Credit Cards - Not Your Flexible Friend

By Jack Curtis

Credit cards are among the most heavily advertised type of financial product available. Their names are associated with sporting events and good living, with ads involving glamorous people in far-flung locations using their plastic to give them access to products and services that would otherwise be out of reach.

They never show the single mother buying her weekly groceries with one, or people getting into horrendous debts because they’ve been using them instead of loans to buy household appliances. But this is how credit card debt really builds up. It happens when an impulse buy goes onto the credit card when our bank accounts are in the red, when we get a couple of bottles of wine on the way to a dinner party and don’t bother to pay it off the next day. What we forget is that at interest rates of 17 to 20 per cent on purchases, failing to pay off our accounts in full every month could be the equivalent of working an extra day a week for no pay!

So it’s clear that credit cards aren’t the way to get the things we dream about having. Those things should either be saved up for or bought with a loan. So when the realisation dawns that your credit card repayments are actually becoming a burden, what should you do?

If you’ve lost your job or are unable to work, you should inform the card company straight away. If you’ve had payment protection, that can be activated. But if your debts are just getting out of control, they might simply stop you from using the card and arrange a way of paying the outstanding balance back without charging you more interest.

If you merely want to save money, you need to eliminate your card balance immediately. If you have a little spare cash, don’t leave it in your bank account, put it on your card. Long-term thinking is key. If you don’t have the cash but do have an income, you should go for a consolidation loan. You can borrow enough to pay off all your credit and store cards and repay the loan at a much lower rate.

At the very least you should make sure you make your minimum payment every month. Not only will you avoid penalties that just add to your debts, but you’ll also keep your credit rating favourable enough for you to obtain a cheaper consolidation loan when you decide to take one out.

Jack Curtis publishes a range of discussions and commentary on credit and finance subjects. Read more of his work about flexible loans on http://www.fair-loans.com