Our financial planners and mortgage brokers look at a lot of financial information on the way to helping our clients. One of the more disturbing patterns we see on a regular basis is clients who pay too much money on credit card debt.
For many, having a credit card seems like an invitation to immediately max it out. After a few late payments, some companies raise the interest rates. If you have multiple credit cards at maximum interest rates, it can become a problem for your budget, your credit rating and what lenders deem your “ability to pay.”
Here are some ways to get credit cards working for you instead of against you.
Choose Your Credit Card Wisely
Compare interest rates. Look for hidden “escalator clauses” that kick in after late payments. Some companies even raise rates after you have made a late payment on another company’s card.
Budget Your Finances
Especially in relation to credit cards, you need to have a budget. Don’t make purchases that will result in a higher monthly payment than your budget dictates.
Pay on Time
We already covered “escalator clauses,” but paying on time avoids being charged late fees. It also keeps you from getting “black marks” on your credit rating.
Track Your Purchases
Always track your purchases so that you know how much you have spent on your credit card. This will help you stay within your budget and keep you from overspending your limit.
Never Pay Just the Minimum
The minimum repayment is designed to keep your debt level and interest per month high. Always pay more than the minimum and try to pay off the card entirely from time to time.
Avoid Cash Advances
Cash advances usually have a service fee or higher interest. Also, they are a bad habit for many.
Watch Out for Store Cards
Store cards usually come with high interest and extra fees. If you decide to take out or use a store card, make sure you know exactly what you are getting into.
Call Purely Finance
Talk to one of the mortgage brokers or financial planners in our Perth office. Let’s develop a financial plan that is right for your current situation. Call: (08) 9453 8888.