Newbie Question Alert

PennyRich

Hi, I've lurked here for ages, gaining loads of inspiration and help, so first of all thanks to everyone who has posted help and encouragement as it doesn't just help all the members here but everyone who is lurking in the shadows. :T

Right, I've not so much had a lightbulb moment, more a slow dawning of the mess we're in. Have begun to make changes and haven't used our credit cards for just over two years, mainly due to making the somewhat drastic decision to move in with my Mum for 18 months and now in a very small, cheap to run cottage.

Sorry for the waffle, my question is:
Am I right in thinking that if, out of desperation, we did use a credit card, as long as we pay back at least the min payment plus the amount that we had used the credit card for, then the status quo would be maintained? Or am I missing some nasty little trick that is setting us back?

Not going to get back in the habit of using them, the main culprit is some websites still only take credit cards and not debit cards for payment.

Thanks for listening

Penny

Tixy

Hi Penny

Firstly I assume you mean you already have an ongoing balance on your card, is that right?
Is the existing balance on your credit card from purchases or is any from balance transfers or cash advances? If its all purchases then you are right that if you need to add to them but then pay off the same amount plus the minimum at the next statement date the only effect will be a little bit more interest (being the extra balance for the number of days between the purchase and the date you pay).

One thing to watch out for is your credit card provider telling you they are increasing you APR. If they do this then you can opt out but would then no longer be able to put new purchases on the cards.

One other option you might want to consider if its just for online purchases is to use a pre-paid card and load the money on in advance.

PennyRich

Thanks Tixy

Yes, there is outstanding balance on the card from previous purchases (and probably from cash withdrawals:o too). No balance transfers.

Yes, we've frozen some of our cards instead of allowing them to up the interest, we've 9 in total between us (4 frozen).

Having been monitoring the cards for the last two years it has been a real eye opener, especially where the minimum payments come in. On several of them on some months the minimum payment doesn't even cover the months interest. It really is shocking and no wonder it takes a lifetime to pay them back. Just wish I'd taken my head out of the sand earlier.

Thanks again and will look into this pre payment card, that might be the answer.

Penny

Tixy

Prepaid cards info here http://www.moneysavingexpert.com/cards/prepaid-cards

Now if you are organised and are sure that you will pay off the amount you put on the card it could in theory work out better to use one of your existing cards if it has cash withdrawals on it - you should be able to tell if the statement shows interest as 2 different figures at 2 APRs.
The reason being is that your card provider now has to allocate your payments to the most expensive debt first.

So in theory if you currently have £1000 on the purchase rate and £500 at the cash advance rate but put on an extra £100 purchase and then pay it off, you would then be left with £1100 at the cheaper purchase rate and £400 at the cash advance rate (all ignoring the month's interest and monthly payment).
This will only save you money if there is a big gap in the APRs between purchases and cash advances. And only if you are certain that you will pay off any extra spending you put on the card and won't increase your debts overall. If you are not sure of that then I would use a prepaid card.

handyman123_2

Hi Penny, I use a pre paid card for web purchases, they do charge a percentage every time you put money in and a percentage on each transaction. I find it works to my advantage cos as one of the few people in the universe who doesn't have a Bank A/C. It works out the same or slightly less than the poundage on a postal order. It does have a security side as if anyone gets my card details I only ever load it with the cost of the purchase + the charges, so there is never any more than a few quid left in between purchases, and they would have to be super fast to get anymore than that.

Not exactly MSE I know but it works for me. It also means no matter how much I want something if I cant afford to charge my card I can't have it.

Regards Handy.