Phil MeekinView Profile
Good credit management is important for you as an individual and your business. Any late payments and mismanagement can affect your credit rating.
Being able to look after your finances and pay off any debts, such as credit cards on time is important for being approved for any loans in future.
If you’ve never had a credit card before or you are struggling to stay on top of your repayments, we’ve put together some tips below to help you.
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 is found to be wrong, it will be removed and should no longer affect your credit score. If things like this are left then it can affect your chances of approval on credit applications in future.
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 cost 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 there is nothing 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 on a month by month basis, the quicker you pay your card off, the less time you have a balance to pay, the smaller amount of interest that will be added.
Pay on time to avoid late fees
Along with being given a minimum repayment charge, you will also be given a date by which your credit card repayment for the month needs to be paid by. If your payment is a day later or more than that, 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. The way this works is by your credit card provider taking an amount of money out of your account on one particular day a 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 which is best for you, so you can change it if necessary. You can change the date by writing to your credit card provider and informing them of the day that would suit you best. Setting up a direct debt with your credit card provider is a good way to not miss or be late on payments.
Keep within the limit given to you
When you are approved for a credit card, your bank or provider sets you with a limit on your card. This 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 £1200 limit, then you should stay within that limit at all times.
If you go over your credit limit, your provider will likely charge you over the limit fees, decrease the limit on your card or provide 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 by your credit card provider. 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 cash from an ATM with your credit card, you will have to pay fees and interest which is usually a higher rate than you would normally 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 as usual.
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.