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How to Repay your Credit Cards - Managing Your Money

Keeping on track with your repayments and using your card wisely will enable you to stay on top of your finances.

More from Understanding Credit Cards
29 December 2008

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How to Repay your Credit Cards

The most effective way to repay your credit cards is to understand what your monthly commitments are.

Effective Money Management Puts You in Control

How you repay your credit card depends on what your situation is. You may not have an existing balance or a card, but may wish to open one for convenience, to help cash flow and also to increase your credit rating. The best discipline you can adopt is to understand why you are using the card and how you can pay it off, in full every month.

Or you might have a balance that you want to decrease down to zero. Depending on how big this debt is, there are a number of cards available to help you do this.

More Than You Bargained For

If you do want to use your card on a monthly ‘use and then pay off’ basis, be aware that it is easy to start off with good intentions and then slip. The key point is to be strict and never use this card for an extra impulse purchase that you don’t pay off at the end of the month. This would create a balance on which you have to pay interest.

If you have chosen a cash back card, this can also negate the value of the cash back you receive. Depending on the interest you are charged, it may also mean that the cost of your groceries is far more in the long term.

Before using the card, work out a realistic budget for your monthly essentials and spend no more than you actually have put aside for this. If you do work like this it is an efficient way to gain a months’ grace on payment.

Paying for goods and services with a credit card also comes with additional consumer protection and can aid you in getting your money back if a company goes into liquidation for instance. This is an essential point if you are on a tight budget.

Juggling Payments with Existing Spending

If you have an existing balance and want to decrease it there are two ways to handle this.

The trick is to balance existing spending with paying off the balance. In this case it is smart to have two cards; one for spending that is within your budget and gets paid off every month.

The other one can be used purely for getting your balance down. The way to do this is to shop around for the best interest rate. A 0% interest credit card works well if you can pay the balance off in the allotted time. Or you may look for a low interest life of balance card that allows you breathing time to pay off your card at a reasonable rate of interest. This is called APR – annual percentage rate - and it needs to be as low as possible.

Make a Realistic Budget

The most effective way to repay your credit cards is to understand what your monthly commitments are. Making a budget will clearly focus on what you need for your essentials and what money remains spare to pay off any existing balances. Based on this, it is possible to predict when you will get to a zero balance. It doesn’t matter if your payment plan spans over a few years, the point is to have a plan and stick to it.

Beware not to overestimate your budget. If you leave yourself short you may end up making it up by spending on a credit card. This is not a good plan if you are trying to decrease the amount in the first place! Be realistic about how much you can afford to pay off every month.

Put yourself in control like this and you’ll get to understand your spending pattern and what you need to do to repay your cards.

Look After The Pennies

When you are taking an overview of your money take into account not to over commit to any purchases or services that will stretch your budget too far. If the cable TV contract or new sofa for the living room can wait, let it. It is far better to get on track then to consider what extras you can accommodate.

If You Can’t Make The Repayments

There are circumstances, such as the loss of a job, or an accident that might stop you from working and in these cases you may struggle to make a repayment. It is vital that you speak to your credit card provider immediately. Don’t panic, if you make that call you will find that your provider will assist you in making a plan. But they can’t do that if they don’t know your situation in the first place.

Best Buy Credit Cards

Credit Cards Balance Transfers Purchases APR Representative (Variable)
Tesco ClubCard Purchases Credit Card Logo Tesco Bank Logo Tesco ClubCard Purchases Credit Card Apply
 0%
9 months
2.9% fee
 0%
18 months
 
16.9%
Representative Example: The annual purchase rate is 16.9% p.a (variable) so if you spend £1200 your representative apr will be 16.9% p.a (variable)
Barclaycard Platinum With BT (27 Mths) Logo Barclaycard Logo Barclaycard Platinum With BT (27 Mths) Apply
 0%
28 months
3.5% fee
 0%
6 months
 
18.9%
Representative Example: The annual purchase rate is 18.9% p.a (variable) so if you spend £1200 your representative apr will be 18.9% p.a (variable)
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