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How To Use Credit Cards And Beat The Charges

Aug 17, 2007
We do love our credit cards - to the tune of billions in extra fees, interest and other charges paid out each year, according the FSA. Credit cards can cost you dearly if you're not careful. Unexpected charges, hidden fees and shady tricks can increase the amount of money that you pay in interest fees, penalties and charges, and keep you in debt forever. There are ways to get the best out of your credit cards and beat the charges, though.

Start by choosing the right credit cards when you apply for a credit card. Compare credit cards that you're considering at comparison sites and only apply for those that offer low or no annual membership fees. Watch the APR when you compare credit cards, but look beyond it to find out how interest charges are calculated, how long your interest free period is and how many days leeway you have before your payment is judged to be late.

How to Beat the Interest Charges
A large part of the high cost of using credit cards comes from the interest that you pay. You can avoid ever paying a jot of interest by paying your account in full each month. Of course, that's not always an option - after all, one of the reasons to use a credit card is to afford things you can't pay for all at once. In that case, make long term purchases on the credit card with the lowest interest rate and pay it off as quickly as you can. Don't use that credit card for anything other than long-term purchases and pay more than the minimum every month.

How to Beat the Minimum Payment Trap
It's easy to stay in debt forever with credit cards. Just pay the minimum payment every month. If you have an account balance of 1000 on a 14% APR credit card, and pay the standard minimum balance of 2.5% each month, it will take you 52 months to clear the balance, and you'll pay 300 in interest. That's over four years. Pay twice the minimum - just another 25 per month - and you'll have the balance cleared in less than two years, and save 150 in interest charges.

How to Play the Balance Transfer Game Without Getting Beat
Pay close attention when you compare credit cards if you're looking for a balance transfer card. Look beyond the balance transfer rate to any requirements that you have to meet in order to keep that rate. Be aware that the credit card company will apply your total payments to the lowest interest rate items on your account - so if you have an outstanding balance transfer at 1.9% interest and a new purchases balance at 9%, the credit card company will apply your payment to the balance transfer. That leaves the higher interest purchases to accumulate interest at 9% until the balance transfer is paid off. Avoid the balance transfer trap by NOT using that credit card for new purchases.

How to Beat Cash Advance Charges
The only real way to beat cash advance charges is to find another way to borrow money if you need it. Unlike any other type of purchase or charge on your account, cash advances start accruing interest the moment you take out the advance. The interest charge is almost always on of the highest rates on your card, and it will be the last part of your balance that is paid. If you can avoid it, don't use your credit card to get cash loans.
About the Author
Jon Francis has been involved with finance for many years! With an in-depth knowledge of the credit card UK market help helps others get the best from a credit card.
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