Ten ways you can use your credit card more wisely in 2021

Not sure you’re using the cards in your wallet in the right way? We help you get the best out of your plastic

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Given the turbulent year we’ve just gone through due to the arrival of Covid on our shores in early 2020, many of us have had to rely on a credit card for one reason or another – some for the first time.

But with signs that things are starting to return to some semblance of normal, since the Government announced its roadmap out of lockdown, now is a great time to give your plastic a health-check.

Here’s some tips to help you use your credit card more wisely this year – and get your finances back on track – as we start to move forward with our lives.

1) Transfer expensive credit card debts to a balance transfer deal

If you’ve got costly debts on a number of credit cards, shifting these to a card with an introductory interest-free period on balance transfers is a good way to lower monthly costs. This will also give you some breathing space to reduce what you owe.

Some cards are currently offering more than two years at 0%.

But you must remember to factor in any ‘balance transfer fee.’ This could be as much as 3%.

To compare balance transfer credit card deals, head here.

Also note that getting accepted for a new deal will depend on your passing a credit check. To check your credit score and report, make use of our credit monitor service.

Representative example: If you spend £1,200 at a purchase rate of 21.9% (variable) p.a. your representative APR is 21.9% APR (variable)

2) Use an eligibility service before applying

Prior to making a formal application for any credit card, it’s well worth making use of our eligibility checker tool.

This will allow you to carry out a ‘soft search’ and shows the likelihood of you being accepted, without leaving a mark on your credit record.

3) Never miss a credit card repayment

Missing just one month of repayments on your credit card could hit your credit score hard – and could mean that your promotional offer gets withdrawn. With this in mind, it’s vital to take steps to ensure you pay off at least the minimum on your debt.

A good way to ensure you never miss a payment is by setting up a monthly direct debit.

Making payments on the due date will show lenders you are responsible, and help you build a positive track record. If you’re struggling to make repayments, it’s a good idea to speak to your bank to see how they can help you.

4) Pay off more than the minimum each month

While it’s vital to make at least the minimum repayment each month, you should try and pay off more than this, so you actually tackle the debt on your plastic. If you only repay the minimum, it could take you years to clear your debt. By paying off more than this, you will pay off what you owe a lot quicker.

Better still, if you can, try and clear the balance in full each month.

5) Avoid maxing out on your credit limit

Take care not to max out your credit cards. Ideally, you should try to keep your spending within 25% of your borrowing limit on each of your accounts. This means if, for example, you have a limit of £2,000 on your card, trying not to use more than £500 at any one time.

Staying within these limits will have a positive impact on your credit score.

6) Never use a credit card for cash withdrawals

Try hard to avoid using your credit card to take money out of a cash machine, as doing so could harm your credit rating. And, unlike using your plastic to make purchases in shops, you’ll get charged interest from the day you withdraw the money, even if you are within an interest-free period.

7) Plan how you are going to clear the balance before the interest-free period ends

If you have a card with a 0% period on purchases or balance transfers, it’s important to work out how you are going to pay off what you owe before that promotional deal comes to an end. If not, costs could rocket once interest kicks in.

If you don’t think you’ll be able to pay off your balance in full by this date, be prepared to switch to another deal at that time.

But remember that you can’t go on rolling over debts forever. The longer you leave it, the harder it will get. Have a realistic repayment plan in place – and be disciplined about sticking to it.

Representative example: If you spend £1,200 at a purchase rate of 21.9% (variable) p.a. your representative APR is 21.9% APR (variable)

8) Use a rewards card carefully

If you’ve got a card offering rewards or cashback on your spending, aim to clear your balance in full each month. If not, you will start getting charged interest, and this could outweigh most – if not all – of the gains from the rewards or cashback.

9) Take advantage of the protection offered

Use your credit card to pay for purchases costing between £100 and £30,000 to benefit from the safety net offered under Section 75 of the Consumer Credit Act. This will offer you some protection if your product or service is not delivered, or if a purchase turns out to be faulty – with your credit card company reimbursing you.

To find out more about the protection you get, head here.

10) Prioritise your plastic with the highest rate of interest

If you’ve got a clutch of cards in your wallet and are finding it hard to pay them off in full each month, prioritise the one with the highest rate – known as the ‘annual percentage rate’ (APR).

If you are struggling, the key is not to bury your head in the sand. Speak to your lender to see what options may be available to you. There’s also plenty of free debt help available from organisations such as StepchangeNational Debtline and Citizens Advice. Don’t suffer in silence.

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