The following is a guest post by John, who works in financial management specializing in credit cards for bad credit. He’s a keen blogger and has written several pieces on how to improve credit rating.
Millions of people in the UK use one or more credit cards and they’re an extremely popular form of payment throughout the rest of the World.
It’s easy to see why too; credit cards are an extremely convenient and easy method of payment. They can be used to purchase good or services either in stores or over the Internet, withdraw cash from bank machines, and can even be used as an easy form of identification. With added competition for credit cards, a myriad of incentives, loyalty schemes, and reward schemes are available with most credit cards, with the majority of them also offering insurance covering your purchases.
But whilst credit cards are handled well by some (usually using them in emergencies or utilizing the tips outlined below), they represent a dangerous way into financial difficulties as a worrying amount of people slip into unmanageable credit card debt.
This article is a guide looking at some of the steps you can take to manage and reduce your credit card debt, whilst improving your credit ratings at the same time. You will need patience and a lot of organization but it is more than possible for anyone to control their credit card debts.
Keep Up With Your Payments
The first point I want to make it that you should always try keep up your scheduled credit card repayments. If you can keep up your repayments on a regular basis you’ll be taking a huge step to improving your credit rating.
Make sure you’re aware of how long your payment will take to clear; cheque payments and some bank transfers will take a few days to clear, you need to take this into account in order to have your payments considered ‘on time’ by the credit card companies.
Should you miss your repayment date, you’ll be charged a penalty fee (which varies depending on the company), which will simultaneously make your financial management more difficult and lower your credit rating.
Pay More Than the Minimum
Secondly, do your best to pay more than the minimum amount required each month. You don’t need to be drastic, but making sure your payment exceeds the minimum required will mean you pay less in the long term (due to interest), get into a good financial management habit and improve your credit score.
Don't Exceed Your Limit
The next point is probably the most important for effectively managing your credit card debts; don’t EVER exceed the fixed credit limit dictated by the credit card company. It will create a bad financial habit and will add to a mounting debt that has the potential to spiral into serious financial difficulties.
Should you exceed your credit limit, you’ll be charged a penalty fee that will increase both your minimum repayment for the next month and the amount you have to pay in interest. Consistently going over your credit limit will result in a lowered credit rating, which can often be hard to recover from.
It might be a wise step to figure out what would be a sensible credit limit for you, then contacting the credit card company and requesting that they lower your credit limit. This is particularly advisable if they suddenly increase your credit limit, as this creates a heavy temptation to overspend.
Budget
The last tip is an important, albeit fairly general one. You need to get used to properly managing your monthly budget. Keep a proper track of what you spend, noting down exactly what you spent it on. You might well be surprised at what you’re spending your money on every month and if you can get a strong idea of your spending habits, you’ll have a far better chance of cutting down your monthly outgoings.
I’ll give you a fairly simple example, last month I saw I was buying a bottle of water every day on the way to work at 69p per bottle. This worked out to an average of £13.80 for 20 bottles. A quick trip to a local supermarket and I found 8 bottles of Evian mineral water on a ‘buy one get one free’ offer, priced at £1.91. I bought two 8 packs which gave me 32 bottles of water (enough for one every day of the month, plus a couple left over), for £3.82, giving me an overall monthly saving of £9.98.
As I said, it’s a fairly simple example but it shows you how you can cut down your monthly spend with a little forethought and organization, and those savings really add up in the long run.
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