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Credit Cards

Is it Worth Paying off a Credit Card in Full Each Month?

A credit card is designed to allow you to borrow money. However, a lot of people use them to give themselves some interest free credit by paying off the full balance each month when the bill arrives. This means that they do not normally have to pay any charges on the card, such as interest, which you do have to pay if you do not pay off the full balance.

If you want to save money on interest, then paying off the full balance of your credit card each month is what you will need to do. It means that you can take advantage of all of the pluses of having the credit card without having to pay for them. These advantages include being able to buy things all month and only pay for them when the bill arrives so you can more easily manage your money and ask for the direct debit for paying the card off in full to occur on payday. You can also shop more easily and safely online if you have a credit card and if you are sold faulty goods which you have trouble getting exchanged or refunded, the card issuer will be able to refund the card for you. Using a credit card can also be more convenient in shops than using cash and may mean that you carry less around with you in your purse or wallet.

The main advantage for many people of having a credit card though, is because they can buy things and not pay for them immediately. The credit card allows you to buy items and then you do not have to pay back what you have paid for them but you can wait as long as you like as long as you pay back a minimum payment each month. This minimum payment will cover the interest on the loan and may also cover a small repayment of what is owed. By just paying this amount, you can borrow the money for as long as you wish.

The difficulty with this sort of borrowing is that you may find that it is really easy to not pay back the loan and may need to resort to a payday loan of sorts. This means that each month you are paying interest on it, but not really paying any of it back. If you do not repay for months, then that interest will add up to a high amount, if you leave it for years it will be even greater. You could end paying very much more for the items that you bought than you would have ever been prepared to pay when you first bought them. You may even have forgotten what you bought or no longer have the items by the time you have paid off the card.

Therefore if you want to save money, paying off the card in full each month makes total sense. You want to make sure that you have set up a direct debit so that it all gets paid off, if you want to save money like this. However, if you do want a bit of time to pay for things and you are aware of the costs and consequences of only paying the minimum balance of the card, then this could be a better option for you. Think about why you might want to delay paying and whether you can justify the extra cost. Calculate how much a month you will have to pay out until the loan is paid off.

If you feel that you would want to pay the card off in full each month then it is important to make sure that you keep a tight rein on your spending. You need to make sure that you do not spend so much money on the card that it ends up being too dear for you to be able to afford to pay it off. You might be able to check the balance regularly online to see how much you are spending or you could make a note when you spend on it so that you can be sure that you will be able to afford it. It should not take too much effort and it will mean that you will not get any nasty surprises when the bill arrives.