Credit cards mean different things to different people. For some, they’re payment protection, for others they’re more convenient than cash and investments. Some people use a credit card as a short-term cash flow solution, and others use a credit card as a personal loan to borrow within their credit limit.
If you pay your balance off every month and never pay interest on a credit card, this article will not offer much for you. But if you keep balance on a card for the longer term then you’ll appreciate these top tips for managing your balance, ensuring you invest as little as possible to service the balance – which will effectively reduce the cost of your purchases!
Management Tip #1 – Prioritize Borrowings by Interest Rate
The first step towards minimizing interest payments is to rank multiple balances by interest rates if you spread your borrowings across multiple cards. If you make an overpayment, then make sure it hits the card with the highest rate first. This way, the debts that roll up with the highest interest will become your smallest – thus saving you pounds overall. Any of the best investing books will explain that this effort to rank your debts by expense, and to pay off the costliest first, is one of the smartest tips for managing a large balance.
Management Tip #2 – Consolidate Borrowings onto one Card
A more complicated and administrative route is to actually transfer the balances to the cheapest card, or perhaps a new card. Yes, this will involve calling around and filling in paperwork – but having a single card with a single balance is great for de-stressing. One number, one card, simple! By consolidating all balances on the cheapest card – you’ll be going one better than tip #1, by ensuring every pound you spend hits the best card!
Management Tip #3 – Set up a Direct Debit for a minimum payment
If you already have a sizable balance from, for example, the purchase of a car – the last thing you’ll want is to increase it by being hit with late charges and penalties. Life is hectic and bills can often fall off the table. If you forget to pay a bill on time then you could be charged £10-£15, which is a restaurant meal in other terms! Call up your credit card provider today and ensure you set up a direct debit from your current account to cover the minimum payment required. This will save you from having to make a trip to the bank each month, leaving you free to enjoy your free time however you please!
Management Tip #4 – Utilize 0% Balance Transfer Offers
In some industries, such as investing, it pays to remain loyal. For example, when comparing share dealing platforms, you will want to look for loyalty offers before jumping ship.
However, Credit cards certainly aren’t one of those types of industries! Credit card companies are offering brilliant incentives to attract new customers, and the juiciest of all the worms is the ‘Zero Percent Balance Transfer‘ offer. These deals (Which do generally charge a few % as an upfront fee, by the way) give an opportunity for credit cardholders to take a break from interest payments for up to 2 years – meaning the balance at the end of the introductory period will be the same as when you began (fewer minimum payments).