Debt Management - Credit Cards
The origins of the modern credit card can be traced back to 1890 and they have proved to be a hugely profitable to the banks.
Today's credit cards do have an appropriate limited use in a controlled, disciplined environment however if you're currently carrying interest bearing debt with one or more credit cards it is quite likely that credit cards are not working for you but vice versa.
Credit cards can work for you if:
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You keep your money in the bank and use the card for your purchases but pay your balance in full (in fact due to the current low interest rates there is very little benefit at present here)
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The credit card offers a cash back incentive or money voucher incentive from using the card - again as long as you clear the balance each month
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You need a short term (typically less than 9 months) interest free loan.
Although all the card holders carry a balance transfer fee of around 2-3% and you are comfortable about paying this back in this time period. In addition if you are earning less than £40,000 per year credit cards are probably not a good product to have where there is a danger or you having to dip in to meet your monthly commitments.
Using them abroad doesn't offer any benefit as there are all sorts of charges slapped on to every transaction from a poor exchange rate to commission on every transaction. The only card we recommend using abroad is Nationwide current account card for purchases (although avoid cash withdrawals and try to buy your cash and travellers cheques before you go)
Ok so to shift your credit card debt write down the current balance, interest rate and minumum payment on each of your cards and then list them in order with the most expensive at the top and the cheapest on the bottom. Next look at whether you can realistically can pay this balance off within 24 months.
If you can you should pay minumum balance on your cheaper cards and then use as much money as your budget allows to pay off the most expensive debt first, once this is clear then use the same pot combined with the mimimum payment to pay of the next expensive and so on. It's a good idea to have a credit card which is only used in the case of a REAL emergency but is not used at any other time. BUT keep an eye on this credit card to ensure you are not incurring inactivity fees.
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