----------------- ----------------- |  | | Last Updated: Wednesday, 21 January, 2004, 09:20 GMT |
| Millions of us use credit cards every single day, and at their best, they provide financial flexibility. You can pay your debt off immediately, "buy now, pay later" or spread the payments of a hefty bill over a much longer period of time. But the flipside to all that is the ease with which the credit purchases can start to mount up. To help avoid trouble, here are 10 tips you should think about when using a credit card.
Before you take out a card, spend time shopping around, and finding out what else is on offer. You may think this will take too much time if you need to make a purchase quickly, but you'll be paying the price for years to come if you don't. Don't use credit cards to borrow money over a long period. Easy as it may seem, personal loans from High Street banks and building societies are usually cheaper. Always ask about the APR - the figure that helps you compare the cost of different sorts of credit. But also make sure you know about any annual fee, and other charges for late payments - the lowest rate card is not always necessarily the cheapest card to have. Be wary of cheap introductory interest rates that seem attractive. The card companies use these as a way of pulling in customers, but after a while, they'll increase the interest. Think carefully before you take out payment protection insurance. Make sure it is right for you, as you may already have other insurance that covers this. It can be expensive, and may not be worth it. Never spend on credit cards on the spur of the moment. If you are making a big purchase (car, sofa, etc), think about how you will pay the money off beforehand. Watch out for the offer of "repayment holidays", where the card issuers give you a month or more off from repayments. What seems like extra money in your pocket is actually a way to make sure you pay more interest to your lender. Credit card cheques can be particularly expensive. Remember, you will be paying interest on the amount you have borrowed from the day the cheque is issued. Read the small print - 0% offers on balance transfers may not apply on new purchases when you start using the card. Always try and pay at least 10% of your balance every month on your credit cards. Minimum payments of 2% to 5% are designed to keep customers paying interest on their debt for a long period.
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