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You and your money
Credit cards can be convenient, as they allow you to spend as you go and then make one payment at the end of the month.
However, if you're not careful you can end up paying dearly for the convenience they offer.
The FSA's website www.moneymadeclear.fsa.gov.uk explains some of the 'traps' that credit card holders can fall into.
1. The late payment trap: If you miss the date shown on your statement you may be fined a late payment charge. If you're behind with your payments, this could also show up on your credit history, which another potential lender might see. An easy remedy: ask your card issuer for a direct debit form and pay on the due date direct from your account.
2. The minimum payment trap:
Remember, if you just pay the minimum amount each month, your interest will build up, month after month, on every pound you owe. If you can't pay in full, at least try to pay a bigger amount each month.
3. The cash trap: Don't confuse credit cards with debit cards when you're at a cash machine. If you use a credit card to withdraw cash, you'll normally be charged an extra fee.
4. The store card trap: Many leading shops have their own credit cards. Sometimes they offer extra discounts for cardholders and preview sale days. But many store cards carry very high interest rates. Be careful to check their %APR rate before signing up – the lower the rate the better.
Credit cards have their advantages, but they are not always the right choice.
If you need the help of some extra funds, consider whether a bank overdraft or personal loan might be cheaper.
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