Repaying your credit card

Many people have become reliant on credit cards over recent years, and this is partly due to the convenience and ease that credit cards offer. However, credit cards have become more and more popular over the years, with many cards offering a wide range of benefits, ranging from interest free credit to rewards and discounts.

Credit cards can be very useful and beneficial if used and repaid responsibly, but it is important that you ensure that you do maintain responsible and timely repayments on your card otherwise you could find that you suffer the financial consequences.

When payments are not made responsibly or in line with the type of card that you have you could find that using your credit card becomes very costly.

This is why it is always vital that you are mindful of how to repay the credit card that you have to avoid the financial penalties and high interest rates that come with many credit cards today. Below are some frequently asked questions relating to credit card repayments:

How much do I have to pay each month on my credit card?

Each month you will receive a statement from your credit card company outlining how much you have to pay. This is the minimum amount required and you can pay more than that amount but should not pay under that amount.

Why is it important to try and pay more than the minimum amount requested?

It is not a necessity to pay more than the minimum amount requested, but it is strongly advisable to do so. When you make a repayment on your credit card each month part of it goes towards paying interest and part towards paying off the actual debt.

However, if you are only making the minimum repayment you will find that each month most of the repayment will be swallowed up by interest and your actual debt will be left more or less untouched. You could find that a fairly modest balance hangs around your neck for several decades if all you do is make the minimum payment.

What happens if I miss a payment or make late payment?

In the past credit card companies were able to apply hefty fees for late and missed repayments, but this was reviewed by regulatory bodies last year.

However, although credit card companies are now not allowed to charge the amount that they were charging previously they can still charge up to £12 per fee for missed or late payments, and for exceeding the credit limit, and these charges can soon add up.

Also, missing and making regular late repayments can have an adverse effect on your credit report.

What is the best way to repay a 0% balance transfer card?

If you have transferred a balance onto a 0% balance transfer card then you are best off making as high a payment as you can afford to each month. This is because you need to clear the balance before the interest free period expires, otherwise you will be left to face hefty interest charges on any remaining balance.

What about a life of balance transfer card?

With a life of balance transfer card you can enjoy the low rate of interest for the life of the transferred balance, which means that there is no rush to get the balance cleared within a particular time frame providing you keep up with the minimum repayments. However, in order to avoid being left in debt for long periods it is still advisable to pay off as much as you can each month.

What are the benefits of paying my balance in full each month?

If you repay your balance in full each month when you receive your statement you will not be charged any interest, which means that you can enjoy the ease and convenience of a credit card without having to pay for the privilege.

In addition if you have a rewards based credit card, such as a cash back or loyalty points card, you can make the most of these benefits as they will not be counteracted by the interest that you end up paying on the card.

Also, by repaying your balance in full each month you do not have a debt hanging around your neck and you can avoid being charged for missed and late payments.

What’s the best way to make my credit card payments?

There are a number of options available when it comes to making your credit card repayments. This includes cheque payments via post, calling the card providers and making a debit card payment, paying via your bank, and setting up a direct debit.

The easiest and safest way is to set up a direct debit, as this means that you will not risk missing or making a late payment and will be able to avoid charges.