Why Carrying Credit Card Balances Costs You

You've undoubtedly heard the advice to clear your credit card account balances every month. It's the standard advice given by every financial expert, and with good reason. Carrying credit card balances costs you dearly - and not just in cash out of pocket. The most obvious way that carrying a balance on your credit account costs you is in the interest charges that you pay. You can reduce the amount of interest you'll be charged by paying careful attention to the fine print on your credit card agreement.

Keep note of the grace period on each card - the amount of time you have after making a purchase before interest starts to accrue. Some cards may have a grace period as long as 50 days, while others start to accumulate interest immediately. If you pay off your purchases before the grace period ends, you won't have to pay any interest charges at all. Once you've gone past the grace period, the amount of interest you pay will depend upon the prevailing rate of interest on your balance. It's important to know that most credit cards have more than one interest rate. You may be paying one interest rate on new purchases, a second on purchases over sixty days old, a third on any balances transferred from other cards and yet another on cash advances.

Knowing which credit cards offer the best deals on each type of transaction can help you choose the best credit card for that transaction. The balances that you accumulate on various credit cards can affect you in other ways as well. When you carry a balance on your credit cards, it shows up in your credit report in several ways that can affect your chances of getting a loan, a mortgage, another credit card - or even a job or the flat you've got your eye on. Whenever you apply for a credit card or loan, the lender will check your credit report to help them figure out if you're likely to repay your loans on time. Prospective landlords and employers may also check your credit report before deciding to hire you or rent a flat to you. Very often, the information in your credit report is used to calculate a 'credit score' or 'credit rating', and many people base their decisions about hiring, renting or lending your money on your credit rating.

One of the major factors that influence your credit rating is how much money you owe on your combined credit cards as compared to how much money you have available to you on your credit cards. If you have £10,000 in combined credit limits on your cards, and you're carrying £5,000 in balances, your available credit ratio is 50% - and that will lower your credit rating. The higher the ratio is, the lower your credit rating will go. Your credit rating can also affect the interest rates offered you on other loans and credit cards. If you're carrying high balances on your current credit cards, you could end up paying higher interest rates on mortgages, car loans and any new credit cards for which you apply.

When you apply for a credit card, you should always take the time to compare credit card features to find the best credit card for you. Knowing the terms and conditions of your credit card agreement can help you work out which cards will cost you the least when you carry a balance on the account. You can find out all that information and more at moneyeverything.com, where you can compare credit cards and apply for the best options online.