Credit cards are one of the most popular forms of credit but if they’re not managed wisely, it’s easy for debt to mount. There are some simple ways to avoid this, starting with thinking about the credit card itself.
Is your card right for you?
There are hundreds of credit cards on offer from banks and other financial institutions, each with different features. Shop around and make sure you’re getting the most out of the product.
Credit cards can range from ‘no frills’ cards with low interest rates through to full service cards with a wide selection of features, such as travel insurance and reward schemes, with higher interest rates.
If you’re unlikely to spend as much as is needed to take advantage of reward schemes, a card with less features and less costs may be better for you.
There are a variety of ways for consumers to find information on credit cards, including on financial institutions’ websites, in bank branches or over the phone. Online comparison tools can also help consumers stay informed.
Keep track of your spending
It’s important to treat your credit card like a debit card and only spend money you have. Consider setting a budget, putting in place a savings plan to pay down any debts, and tracking your expenses.
If you’re only making minimum monthly repayments, it can take months or even years to repay, with interest accumulating over time.
Many banks have online tools to help customers better understand their expenses and accounts.
Don’t get caught out missing a repayment
Talk to your bank about putting in place alerts and notifications so you always know when a payment is due. You may be able to set up an auto-payment so you never miss a repayment by mistake and accidentally incur interest charges.
Tip: If you want to cancel your credit or debit card altogether, you need to contact your bank and ask them to close your account – cutting up the card and throwing it away will not close the account, or stop any direct debit arrangements.
Before you cancel the card you’ll need to pay off the balance and make sure there are no outstanding amounts owing to any merchants and cancel any direct debit arrangements.
Talk to your bank
If you’re finding it hard to manage your finances, talk to your bank about your options. You may like to put a temporary stop on your credit card account. If you do so, don’t forget to update any direct debit arrangements you may have with merchants and retailers.
Don’t just cut up your credit card – this doesn’t close your account and you may continue to have a debt with your bank or other credit card provider.