How do I best manage my credit card?

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Managing your credit card

There are some simple steps you can take to manage your credit card and improve your credit rating at the same time. You’ll need to be methodical and organised, but if you can keep on top of your credit card, it won’t get on top of you!

  • Pay Your Bills On Time

    You should always pay your credit card bills on time. Give particular attention to the amount of time needed for your payment to clear. If you’re paying by cheque for example, you should post the payment at least 5 working days before the payment date shown on your statement to allow time for the cheque to arrive and clear.

    Most credit card companies consider payments to have been made on time only if they get cleared funds by the required payment date. If you delay, they may charge late fees (usually £12) and file a late payment entry on your credit report which could affect your credit score.

    Check your statement to see the suggested lead times you should allow depending on how you intend to pay (cheque, cash or debit card). Paying your bills on time will also help improve your overall credit history and build your credit score. That’s the case for credit card bills and all other monthly bills (gas, electric, store cards, mobile phone contracts etc) you receive.

  • Pay More Than The Minimum Amount

    If you can, try to pay more than the minimum amount requested on your credit card statement. It needn’t be a huge difference like double or triple the amount, but you’ll be better off if you do this.

    For example if your balance is £1,000, the minimum payment required would probably be in the region of £25. If you only ever pay the minimum it will take a very long time to pay off the amount you owe and cost you more as interest will continue to be added on a daily basis.

    Also if you don’t pay your bills on time, late fees and charges could be added, creating a larger minimum payment for the next month. So remember, pay more than the minimum amount and pay it promptly.

  • Don’t Exceed Your Credit limit

    You should always check your credit limit. This is normally fixed when you are first issued with a credit card and normally printed in your welcome pack and on your monthly statement. Sometimes credit card issuers will change your credit limit and put a notice that they have done so on your statement.

    If you do go over the credit limit on your credit card, you may be charged an over limit fee (Usually £12) that will be added to your total, costing more in interest charges and creating an even larger minimum payment required for the following month. If you persistently exceed the credit limit then that too will be noted on your Credit File and will damage your Credit Score.

  • Manage Your Budget

    Managing and controlling your credit card debt should be part of controlling and managing your overall household budget. The first step is to keep track of what you actually spend. You’ll often be surprised at where the money goes and what you spend it on. Only when you have a firm idea of what you are spending every month will you be able to make decisions about what can be cut, what must stay, what could be increased etc. It’s worth visiting the FSA's Financial Health Check on their Money Made Clear website to find out tips for improving your budget planning. You’ll also find a series of helpful and Free online budgeting tools on the same FSA site. You could also take the FSA’s Debt Test to find out whether you have, or are likely to have, problems with your borrowing.

  • Watch What You Withdraw

    A credit card can be a very convenient method of payment particularly in emergencies or if you regularly purchase goods or services over the internet. You can also withdraw money with your credit card. Cash withdrawals often incur a handling cost of around 1.5% to 3% of the amount you take out with a minimum charge of around £1.50 to £3.00

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