.

As interest is added monthly, the quicker you pay your card off, the smaller the amount of interest added.

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Pay on time to avoid late fees

Along with being given a minimum repayment charge, you will also be given a date by which to pay your monthly repayment. If your payment is a day or more later, you will incur a charge, and again it will negatively affect your credit score.

The best way to make sure you pay on time is to set up a direct debit from your current account. This process works by your credit card provider taking an amount out of your account on a set day each month. You have two choices here for the amount they take; either the whole balance or the minimum payment. If you choose the minimum payment, you can pay more on top a month by transferring the money from your online bank to your credit card account.

Providers will usually let you choose the day of the month best for you, so you can change it if necessary. You can change the date by contacting your credit card provider and informing them of the day that would suit you best. Setting up a direct debit with your credit card provider is a safe way to avoid missing payments.

Keep within your limit

When you are approved for a credit card, your bank or provider puts a limit on that card. Said limit is based on what they feel safe to lend you, based on the current information on your credit file. If your provider has approved a £1,200 limit, then you should stay within that limit.

If you go over your credit limit, your provider will likely charge you ‘over the limit fees’, reduce the limit on your card or issue any other penalties deemed appropriate. The provider may also decline the payment if you have already reached your credit limit or this payment will push you over. If you go over your limit often, this may result in your account being closed. Know your limit and stick to it.

Don’t use cash withdrawals

Unlike debit cards, you should not use your credit card to withdraw cash for free. If you withdraw money from an ATM with your credit card, you will have to pay fees and interest, which is usually a higher rate than you would typically be charged.

There is no interest-free period on withdrawals like there is with purchases, so it won’t be a case of interest being charged at the end of the month.

These fees and interest charges for cash withdrawals also apply to:

  • Buying foreign currency.
  • Buying postal orders.
  • Competition entry fees.
  • Paying for something with credit card cheques.
  • Gambling transactions.

The best way to manage your credit card is to stay on top of payments and purchases. By not being aware or not paying off the correct amount on time, your credit score may be affected, and it will cause you financial difficulties in the future.

In summary

Effective credit card management and monitoring of your credit rating means you’ll find it easier to apply for loans and other credit arrangements going forward. It also makes you less likely to fall into credit card related debt. You can maintain a healthy credit file by regularly checking your credit score and outgoing bills to make sure all transactions are genuine and within your budget. Pay off your outstanding balance and your minimum repayment costs each month to avoid additional interest and pay on time to avoid late fees. Keeping within your credit limit puts you in better standing with your bank or credit provider. Finally, you should be careful not to use your credit card for withdrawing cash.

If you choose not to follow these tips and find yourself burdened by credit card debt, we can still help you repay what you can afford by applying for an Individual Voluntary Arrangement (IVA), in which your debts are all consolidated into one monthly payment to your creditors, managed by a licensed insolvency practitioner.

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