Avoiding Credit Card Problems

Credit cards have long had something of an image problem, being seen by many as a fast track to debt problems and general financial distress. While attitudes have changed over the last decade or two, to the extent that nearly everyone these days carries a card, there's no doubt that this is one of the easiest forms of credit to get into trouble with.

There's no reason that this needs to be so, however, so long as some basic principles of safe usage are borne in mind.

Pay On Time

Most people pay late at some point, whether through an oversight or a cash flow problem of some kind. However, frequent missed and overdue payments can have a serious impact on your credit rating, as well as having other serious side effects. Read our article on late payments for more details.

Pay As Much As You Can

In an ideal world, you'd clear your balance in full and on time each and every month, so as to avoid paying interest altogether. Not many people achieve this of course, but even so you should pay as much as you can to minimise the amount of interest you pay.

It's certainly highly advisable to pay more than the minimum amount shown on your credit card statement, as sticking to this low figure will ensure that your debt repayment is strung out for years, and the amount of interest you pay will be greatly inflated.

Avoid Impulse Purchases

Paying by plastic is so easy that impulse purchases can be completed before you've even begun to consider whether it's a good idea. Avoid the temptation by not carrying your card with you whenever you leave the house.

If a purchase can't wait until the next shopping trip, is it really worth making at all?

Avoid Cash Advances

Credit cards can now be used to withdraw cash from ATMs, but this is a seriously bad idea. Not only will you be charged a fee to do so, the interest charged on debt you build up in this way will be far, far higher than that on ordinary purchases.

Avoid Credit Card Convenience Cheques

A similar story applies to so-called convenience cheques which were once commonly issued to cardholders. These too attract significantly higher rates of interest, although this is less of an issue than it used to be, as they are now rarely issued by most mainstream card accounts.

Stick To One Card Only

Finally, in these days of easy online credit card applications, many people end up building up quite a collection of different cards in their wallets. This is truly one of the fastest ways to get into credit card trouble - taken individually, the debt on each card may not look too hard to deal with.

The total balance across all your cards though can quickly race ahead until the point where it's relly become a problem before you're fully aware of what's happening.

Avoid this by sticking to using just one card, or at most one for purchases and one for balance transfers, to make best use of the deals available for each.


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