Wednesday, October 27, 2021

Card mistakes can really add up

Image copyright Getty Images Image caption You should be able to pay off debt quicker if you already have multiple cards

If you have at least one credit card, there’s probably a good chance you’re making more mistakes than you realise when it comes to balancing bills.

These are common errors and add up to more money slipping away than it sounds.

Experts say it’s important for people to pick the right card, make sure that it’s costing you a fair price and follow a simple advice guide to keep from making more payments errors.

Sylvia Waycot, payments expert at savings firm LV, says many cardholders don’t realise the benefit of getting a card with a lower interest rate.

“Many people think that they need a credit card to build a healthy financial history and they don’t want to hold cash or cashback – and if you don’t want to have cash or cashback then you want to get a card with low interest,” she says.

“Low interest is good. It gets you that regular foot in the door. If you have two interest-free periods or interest-free periods, the third interest-free period is much less important.”

However, Ms Waycot says that you should be able to pay off debt quicker if you already have multiple cards.

“If you have several different cards, you’re losing money because you’re paying the interest on it that’s due every month – then you’re not using up credit available on the cards,” she says.

Tips to save

If you use your card just to pay for everyday items like groceries and gas, then you should make sure that the interest you’re paying is fair, says Ms Waycot.

“If you are paying cash, there’s no question you’re paying interest in the current account, while you’re seeing no interest on an average cashpoint card,” she says.

“You could be taking on extra credit – what is going on here, I don’t know, but it’s not an ethical way to spend our money.”

How to avoid making big payments errors

Image copyright Getty Images Image caption Opt for a card with no foreign transaction fees

Don’t carry a balance if you have to have one

Compare the amount you’ll pay in interest

This means ignoring those nice zero per cent deals.

“They say don’t use up a zero per cent deal or you’ll end up paying far more money in interest than that,” says Ms Waycot.

“That’s a bit like saying go on, hit the lottery and try and win £20 so you’ll never have to make any money again. That is actually more dangerous in the long run.”

Set up a special payment link in your account, like an automatic transfer from your card to an emergency savings account, where you can make a quick repayment on a bill if needed.

Go into the app or website and create a list of bills that you need to pay and make a clear separation between those who you’ll pay on a regular basis and those that you’ll pay if a special emergency arises.

In the meantime, you should look at how much you owe and work out whether you need to top up the cash to pay the debt.

“Go and pay off the debt. Don’t use up credit,” Ms Waycot says.

“The point is not to hold on to credit as though you’re a cash cow. The point is to keep yourself in the right financial cycle and understand that interest is important, whether it’s going onto an emergency saving account or whatever you’re going to do to pay it back.”

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