Smart ways to use a credit card #AD

Credit cards are often seen as a bad thing, and they can be when they’re not used properly. I was guilty of using credit cards far too much when I was younger, without any thought about how I would pay that debt back. It’s only now that we’re completely debt free that I recognise that there are actually some benefits to using a credit card, but only if you’re smart about how you use them.

When might you need to use a credit card

There are many times when you might choose to use a credit card over a debit card. Perhaps you’re making a large purchase and don’t have the funds available in your bank account. Or maybe you choose to pay using a credit card because of the extra level of protection you have on your purchases should anything go wrong. Maybe you’re using a credit card to pay for a holiday or perhaps you’re moving an existing credit card over to a 0% interest card in order to save money.

Whatever the reason, it’s important to be smart about how you use credit cards.

How to manage your credit cards

As with any financial product, it’s important that you understand exactly what you’re signing up to before you take out a new credit card, as well as considering any impact that might have on your credit record. There are smart ways to use a credit card, just make sure to do your research.

Know your budget

I can’t emphasise enough how important it is to know your budget. If you’re finding that you are using credit cards to cover the costs of everyday living expenses, then it’s time to take a deeper look at your finances.

Sitting down and looking at your finances for the first time can be daunting, but it’s really, really important that you do this, particularly if you’re struggling to get through the month. You need to be completely honest with yourself about all of your outgoings, and if you find you have more going out than you do coming in, then it’s time to make some cut backs.

How to choose the right credit card for you

Before you apply for a card, it’s important to make sure that you’re choosing the right one for you and your needs. It’s worth comparing the different options and seeing what different cards can offer you. For example, HSBC Credit Cards offer various different card options depending on your particular circumstances. If you’re looking to move an existing credit card balance over, then the 0% balance transfer card might be your best option.

Avoid making the minimum repayment each month

In an ideal world, you want to be clearing your credit card balance entirely each month. After many years without owning a credit card, both myself and my husband now have a card each. We use these cards purely to boost our credit rating as we need to show that we can be responsible with credit and manage our money. We use our cards a couple of times a month and clear the balance entirely when the statement comes through. This is a really positive way to make use of credit cards.

If you can’t afford to clear the balance in full, then you should at least aim to pay more than the minimum payment amount. This will reduce the amount of interest you pay, as well as showing future lenders that you’re not struggling to repay your debts.

Take advantage of 0% interest offers

Many credit card companies will offer 0% interest to new customers for a set period of time. If you have outstanding credit card debt, then it’s always a good idea to switch that debt over to a card with 0% interest so that you’re only paying for the actual money you borrowed rather than paying a fortune in interest.

Introductory offers will normally have a set time limit, and when that comes to an end, your credit card debt will automatically start to accrue interest. So it’s a good idea to make a note of when the introductory offer ends so that you can take the time to do a balance transfer to a 0% interest card. This might mean switching a few times, but the amount of money you save means that it’s worth it.

*This is a collaborative post.