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Credit Cards - How to stop credit cards ruining your financial future

The adverts are everywhere and the deals are attractive. No doubt even the strongest willed consumers find it hard to keep their eyes off the “0%” sign when the purse is running low. For those already attached to credit card providers, with interest rates rising and credit getting harder to come by, it might seem crazy to ignore a better offer when you see one. But as attractive as flitting from provider to provider and picking up cheap deals as you please might seem, this way of managing finances has its consequences and instead of solving problems, could actually create more.

Firstly, it is a common misconception that it is not only quicker, but easier, to put in applications for multiple credit cards at once. A lot of consumers think they save time doing this because then they get to compare the different deals they qualify for which – let’s face it – is a lot more appealing than hours of research. What a lot of people don’t know however, is that each credit card application leaves a big, traceable footprint on your credit history. Whenever you submit an application to a lender, they will do a credit check which will stay on your record for a year. No matter what your actual intentions are, jumping into the credit application pool headfirst means that lenders could very well look at your record and assume you are in desperate need of cash, or even trying to commit fraud. As a result, your credit rating will plummet, which, if you are trying to get credit, is obviously not helpful.

So instead of diving headfirst into the credit pool, just take a step back. Comparison websites offer a great way to compare different credit deals quickly and easily. If you do have any dealings with lenders, make sure you ask for a quotation only – this will get the same information as an application but won’t leave a big black mark on your credit history.

The second common credit card faux pas is the notion that a great way of managing debt is to move it from card to card. If times are hard, then all those “interest free period on balance transfers” and “0% for a limited time only” deals start to look more and more attractive. As the saying goes, however, nothing comes for free – especially not in the financial world! As with any contract you sign, read the small print. Normal fees for transferring balances come in somewhere around 2-5%, but any repayments you make on the new card will cover newer spending first. In the meantime, the older debt could be increasing in size even more rapidly than on the old card. Although sounding rather ominous so far, if used wisely interest free periods really can save you money. It is a great time to take the opportunity to start paying off as much of the existing balance as you can, greatly reducing the amount of interest that will be heaped onto your account in the future.

So, you found a great introductory interest free offer and you’re all set up. Life goes on and everything is great - until you get the credit card bill from hell because you forgot that your interest free period finished months ago. If you go for one of these deals, remember when it ends and make sure you pay off as much of the debt as possible by then otherwise instead of saving money, you will most definitely be losing it on massive interest payments. The same rule applies to loans – the end date might seem like a long time off when you apply for credit, but inevitably it will finish sometime, so be certain you are prepared.

Finally, if you want to investigate your credit options – whether for a credit card, loan or mortgage – the first thing to look at is always your credit report. This will give you a good idea of how well you are managing your credit and, at the same time, how likely lenders are going to want to give you credit. If your credit report is looking far from rosy right now, it might be a good idea to wait a while before applying for more credit. That way, not only are you more likely to be approved but you will know you are more likely to be able to manage your repayments too.