How to Save on Your Credit Card Bill

Having a good debt-to-available credit ratio will help you attain a good credit rating. The less debt you have compared to available credit, the better your credit rating. To learn more about how important credit cards are to the overall credit rating process, visit myFICO.

Since having good credit is important, knowing how to minimize the charges you pay to credit card companies is also important. Monthly finance charges, fees, and penalties can become quite costly over time. However, there are a few ways to save on your credit card bill.

Use credit cards only if you have the money to pay off the balance. If you stick to using credit only for things you can already afford, you will not run the risk of carrying balances from month to month. Although this is much easier said than done, consider the high interest rates charged by many credit cards, especially department store credit cards. By relying only on necessary purchases and not carrying balances, you will avoid monthly finance charges.

Understand how monthly finance charges are calculated. Monthly finance charges are the monetary amounts that credit card issuers charge for using their money each month. These charges are based on the annual percentage rate set by the credit card company; however, the monthly charges can fluctuate based on several factors:

• Due date: The date the bill must reach the company. If the company does not receive payment by this date, they may charge a late fee.
• Actual date the payment reaches the company: If a bill is paid before the due date, no late penalties should occur. However, if the entire balance is not paid in full, this date will help determine monthly finance charges.
• Date the account “closes”: The date that reflects any past activity on the account.
• Grace period: The time between the “closing” of the account and the date the bill is due. This is usually around 20 to 25 days, but you need to check with your credit card company to find out the terms of your grace period. (Note: Some credit card companies do not offer grace periods on purchases if balances are carried from one month to the next. In this case, finance charges will immediately apply to all purchases.)

In order to save money and still carry a balance on your credit card, you need to take all of the above factors into consideration. The earlier you pay your bill, the lower your finance charges are likely to be for the following month. For examples of how payments affect interest rates, visit the Care One Credit Counseling website.

Pay attention to the interest rates, not the perks. Many credit cards, especially department store credit cards, offer perks or rewards to customers for using them. Before you commit to such a card and make large purchases, be wary of high interest rates. Some store credit cards offer decent rates; however, most usually charge significant interest.

Department store credit cards are not the only ones that charge higher fees. Major credit card companies, like Visa and MasterCard, might offer rewards cards that allow you to earn points or miles for every purchase; some even allow you to earn cash back. As with department store credit cards, these also tend to carry higher interest rates. They may also charge annual fees.

Try to avoid unnecessary fees. One way to save on your credit card bill is to be aware of the common fees charged by your credit card. Although every card differs, but sure to check whether you are paying:

• Late fees
• Minimum finance charges
• Annual fees
• Cash advance fees
• Balance transfer fees
• Over-the-limit fees
• Set-up fees

If you are unsure about whether or not these fees are applicable to your specific credit cards, check the fine print on the back of your credit card statement.

Never assume that your monthly interest rate is the same rate you pay for cash advances or balance transfers. If you often rely on your credit card for cash advances, be aware of the difference in interest rates, if applicable. If you are getting charged fees that seem inaccurate, contact your credit card company and request that the fees be removed.

Do not overlook 0% interest and balance transfer offers. Although opening another credit card account may not be appealing, pay attention to some of the great offers out there. Some cards offer 0% financing for a set period; some of these cards also offer free balance transfers. These cards may help you pay off your debt faster.

Pay more than the minimum amount due. The only way to get out of debt and spend less on your credit card bills is to pay off all outstanding balances. If you pay only the minimum amount due, this may take a very long time. Look over your entire financial situation, and see if there is a way to pay more toward your credit card debt each month.

Remember, the sooner you get out of debt, the more money you will save. For more information regarding debt relief, visit Care One Credit Counseling.