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Spending only what you can afford

Always use your credit card sensibly. It is common sense that you should only ever borrow what you can afford to repay, and borrowing on credit cards is no exception. If you want to borrow money check that your credit card is the most effective way for what you have in mind. A credit card can give your finances flexibility but longer-term debt can be more expensive compared to some alternatives, such as a personal loan. Anything you borrow and spend you will need to pay back, along with any interest that has been accumulated.

There are important points to bear in mind before using your credit cards:

  • For major purchases, plan your budget carefully prior to the purchase to make sure that you can afford the repayments.
  • If you are finding your repayments difficult, don’t be tempted into making any new purchases that you can’t afford.
  • Compare prices and value when you are shopping for a particular item to make sure you are getting the best deal.
  • DO NOT think of the money that is available from your credit card as “free money” or money that you can freely spend. If you can’t afford to pay it back then don’t spend it. Ask yourself if you would still buy an item if you were paying cash for it.

Think very carefully before withdrawing cash on one credit card to pay-off another. Do not use one credit card to pay-off another on a regular basis as, in reality, you are not paying off any of your debt at all and are also incurring additional charges. Seek advice if you are having trouble paying your credit card bills. If you are having trouble with your debt and would like some advice please click here.

If you want some help deciding if you can afford your current borrowing the Financial Services Authority (FSA) (the UK’s financial watchdog) has worked in a joint venture with Experian to launch a handy online tool to help you to find out whether you have, or are likely to have, problems. The debt test will ask you a few simple questions about you and your finances. This will help you assess whether you need to reconsider your borrowing habits, provide you with tips on how to avoid debt problems and help you find advice on how you can tackle your debts if you believe you are in financial difficulty. Click here to find out more about the Debt Test.

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