Did you know that in the UK the average credit card debt is approaching £2000 and despite the Bank of England base rate being near zero, many people are paying too much interest. Here we will explore 3 ways to save money on credit cards.
Many lenders offer introductory periods of zero percent interest as an incentive to new card holders. If you are carrying a balance on your cards, it is worth considering how much you can save by using a balance transfer.
For example, if you owed an average figure of £2000 and were currently paying 24.9% interest, a 2-year zero percent balance transfer would save £441.
There are a number of handy calculators online where you can put in your own figures and see how much you save.
Increase minimum payments.
Do you remember when you applied for your new credit card? In many cases you were asked whether you would like to set up a direct debit so as not to miss a payment. Sounds sensible, right? Well again in many cases you were offered the choice whether to pay off the entire balance or make the minimum payment of 2 or 3%.
Th issue with paying a percentage, rather than a fixed sum each month is that the percentage amount will gradually decrease as your balance decreases, meaning that it will take longer to clear your balance and ultimately pay more interest.
This is a real bug bear of mine and I created a video to demonstrate here
So if you want to save money on credit cards, the solution is to contact your provider and ask to switch your repayments from a percentage to a fixed amount.
Improve your credit score
The third way to save money on credit cards is by improving your credit score. When you apply for a loan or credit card the decision is not usually a straight yes or no. With a better credit score you receive more offers and a better choice of interest rates, thereby saving you money.
I have created a guide to improving your credit score which you may like to read next.
In short by having a better credit score you can either open or switch to lower interest rate options and therefore save money on your credit cards.
I hope you will find these points of interest and look forward to hearing from you if you have any comments or questions