The Allure of Plastic

I remember when I first got out on my own. Back then it was difficult to get a credit card if you didn’t live with your parents and had to support yourself. My very first credit card had a limit of $300. And boy, did I use it!

Thankfully as I have grown older I have also become wiser in the ways of money. Which you have to be with all the credit card offers that flood your email and snail mail on a daily basis. I keep track of my credit score and make sure we are getting the best interest rate possible. I do my research and call my credit card companies to get my rates lowered if I think it is too high. And if they can’t lower it I will – and have – transferred balances to other cards with lower rates.

I was clicking around for info on 0% Credit Cards and found some interesting information. Over half (59% ) of credit card users pay their balance in full each month. That actually surprised me because the media spin really points the other way. Most articles you read in the main stream media tell you about the “big bad credit card companies who are extending too much credit and ruining people’s lives”. According to the article only 9% risk deeper debt by getting more credit to pay off existing credit. Hmmm… Interesting.

Paying off your balance each month is obviously the best way to use your credit card. But if you can’t you definitely want to make more than the minimum payment. Here’s an interesting tidbit

“According to the banking code, credit card providers have to demand a monthly minimum repayment that more than covers interest accrued. This way, customers who repay the minimum will still be paying off a proportion of the outstanding debt instead of just treading water paying off interest.”

Still it seems that some card companies are lowering their minimum payments in order to bring in more revenue.

Here’s a bit of math for you:
Research from Moneyfacts shows that a customer with a £1,000 debt on a card with 14.9 per cent APR, paying only a 2 per cent minimum payment, would take 20 years to finish paying the debt back, including £1,116 in interest. By contrast the same customer paying three per cent would clear the debt in 11 years. Repayments at the rate of seven per cent would allow the debtor to pay off the debt in just five years. Crazy, isn't it, how only 1% can make such a difference?


All of our credit cards have rewards. We have earned hotel stays, restaurant gift cards, credit back to our account... You name it and you can probably find a card that provides it. Of course you don't want to over-spend on a credit card just for the rewards. That gift card may look good but is it really worth 5000 points?

Credit cards make it easy enough to forget that you are playing with real money. A bit of advice from someone who has been there: do your homework, know your worth and pay more than the minimum.