Winners and Losers in the Credit Card Game

With a title like that, you could be forgiven that this article is going to be about how the only winners from credit cards are the banks, with their high charges and profits, while ordinary users are the losers racking up expensive debt.

While there's certainly a grain of truth in that, I think that gives the average card holder too little credit. There are certainly ways to come out ahead in the credit card stakes - it all depends on how you use your card.

Ways to be a Winner

Don't Carry A Balance - Always clear your account every month so that you avoid interest charges.

Use Cash Back and Rewards - If you avoid paying in interest on your spending, while at the same time earning rewards or cash back, then you're certainly going to win the game, you'll actually be turning a profit.

Consolidate to a 0% Card - If you move your various credit card balances into one, making use of a 0% balance transfer, you'll be able to avoid interest on your debt for up to 15 months, giving you a head start in actually getting your debt cleared.

Replace Loans with a Long Term Deal - Some credit cards let you lock in a low rate for life on balance transfers, and this rate is usually lower than almost any other form of finance. Replace your personal loans and other debt with one of these cards and you'll save big in interest.

Losing Strategies

Paying the Minimum - If you only pay the minimum amount required when you get your monthly statement, your debt will hang around for far longer than you'd like, and be far more expensive. A huge chunk of every minimum payment goes towards simply paying interest, not reducing your debt, so in effect you're treading water. Paying a little more each month tips the balance in your favour, and you'll see your debt reducing much more quickly.

Spending on Balance Transfer Cards - If you've transferred a large debt to a card and are paying 0% on it, then don't use that card for spending. All your repayments will go towards clearing the cheapest debt first (i.e. the 0% part), leaving your purchases to rack up interest at your card's standard rate for as long as some of your balance transfer remains.

Day to Day Spending - Don't use your card for little luxuries or day to day bills unless you plan to clear your balance in full at your next statement. Fueling an unaffordable lifestyle with plastic will inevitably lead to trouble.

There's no doubt that if you use a credit card unwisely, you can land yourself in real financial trouble - the list of people forced into bankruptcy by card debt is long and unedifying. However, with a little care and planning, you really can be a winner in the credit card game.