Three Ways To Beat Plasticmania
If your credit cards are melting from overuse, here is a trio of ways to gain control over your plastic and save a handsome sum!
Trawling through the website for banking payments group APACS earlier today, I came across some interesting (at least, to me!) facts and figures. Here are a few examples:We're completely spoiled for choiceOutside of the US, the UK has the most competitive credit-card market in the world, with around 1,500 different cards to choose from. No wonder over 30 million people held one or more credit cards in 2004.The UK has more credit cards than residentsAt the end of 2004, there were 74 million credit and charge cards in issue in the UK. Furthermore, there are 23 million store cards in circulation, which I refer to as the Devil's debt! Given the strong growth in borrowing since then, I guess that we now have roughly 76 million credit cards. However, there are only 48 million adults in the UK, which means that there are 1.6 credit cards per person, excluding the under-18s.We spend over £10 billion a month on our credit cardsIn 2005, British cardholders spent a grand total of £124 billion on credit cards (five grand per household!), with over £10 billion of this spending taking place overseas. Most of this spending was paid off in due course, but our overall credit-card debt increased by £3 billion to £56.5 billion in 2005. In total, we made over 1.9 billion transactions on our credit and charge cards, or more than sixty transaction per second!So, the UK is clearly in the grip of plasticmania, or an addiction to spending on credit cards. However, if you play your cards right, this need not be a bad thing. In fact, the following three tips could save you hundreds of pounds a year:TIP ONE: Don't pay interest on your existing balancesAbout three-quarters of our total credit-card debt is interest-bearing, and the frightening thing is that the average credit card charges an annual interest rate of 15.6%. Ouch!The simple answer to rip-off interest rates is to move your existing credit- and store-card debts to one of the scores of cards which offer introductory interest-free deals on balance transfers. By transferring your balances to a 0% on balance transfers deal, you can avoid interest for a year or more. You can learn the tricks of this trade here.Check out the delightful deck of 0% cards in our Credit Card centre!TIP TWO: Get a cashback card and a Direct DebitIf you spend less than you earn, and can therefore be sure that you'll always be able to pay off your monthly credit-card bill in full, then you can earn as you spend with a cashback credit card. Simply apply for a Best Buy card, set up a Direct Debit for your full monthly balance, and then put all of your spending on your credit card. By doing this, you can earn an annual rebate of up to 2% of your spending. For instance, in the last ten months, I've earned £100 by spending on a Best Buy cashback card, which is a free tenner every month!Check out the cashback on these cracking credit cards!TIP THREE: Avoid over-priced payment protection insuranceAs this article proves conclusively, the optional accident, sickness and unemployment cover sold alongside credit cards is enormously overpriced. The premiums for a typical policy will add 9% to 12% a year to the cost of your card, which might be more than the interest that you're paying!As an ex-industry expert on payment protection insurance, my advice is: don't buy it, and if you already have a policy and aren't currently making a claim, then think seriously about cancelling your policies. Otherwise, you'll be another sucker in a billion-pound-a-year rip-off!More: Let the Fool help you to find great credit cards, personal loans and savings accounts!