In the lead up to and during the festive season many people use their credit cards to cover the cost of Christmas, but unless it’s kept under control the extra spending can put cardholders at risk of being rejected for credit in the future. This is due to the money spent on credit cards over Christmas still being repaid nearly a year later by many consumers, something which can damage your credit score.
Here are some tips to help you stay in control of your credit cards and keep your credit score positive:
Check your interest rate
Check what rate of interest you are being charged by your credit card provider. The average APR is a massive 17.32%, but you could pay no interest at all if you moved the debt to a balance transfer card with a 0% introductory rate.
Pay on time and never make just the minimum payment
Potential lenders will always look at how you manage your money, so paying on time is a must. We would advise setting up a direct debit to avoid payments being forgotten. If you only make the minimum payment each month the debt will increase considerably. Wherever possible try and clear the balance or pay more than the minimum amount due. If you can’t clear the whole balance, set up a standing order to the credit card company for an amount you can afford to pay on top of the direct debit for the minimum amount.
Do not use your credit card to withdraw cash
Credit cards have much higher rates of interest on cash advances than purchases made, and some will also charge you a one off fee. To lenders, those who regularly withdraw cash on credit cards can be viewed as struggling financially.
Don’t use all your credit
If you use a high amount of the credit available to you it can harm your credit score. This is because to lenders you will look like you are dependent on credit. If you use a relatively small amount of the credit available to you it means you have access to healthy amounts, this will be viewed as good money management by lenders.
Consider transfer deals
Balance transfer deals can save you a lot of money so consider moving credit cards to a 0% balance transfer deal. Bear in mind however that you will only save money if you clear the balance before the 0% deal finishes. Check the best 0% deals here.
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Christmas spent on cards could cripple your credit report