Credit cards are a practical method of obtaining credit and, despite the negative press, when used correctly they can provide flexibility to the cardholder.

Step 1 - Choosing the right credit card

It’s important to decide whether your credit card it’s actually suited to the purpose for which you intend to use it. If you do not understand you’re spending and repayment habits, you will probably end up paying much more than you need to. A credit card is a useful tool, if you make it work for you, but remember, you can always save money in interest charges by finding a better deal. Be careful though, credit card issuers have a variety of tricks up their sleeve and often manipulate their terms & conditions in order to recover interest in other ways. So which card is best for you? A sound tactic is to use different credit cards for different purposes, thus getting the most out of each of the credit cards for as little as possible. Here are some spending and repayment trends to keep in mind when choosing a credit card.

• Regular spender, balance always cleared monthly
• Regular spender, balance usually cleared monthly
• Regular spender, balance rarely or never cleared monthly
• Poor Credit History
• Special Uses
o Withdrawing cash
o Use abroad
o Added benefits
o Donations to charity

Step 2 - What if things go wrong?

It is vital that you contact your credit card issuer if you are not capable of meeting your monthly repayments and are under pressure to repay your outstanding balance. They are generally more sympathetic when approached earlier. Another alternative is to switch to a credit card with lower interest rates and fees but remember if you leave too late you may not be accepted. In case you are refused a credit card and wish to make enquiries about your own credit rating you could apply to the credit reference agency for documentation. Credit reference agencies will provide a thorough analysis of your own financial situation.

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