How to avoid credit card debt

Caroline Cassidy

Times are tough for the majority of Brits and when you're struggling to pay the bills it can be tempting to reach for the credit card. But as handy as plastic can be, it can also get you into serious trouble - here are some tips to help you avoid credit card debt.

Avoid credit card debt
Avoid credit card debt

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Maximum repayment, minimum fuss

The lure of the credit card is that you can pay off your purchases in smaller amounts over a period of time. But when you start using your card for everything from new TVs to groceries, the repayments can quickly mount up. If you only make the minimum payment each month, the debt can take years to clear and you'll pay a huge amount of interest over that time.

The key to keeping your credit card under control is to pay off what you owe in full when the bill arrives each month. Whatever is not paid off will be charged interest and, though there are some good deals around, the APR is often very high.

Setting a budget each month may help - that way you can work out how much you can afford to pay off when the bill comes and use your credit card accordingly. If you just can't resist impulse purchases at the supermarket, leave the credit card at home and take cash or a debit card.

Avoid the cash trap
Here's a tip for withdrawing cash on your credit card - don't! In the majority of cases, you will pay higher interest on a cash advance (which you will start accruing the moment you use the ATM) and transaction fees apply.

Balance transfers
In order to tempt customers to apply, credit card companies often offer zero per cent interest rates as an incentive. If you have already racked up a sizeable debt on a credit card, this can help you to start clearing what you owe. However, the zero per cent deal only lasts so long and any new purchases will incur interest charges. Be aware also, that some companies will charge a balance transfer fee - either a flat fee or a percentage of the amount you are transferring - so be sure to read the small print.

And ALWAYS cut up the old card and close the account so you are not tempted to double the debt.

Shop around
Whether you are looking to make a dent in your existing debt with a balance transfer or just after a credit card for everyday usage, it pays to shop around.

For instance, Barclaycard Platinum currently offer a tempting 0% rate on balance transfers for a full 20 months. But the fee is 3.2 per cent so you'll need to do the maths to see whether the pros outweigh the cons.

Sainsbury Finance, on the other hand is offering only 12 months interest free on balance transfers (with a fee of three per cent) but your purchases are also interest free for the first 12 months. Thereafter the APR is 15.9 per cent but this card is only available to Nectar Card holders.

If you are over 50 and looking for a credit card, the Saga Platinum card offers nine months interest free on balance transfers (three per cent fee) and zero interest on new purchases for nine months. But it is their standard 11.9 per cent that is the big draw.

Whatever your credit card needs, it is always best to check price comparison sites as rates vary considerably and change regularly.