Making Repayments

No one likes to repay what could be classed as bad “debt” but if you have a credit card or are considering submitting a credit card application (whether it is for the first time or not), you will be aware of the importance of keeping up with the repayments which become due on the card each month.

There are a couple of ways that you can approach the clearing of repayments and these involve either clearing the entire sum due each month or making a minimum payment (with the adequate interest included, if applicable), the percentage will vary depending on the lender but it can be around 3% - 5% of the total balance due.

The cost is minimal but in cases such as this if you can clear the whole balance, I would suggest doing so because many aren’t aware of this but if you clear the entire balance each month then there will be a reduction in the interest whereas making basic payments monthly will end up costing a lot more.

In most cases and usually before, during and after a credit card application submission lenders will provide you with the average rate for repayments and as you will know, the importance of ensuring that they are paid in full or at least a partial balance is cleared.

Imagine getting charged 5% interest on the outstanding balance each month, it will soon add up and many people may not be able to afford “throwing away money” unless you are fortunate enough to win the lottery.

Before submitting credit card applications

Applying for a credit card and keeping up with the repayments is an area I would always approach with caution and before submitting any credit card applications, have a plan of action which should include an allocated monthly spend and how much you will pay back each month (if it is the total balance or a partial balance payment).

It may not appear to make much of a difference to one’s finances but I can guarantee that when you calculate exactly what you are paying with partial payments, you will be surprised because it will soon add up to a small fortune which could have been save 10 times over by just making full payments.

Always bear in mind that lenders may appear that they prefer you only pay partial balances, why is this?

Lenders are there essentially to make money and when it comes to outstanding balances, they are making more and more money with the interest that is being charged. It is pure profit to them, paying a balance in full may not seem like it is making you better off but in the long term it is.

This may seem like a “bump to earth”, a harsh reality but it is the truth. Everyone is here to make money and that is how they do it.

Remember this one point, not only will clearing a full credit card balance save you hundreds if not thousands of pounds in interest, paying a balance in full is well to known to help strengthen your credit rating even further.

What are you waiting for, get out your cheque book, make that vital payment and rip up that statement once and for all!!