Saving on Credit Card Costs
Credit card issuers make an enormous amount of money each year - it's no surprise, given that many cards have high interest rates and that many credit card users take little interest in the way that cards work.
The problem is that credit cards often seem so handy - so easy to use and so available. By their very nature, they allow us an easy way of gaining access to credit - we can purchase items that we might consider to be luxurious and then think about the real costs later.
That all sounds well and good - the unfortunate thing is that, by ignoring the real cost involved in using credit cards, many of us are spending a lot more money than we should be.
I'll give you an example: a colleague had run up a fair old amount on his credit card. He'd paid for a holiday and various one-off items. In order to keep on top of it all, he'd been repaying the credit card by paying off the minimum amount each month. None of this may sound too unusual to many of us.
The only problem was that, by paying only the minimum amount each month, he found that he wasn't even paying off the interest on his credit card, meaning that he was actually seeing the amount that he owed increasing each month.
He had a balance on his card of just over £5,000, with a minimum monthly repayment set at just short of £45. The only problem was that the monthly interest charge was more than £75.
In fact, over a 12 month period, he would pay £900 in interest.
That figure may seem surprising - in fact, it's quite typical of many credit card interest rates.
Reducing your credit card costs
Looking at the example above, you can probably see why many credit card lenders are making so much money - they rely on users, like you and me, to use our credit cards often. Once we've built up a large balance, they then hope that we'll pay it off quite slowly, thus increasing the amount of interest that we'll pay.
I think there are two key things that you can do to reduce the amount of money that you are shelling out on credit card repayments.
The first move that you can make is to find a company offer a 0% interest rate on balance transfers. At the time of writing, there are a number of credit card companies offering such an introductory rate for a period of up to 13 months.
One important point to note is that you will pay a fee to carry out the balance transfer. On the plus side, the fee is likely to be less than about 2 months' interest, so should still ensure that you make a substantial saving over a period of time.
Don't forget that, at the end of the introductory period, your balance transfer will revert to the standard interest rate for the card. In order to avoid paying a high rate of interest again, you'd be wise to carry out another balance transfer if you still have a large balance outstanding.
The other action that you can take to ensure that you minimise the amount of interest that you are paying is to make sure that you pay more than the minimum required monthly repayment on your cards. That way, you can actually start reducing the total sum that you owe, rather than constantly fighting against the additional interest.
Don't forget that credit cards are a relatively expensive means of borrowing money. The interest rates on offer are often considerably higher than those available on loans from high street banks, for example. It may be worth your while to look at an alternative form of borrowing - if you're not sure then consult an independent financial advisor for advice.