Learn how to get the most from your credit card

Credit cards have a split personality. Pay off your entire balance on time each month and it’s the cheapest form of credit. But if you miss a payment, or even if you only pay the minimum, you will end up paying the highest penalties and interest in the bank.

The minimum repayment amount is dimensioned in such a way as to cover most of the interest and not to encroach too much on the capital.

You pay it on time and they don’t give you any penalties, but they charge you up to 26.6% on that big sliding balance. And that’s how they make money.

If you have a lot of credit card debt, it’s worth checking out the Competition and Consumer Protection Commission credit card calculator. This will tell you how long it will take you to pay off your card.

For example: suppose you have a balance of $ 1,000 and you pay off $ 50 per month at a rate of 22.9% – which is the APR on purchases currently billed by AIB’s Mastercard and Visa, and by Avant Money, Chill Money and the An Post Money credit card.

At this rate, and assuming you stop using your card, you won’t have paid off the debt for two years and two months. And the total amount you will end up paying will be around $ 1,270.

If you double your repayment amount to $ 100, you’ll have the debt cleared in a year, and you’ll save $ 150 in interest.

Switching options

You can also switch to a credit card with a lower interest rate. There are now a plethora of new entrants to the market, several of which are offering great deals on balance transfers.

The best of them comes from Ulster Bank’s Black Credit Card. Ulster Bank is due to close the doors to new applications from the end of this month, but it is still possible to apply for a card, which will give you 0% on balance transfers for a full year. Once this grace period has elapsed, the interest rate climbs to 13.9%. It’s high, but it’s actually one of the lowest interest rates on credit cards.

To benefit from this card, you must earn at least € 40,000 and be over 18 years old.

The An Post Money credit card also offers 0% on balance transfers for a full year. But once the grace period has elapsed, an APR of 22.9% applies to purchases. This is one of the highest rates charged in the Irish market.

Once you change, you’ll need to make sure you close your old account, and when you do, you’ll need to increase the $ 30 stamp duty the government charges each year on each credit card account. To make sure you won’t be charged the same fees on your new card, ask your old provider for a closing letter, which you then forward to the new company.

Possibility of loan

You could take a loan from a credit union to pay off the card. Interest rates on credit union loans cannot exceed 12.68% APR, and at the moment the average rate across the country is 10.59% APR.

There are a lot of people who save and keep large credit card balances at the same time. Deposit rates are miserable right now; if you have a few thousand dollars in the bank and at the same time you have a credit card debt of 1000 €, even if it is at the lowest credit card rate at the moment (visa AIB CLICK 13.8 %), you’ll still save a bundle just by paying off the card.

For those who are struggling with a lot of credit card debt, the first step is to stop using the card. Simple, but not always easy, especially if you’re a slave to impulse buying.

The other obvious tip is to pay as much as you can each month. In addition to getting rid of debt faster, you will also lower the total cost of credit.

It also doesn’t hurt to just ask your credit card provider to reduce the rate you pay for a certain period of time. Tell them you’re going to leave unless they do something about it. You would be surprised what a little haggling can do for you.

If you just can’t do without the card, try lowering your credit card limit and don’t miss any refunds or underpay minimum amounts. The penalties for doing so are cruel, while late payments can show up in your credit history. Consider setting up a standing order or direct debit.

Withdrawal of money

The other cardinal rule is not to use the card to withdraw money. Interest rates are high, the interest itself hits your account from the time you withdraw the money, and there is a cash advance fee as well.

AIB, for example, charges a commission of 1.5% on all cash withdrawals, with a minimum withdrawal of € 1.90. KBC charges the same. Bank of Ireland also takes 1.5% of the cash amount, with a minimum of € 2.54.

Also note that if you use your card to finance your vacation, your credit card issuer charges a hefty commission every time you use your card for a transaction other than euros.

The AIB Visa, for example, takes 1.75% of the value of the transaction in Europe (countries outside the euro only) and 2.75% in the rest of the world. Bank of Ireland charges a cross-border processing fee of 2.25% of the transaction.

The Competition and Consumer Protection Commission also advises that if you have Payment Protection Insurance (PPI) on your credit card, check to see if it’s really worth it. The PPI typically only covers the minimum repayment amount for a limited period of time and is charged as a percentage of your outstanding balance, so the more you owe, the more you pay for it.

If none of these solutions work and the debt has become unmanageable, contact the Financial Advisory and Budgeting Service (MABS).

Credit cards: who bills what

Card APR on purchases, interest on cash withdrawals, introductory rate on balance transfers

AIB beMasterCard 22.9%, 19.68%, 3.83% for 12 months

AIB beVisa 22.9%, 19.68%, 3.83% for 12 months

Visa CLIC AIB 13.8%, 19.68%, none

AIB Platinum Visa 17%, 19.68%, 3.83% for 12 months

A money post 22.9%, 16.8%, 0% for 12 months

Before money one 22.9%, 16.8%, 0% for 6 months

Money Reward + advantage 22.9%, 16.8%, 0% for 2 months

BOI Aer card 26.6%, 21.36%, 0% for 7 months

BOI Classic Card 22.1%, 21.36%, 0% for 7 months

BOI Platinum Card 19.6%, 19.89%, 0% for 7 months

Cool the money 22.9%, 16.8%, 0% for 9 months

KBC credit card 18.25%, 20%, 0% for 6 months

PTSB Ice Visa 22.53%, 22.46%, 0% for 6 months

UB Black MasterCard 16.1%, 13.9%, 0% for 12 months

Data courtesy of the Competition and Consumer Protection Commission. See consumerhelp.ie

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