Is it Better to Save or Spend it Now?

Chances are that you were taught the old adage that 'a penny saved is a penny earned'. Saving for a rainy day is a time-honored British tradition. But, say the experts, saving isn't always the best way to go about things. In fact, if you're following the traditional wisdom of paying your savings account first and then totaling what you can pay on the rest of your accounts, you could be costing yourself severely.

Here's why. When you put your money into a savings account, you are earning at MOST 5% APR ? and that's at the bank rated Best Current Account Provider at the recent Moneyfacts Award Banquet. Your credit cards are typically costing you up to 29% APR. Now then, imagine you've come into 100 quid. Your mother tells you 'Put it in your savings where it will earn interest for you. You'll have more money at the end of the year.'

And you will ? 5% more, before taxes. In the meantime, you've got an outstanding account for that same amount on your credit card that you're paying off at 15.9% interest, a little bit per month. The minimum that you pay each month keeps the card out of collections ? but at the end of the year, even though you've paid near 100 quid onto it, you still owe more than half of it. In fact, you've paid out far more in interest on that than you've made in interest on the money you whacked into savings to earn some interest. The wiser thing to do would have been to take that little windfall and paid it onto your account, which would have saved you the difference between 5% and 15.9% over the course of the year.

In other words, these days, it's smarter to spend than to save. Now, this isn't to say that you should be going out on wild spending sprees. The trick is in managing your money wisely ? and credit cards can be an important part of managing your money wisely. The key is in choosing the best credit card for the job that needs doing, whether that job is paying for purchases, borrowing cash or putting a little extra in your pocket. Very few credit cards will be the best credit card in all circumstances, so it's important to compare credit cards and choose the right one for what you need to do.

Even if you compare credit cards carefully, and are sure that you have the best credit card for each need, you should keep a few things in mind to help keep your credit card spending in line.

1. Pay your credit cards off each month. Compare credit cards to get the lowest interest rate on your purchases, sure, but paying no interest is even better than paying low interest. If you pay your bill in full each month, you'll have the money that would have been spent on interest to do other things with.
   
2. Look over your statement carefully each month. Errors do happen, and the sooner you catch them, the easier they are to resolve ? and the less they will cost you.
   
3. Just because you have it doesn't mean you have to spend it. In fact, if your credit card balances are creeping up above the 50% of available credit mark, it's a sign that you're heading for danger.

You can compare credit cards at moneyeverything.com, your one stop for anything related to money. You'll find listings for the best credit card in all areas from 0% balance transfer cards to bad credit credit cards.