AS the dust settles on the New Year and your January resolutions begin to waiver, now’s a good time to take stock and really start to make realistic plans for the year ahead.
As we look forward it’s a good idea to spring clean your debt just like you’d spring clean your home and look forward to a brighter financial future.
We polled our readers on Instagram and we found out that 87 per cent of you use your credit card for day to day spending, where 13 per cent of you only use it for big, one off purchases.
If you’re a regular plastic flexer then getting a handle on how you manage your debt is a great idea and can bring you more financial freedom and better peace of mind.
We’ve broken it down into three, easy parts and debunked the myths for you.
Know your interest
APR stands for annual percentage rate and it’s the percentage of interest you’ll pay on money you borrow over the course of a year.
The APR on a credit card depends on the card offered and the credit rating of the potential customer. The lower the percentage, the less you’re paying.
If you don’t know what your APR is then now’s a really good time to find out. Your interest rate will be printed on your credit card statement so next time you receive one take a look.
If it’s higher than you think you should be paying then it might be worth switching cards. It’s always a good idea to use a comparison website and shop around before you make a decision so you can ensure you’re getting a good deal.
You should make sure to use an eligibility checker before applying for a credit card to get an idea of your chances of being accepted. This is called a soft check and won’t leave a mark on your credit file.
Once you apply for the credit card a hard credit search will be performed and this will leave a mark on your credit file
If your credit rating isn’t great you will most likely end up paying more interest, and it could be worth looking at getting a credit building card which could help reduce the rate you pay in the future.
How much do I pay each month?
Ideally you should pay your credit card bill in full each month but a lot of us are not in a position to do this.
Although it’s tempting to pay the minimum repayment each month you will inevitably end up paying more interest in the long run and the debt will take a long time to clear.
Minimum payments are usually set at a percentage of the debt, usually around 1 per cent plus interest and/or fees you’ve been charge on that month’s balance.
Your statement will usually show two repayment options, a minimum payment and the full balance. You should always pay at least the minimum payment to ensure you are managing your debt and not charged fees or impact your credit rating.
However, minimum doesn’t mean recommended and if you only pay that figure it will cost you more and take longer to clear your balance.
Using a repayment calculator will help you work out how much you can save on interest, just make sure you work out whether you can afford the repayments before you commit.
When should I pay my bill?
Regardless of whether you’re paying the balance in full or making a fixed payment you should always pay your bill as soon as your statement arrives.
This is especially important if you’re not paying your bill in full because interest is calculated daily – so the longer you wait, the more interest you’re paying.
It’s a good idea to opt into text and email alerts which will notify you when your statement is due – this way you can pay as early as possible and reduce your interest.
Paying it late could result in a late payment fee and harm your credit file.
If you regularly pay your credit card bill on pay day you should use this time to check when your bill is actually due – you could be paying it late without even noticing.
Some credit card providers offer flexibility on billing cycle dates which can mean your payment due date can be flexible. This isn’t guaranteed but if you’re the kind of person who prefers to pay their bills on pay day then it could be worth speaking to your credit card provider.
When we asked our readers on Instagram about their credit card habits 22 per cent said that they had been charged a fee by their credit card provider before. The best way to pay your bill is by direct debit, this ensures you’re never late and not in any danger of accruing any extra fees. Of course, you need to ensure there are sufficient funds in your current account or the payment will bounce back and you may be charged.