How to effectively manage your credit card

We’re sharing five essential tips to help you use your credit card in the smartest way possible.

Many of us are taught from a young age that credit cards are dangerous and will only lead to unmanageable debt. But if you use them well, credit cards can be useful for managing cash flow, giving you protection and even boosting your credit score. 

You just need to know the tricks for using credit sensibly and to your advantage.

Only spend within your means

Rule number one: When you go to buy something, ask yourself if you could afford it without a credit card. If the answer is ‘no’, and you don’t absolutely need it, don’t buy it. Simple as that. 

The likelihood is that if you can’t afford it this month, you probably won’t be able to afford it next month. Unless you’ve been to see a psychic who’s informed you of an upcoming lottery win!

If you struggle with overspending, ask your bank to lower your credit card limit. 

While this can temporarily harm your credit score, it might be worth it in order to stop you from splashing the cash. 

Have an emergency fund at the ready

Try not to rely on credit cards or payday loans to fund unexpected expenses. 

It’s best to have an emergency fund set aside – usually three months’ worth of expenses – that you can easily access if needed. 

That way, you can stick to using your card for planned purchases like buying that sofa for your new home, or renting a car abroad. 

If you absolutely must rely on a credit card in the short-term, try to ensure that it’s one that has a 0% interest period on purchases. 

This will give you some breathing space to clear the debt over time, if necessary, without being charged interest.

Repay your credit card in full every month

If you don’t have a 0% interest card and you’re just paying the minimum on your credit card balance each month, you could end up spiralling into debt with lots of interest payments. 

With the average credit card carrying an interest rate of 22%, it’s easy to see how this could happen. 

We suggest you set up a monthly direct debit to pay your balance in full. 

That way, the money will be taken without you noticing and you won’t need to worry about missed payments.

If repaying your full balance isn’t possible, try to pay at least a bit more than the minimum amount. 

If this becomes a regular occurrence, see if you can switch your credit card to a deal with a lower interest rate. 

You could also try a 0% interest balance transfer card, which moves your debt from your current credit card to another with no interest charges for a period of time.

Use one credit card only

When it comes to credit, the more credit cards you have, the more you’re likely to be tempted to spend – especially if you consider credit to be ‘free money’.

Having one card will work in your favour, especially if you have a card that offers an introductory 0% interest period or a low interest rate. Don’t forget to take advantage of this.

Check your rewards program

Lots of cards come with rewards which encourage you to spend. So make sure any spending you use the card for is worthwhile. 

For example, buying an expensive pair of jeans you don’t need purely because of the irresistible cashback offer might not be such a good idea. 

But if you’re already planning a long-haul holiday and can claim air miles for your flights, it might make sense, especially if you’ve got the money in cash to pay off your credit card straight away.

Always remember to pay off any high-interest debt before you consider saving money. If you’re struggling with credit card debt, there’s plenty of help out there. 

Get in touch with an expert to find out what to do if you can’t make your repayments.

The information provided is financial guidance and should not be considered financial advice.