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
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
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