Debt Credit cards

Published on April 4th, 2013 | by Brook Taylor

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How to Use a Credit Card Without it Costing You a Cent

Ever been tempted to cut up that credit card and go back to using cash for everything? With those monthly statements giving you headaches it’s understandable if you want “out”. No more repayment dates, no more interest to pay – what’s not to like?

Much as we might pretend life is easier without a credit card, it can actually be a really useful tool for living by a tight budget. So, rather than casting your card off into the fires of Hell, why not revise your usage of the little devil so that you start to see its more angelic side?

There is a smart way to use your card which won’t cost you a cent.

Go Interest-Free

Most credit cards offer an interest-free period – typically up to 56 days. This is not to be confused with an introductory interest-free period which may be offered for the first three or six months of card ownership, for example.

The 56-day interest-free period usually applies when you have a zero balance and you are given up to this period of time to pay off a purchase without it attracting any interest at all.

In other words you get a maximum of 56 days to pay for a credit card purchase before interest is charged, provided you have no outstanding debt on the card.

“Up to” 56 days is the term used by card issuers – because the actual period can be anywhere between 1 and 56 days, depending on when you make the purchase.

It might be a little clearer with an example.

Feature image by 401(K) 2013

You Buy that $300 Bicycle You’ve Been Eyeing Up

Your credit card statement arrives on April 15th stating that you have zero balance.That same day you go out and buy the $300 bicycle you’ve been eyeing up for weeks.

If your card has a 56-day interest free period then you have until 10th June (15 days in April, 31 days in May and 10 days in June) before it starts being charged the purchase rate of interest on your card.

Bear in mind that, if you make no other purchases, then your statement on 15th May will show that your balance is $300 and a minimum payment will be required; but you will not be reminded that you need to pay it off entirely before June 10th to avoid paying interest. That is up to you to remember and to make sure you make the payment.

Beating the System!

The banks don’t want you to be organised and in control of your finances. They prefer when you are forgetful with repayments and the interest starts to mount.

If you use calendar reminders to make your monthly repayments on the same day every month (covering all purchases made in the statement period) you clear your balance every month and pay no interest. It feels like you’re beating the system…find a card with no annual fee too, then you’re really flying. You effectively have free credit.

You’ll find you can start using your card with confidence. I used to use my credit card for all my purchases and never paid a cent in interest. All my expenditure was there on one statement, which I always checked against receipts – and it became relatively easy to budget.

Rather than blaming the credit card, examine your own spending and repayment habits and see how you can wisen up in that part of your life – then your card loses its devilish features and you may start to see it in a new light.

What do you think?

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