So once you’ve done your grocery shopping on your credit card, you’ve put the money aside or moved it to another bank account, and you’ve paid off the outstanding balance on your credit card statement at the end of the month without getting any interest?  Well, if you have then bloody well done to you!

So now you’re probably about ready to ask the question: What’s the point in this when i can afford my shopping anyway?

Well in answer to your question allow me to pose another one to you.  Do you have a credit card that offers reward points or cashback?  If the answer is yes then you can surely work out that you’re getting rewards and cashback for doing virtually nothing!  You aren’t paying interest to your credit card company, yet they are still rewarding you for using their card.

Now there is also another huge unseen advantage to paying off your balance like this every month, particularly if you’re young.  This sort of financial dilligence will be recognised by other financial institutions, including banks and morgage lenders.  If you pay off your credit card balance each month without fail and you have no bad debts, you are much more likely to be able to gain credit elsewhere for other life changing opportunities.  Having a good credit history in this day and age is a must!

If you’re not good with money (and i don’t know many people who are) then you are no doubt going to struggle with a credit card.  There are some things you need to know, particularly if you’ve never had one before.  Credit card companies, for all their whining about people who don’t pay their debts, do not actually want you to be able to pay off any more than the minimum amount payable on your statement each month; this way they can make more money by charging you interest.

So what you need to do is quite literally be careful!

When you get your credit card for the first time:

• Don’t use your credit card to buy something expensive that you’ve wanted for ages.  This is something you probably should have saved for, and having a credit card doesn’t change this fact.
• Don’t start to buy your groceries with your credit card.  You can do this later when you’re a little more experienced
• Don’t use your credit card to pay your bills.  Anything like this should be paid how you have always paid for it.

Basically, don’t use your credit card to buy anything except a few items each month, and when you’ve bought them, pay off the balance before you get charged any interest.  This is a great way to begin being careful with your credit card, and it also trains you to pay off your balance each month!

You see the object is for a credit card company to see that you are capable of paying off your debts regularly and on time.  When you fail to pay your payments on your credit card bill, your credit card company will lose faith in you and eventually you will not be able to obtain credit.  The best way to build up your credit score when you have had a debt problem in the past is to get another credit card.

However, the credit card you need is not like the ones that got you into debt in the first place.  They are credit cards that scare you so much with their astronomical interest rates that you dare not miss a payment.  What’s more important than this is the fact that you also need to watch what you spend simply because if you spend over a certain amount, you may not be able to pay off your bill at the end of the month!  Pay off your bill?  I hear you ask.

Yes, this is very important, simply because if you don’t then the interest will absolutely crucify you, and following this, you shouldn’t really do it again.

All in all these high interest cards like Capital One’s Plus card are designed to help you by setting high interest levels and low credit card limits.  These should almost train you to be good with credit again; and if you fail with one of these then you shouldn’t really have a card.

So why am i saying such things about credit card companies?  And why wouldn’t they want you to pay off your balance?  Well i’ll tell you why.  If you have a credit card you’ll know that there is one thing that the company relies on to make any money itself.  It’s all good and well lending people money to buy the things they want, but they must get something in return right?  Well of course.  They make their money from the interest on your balance.   So this is one good reason they don’t want you to pay off the balance of your card.  The more you pay off the less interest they can charge you.  If you spend £100 on your credit card and then pay it back, say when you get paid, you won’t add any interest beause you paid it back so quickly!

Another reason they don’t want you to pay it back is that if they are the type of credit card that offer rewards and incentives for spending money (like points for example), and you go and pay off your balance each month before they add on any interest, then you’ve done it again, you’ve got something for nothing!

Be wise, be credit wise!