It can be a difficult task not whipping out the old credit card every time you walk into a store, restaurant or bar. Having that flexibility at your fingertips can be contagious and the ease at which you can run up your balance can be a very scary thought. This is where fiscal responsibility is vital. First of all, decide whether you absolutely need a credit card or if you are getting one just because it looks good. If you decide you really do need one then choose a credit card with the very best rates to suit your pocket.

Simple Strategies are the Best

Every time you use your credit card you will be adding to your balance. With that, you might also be adding to the amount of compound interest on that balance. If you choose to only pay the minimum suggested payment every month, you can easily fall into the trap of increasing your balance over time. The interest mounts up and by only paying the minimum, the compound interest increases, meaning that it could take you years to pay off  the entire credit card debt. It will also cost you far more because the interest will increase with every month that you only pay the small amount. Always pay more than the requested amount whenever possible.

Ordinarily a minimum payment will be somewhere in the region of 1% up to about 5%. If your balance is less than one hundred pounds it is an excellent suggestion that you pay off that one hundred pound upon receipt of your bill. If your balance is over one hundred, then perhaps paying something in the region of half of it would work. It is also a prudent measure to not use the card until the balance has been reduced back down to zero.

Cash Costs Money

Taking out a cash advance on your credit card is an extremely costly business. The fees for withdrawing cash advances from an ATM can be as high as three pounds for each transaction. Over time this can add a huge amount to your balance. If at all possible, do not use your credit card to take cash out. Use your bank account debit card instead.

The negative repayment hierarchy that credit card companies use means that your cash advances get put to the back of your repayment queue and they accrue far more interest that your store or online purchases. New rules are applying soon, which will change this method of practice, but until they do change, always pay your balance off completely each month if you choose or need to take out a cash advance. It means that you won’t be lumbered with the interest charges when your bill comes. If you have a cash back credit card you can earn extra on what you spend each month.