Save Money By Understanding Your Credit Card
Below is a MRR and PLR article in category Finance -> subcategory Credit.
Save Money by Understanding Your Credit Card
Summary
A recent survey reveals that many credit card holders don’t fully grasp how interest is charged. This lack of understanding can lead to unnecessary interest payments.Importance of Understanding Credit Cards
Every year, credit card users lose out on approximately 6 billion due to a lack of understanding about their cards. Many are enticed by attractive deals without grasping how these introductory offers really work, ending up paying more than necessary.
Many have taken advantage of offers like low promotional rates and 0% deals on balance transfers. However, research shows those unfamiliar with how these offers function might end up paying an additional 200 in interest.
Why Are You Being Charged Interest?
The primary reason is that credit card companies often apply payments to the lowest interest debt first. When you take advantage of 0% balance transfer deals, the lender applies your repayments to the balance transfer. Meanwhile, any new purchases accrue interest at the standard APR.
How Does This Work?
Consider an example: if you have a debt of 3,500, comprising a 2,000 balance transfer, 1,000 in new purchases, and 500 in ATM withdrawals, your payments will first go toward the balance transfer. This means new purchases and withdrawals start accruing interest immediately, which could equal an extra 200 in interest payments.
Exceptions to the Rule
While most companies operate this way, some, like Nationwide and the HSBC Black Card, prioritize paying off the highest interest debt first. This approach is fairer, as it doesn’t undermine the benefits of promotional offers.
How to Avoid Excess Interest
To avoid unnecessary interest charges, always read the fine print. Understanding your repayment terms helps you save money. Ideally, aim to clear your balance each month, though this isn’t always feasible.
Useful Links
- [Nationwide](http://www.nationwide.co.uk)- [HSBC](http://www.hsbc.co.uk)
- [Credit Card Advice](http://www.creditcards-gb.co.uk)
By comprehending how your credit card works, you can make smarter financial decisions and avoid paying more than you should.
You can find the original non-AI version of this article here: Save Money By Understanding Your Credit Card.
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